Tuesday, August 13, 2013

Sticker shock! Inflationary policies of the Federal Reserve have caused parking rates to shoot up just a bit in NYC since Cliff was a boy

And tax rates too. 

Our own Cliff Thies visting his sister last week in New York City.


John Morris said...

Sorry, but a lot of that is about supply and demand for real estate. One can make more money per plot of land with apartments, retail and offices.

Limits on development in other parts of the city, historic zoning & rent control also play some role.

John Morris said...

Of course a lot of those offices are filled with FED induced speculators & crony capitalists.

A lot of the apartments are owned by Europeans, Russians, Japanese & South Americans parking money in a semi safe place to escape their own taxes & central bank bubbles

Eric Dondero said...


jimmyjones5 said...

Its called supply and demand. I thought the free market the whole basis of your philosophy?

mitsukurina said...

Yes, inflation is raging at the yearly rate of 1.8%.

jimmyjones5 said...

Yeah, I'm not sure what 'inflation' this person keeps talking about. There has been almost no inflation for the entirety of the Obama administration. As much as the right has been going on and on about printing all of this money, prices at my grocery store have pretty much remained the same.

John Morris said...

Jimmy is actually somewhat right here.

The FED's expansionist policies can force feed cash/liquidity into the banks but it cannot force the banks to lend. Only when they actually push that money into circulation through lending or investing can really strong inflation develop.

China, which has a state controlled banking system did manage to create inflation.

What we see instead is selective inflation in asset prices like stocks and commodities.

jimmyjones5 said...

Don't forget the mind-control drugs in the drinking water! They say its flouride, but we know the truth!

John Morris said...

China is starting to see the inflation and blow back of bad "stimulus" investments (empty cities, defective bridges etc..) and is pulling back now.

I highly recommend this sight for clear headed economic analysis.


John Morris said...


The FED has itself said its goal is to create inflation to bailout bad debts from the real estate bubble. (Allowing debtors to pay back loans with depreciated money)

Just because Obama and the FED have not managed to create an inflation disaster does not mean they are not trying very hard.

John Morris said...

I mean I recommend this website. spelling error.

jimmyjones5 said...

Seriously man! Flouride is mind-control! And their sending radio-waves through your filling! That's why I pulled out all my teeth!

John Morris said...

Even if inflation is now 1.8% it pretty much means we have no real economic growth.

jimmyjones5 said...

Inflation is horrible!

Actually there is no inflation.

No inflation is horrible!

Fine whatever. Enjoy your tinfoil.

mitsukurina said...

Real GDP grew at 1.7% in Q1 2013 -- sluggish but certainly not "zero". The reason that the Fed's monetary policies have little impact is that we're in a liquidity trap -- rates are up against the zero lower bond.

John Morris said...

Basically, depending on how one is measuring inflation, there is no growth. Employers certainly see this which is why there no employment growth and little demand for loans by remotely credit worthy customers.

jimmyjones5 said...

Aren't you tired of being humiliated yet?

mitsukurina said...

"Just because Obama and the FED have not managed to create an inflation disaster does not mean they are not trying very hard."

Leave aside the word "disaster" and I agree wholeheartedly. The Fed is seeking to follow the prescription that Milton Friedman gave to Japan when it was in a liquidity trap in the 1990s. The Fed certainly would like some inflation. They aren't getting it because monetary policy doesn't work well in liquidity trap.

John Morris said...

Mish has a good post on the so called "liquidity trap" from 2008.


Quotes from Fed Governor Richard W. Fisher

"A good central banker knows how costly imperfect data can be for the economy. This is especially true of inflation data. In late 2002 and early 2003, for example, core PCE measurements were indicating inflation rates that were crossing below the 1 percent "lower boundary." At the time, the economy was expanding in fits and starts. Given the incidence of negative shocks during the prior two years, the Fed was worried about the economy's ability to withstand another one. Determined to get growth going in this potentially deflationary environment, the FOMC adopted an easy policy and promised to keep rates low. A couple of years later, however, after the inflation numbers had undergone a few revisions, we learned that inflation had actually been a half point higher than first thought.

In retrospect, the real fed funds rate turned out to be lower than what was deemed appropriate at the time and was held lower longer that it should have been. In this case, poor data led to a policy action that amplified speculative activity in the housing and other markets. Today, as anybody not from the former planet of Pluto knows, the housing market is undergoing a substantial correction and inflicting real costs to millions of homeowners across the country. It is complicating the task of achieving our monetary objective of creating the conditions for sustainable non-inflationary growth."

There is no way to force feed a system more credit than it needs and there is no way for the FED to determine how much credit is needed.

Mish's quote

"Here's what to do about the liquidity trap: Nothing. The concept of liquidity traps is imaginary. Home prices are too high, they need to correct. There are too many houses and stores so we should not encourage more building. Savings should be encouraged, not discouraged. Overcapacity needs to be worked off not fueled. Bankruptcies are part of the solution not part of the problem."

Only an idiot thinks the fix for two bad investments is 6 new bad ones.

mitsukurina said...

"In retrospect, the real fed funds rate turned out to be lower than what was deemed appropriate at the time and was held lower longer that it should have been. In this case, poor data led to a policy action that amplified speculative activity in the housing and other markets."

Sure, this is John Taylor's explanation for the bubble -- that (otherwise totally rational) market participants bid up house prices due to inappropriately low fed funds rates. The problem (aside from the internal inconsistency) is that the low rates preceded the house price increases by years. What was, in fact, going on at the same time as the house prices were going up was stable rates (not falling rates) and plunging underwriting standards. Lenders were increasingly lending to poor risk borrowers (and were cheered on by the Congress and the President).

As for your stuff about the liquidity trap; its nonsense. The post confuses the existence of a liquidity trap with whether *any* countercyclical policies are a good thing. The Great Recession was to some extent a nice natural experiment of whether a liquidity trap can occur or whether -- Milton Friedman and Ben Bernanke are right and it can't. So far the evidence for the trap looks good: the Fed's monetary expansion has just led to a growth in excess bank reserves not to an increase in real activity.

As for you Austrian School stuff about excess capacity etc etc. No serious economists take that seriously. Since you like quotes, here's a nice one from Big Daddy Milton Friedman who's face is on this website's banner:

"I think the Austrian business-cycle theory has done the world a great deal of harm. If you go back to the 1930s, which is a key point, here you had the Austrians sitting in London, Hayek and Lionel Robbins, and saying you just have to let the bottom drop out of the world. You’ve just got to let it cure itself. You can’t do anything about it. You will only make it worse. You have Rothbard saying it was a great mistake not to let the whole banking system collapse. I think by encouraging that kind of do-nothing policy both in Britain and in the United States, they did harm."