Blue line/red line That is 100% a change in Fed policy to actually execute its mandate not to allow inflation to be too low, so low that it cannot facilitate charges in relative prices enough to avoid failures of markets to clear:
This is not to say that fiscal policy in 2009 did not also fail by not following the NPV rule, spending up to the point at which (with inputs evaluated at MC instead of market prices) NPV=0, which would have been largely prevented by tying spending to the state of the economy rather than dollar amounts and calendar dates. If fiscal policy had not failed so badly it might have covered the Fed's failure, but who knows. The Bernanke-Yellin Fed was just weird!
"Putting the pedal to the metal, not doing that again, and leaving rubber on the road as the economy rejoined the highway at speed in 2021—that was a really, really good idea."
Although the rubber track was a little bit too long, more than necessary to achieve highway speed and subsequently required a bit o brake. This is excellent management but still not 1500.
"But the increase in the unemployment rate did not come. The recession did not come. And the vacancy rate fell, and is falling, smoothly, anyway. " ..."The veils of time and ignorance are extremely thick…"
If I may:
Despite a tight model relating vacancy rates to other variables, the interpretation attached to the vacancy rate is ambiguous. For instance, a falling vacancy rate doesn't necessarily mean that the employment situation is cooling off, for the vacancy rate can decline if:
(1) The vacancies are being filled and the job ads are being closed. To confirm this, one needs to look at additional data, say, the underlying Labor Force Status Flows from the state of unemployed to employed or from the state "not in the labor force" to employed. If employment is improving while vacancies/job ads are being removed, then the labor market is probably strengthening -- not cooling off!
(2) In the opposite direction, vacancies can fall if businesses do not wish to expand due to, say, poorer prospects. They eliminate the vacancy without filling it. This is probably more of a cooling off and signifies a weakening labor market. This too needs confirmation from elsewhere. One may want to see, for instance, the Labor Force Status Flows from the state "employed" to the state "unemployed" or from the state of "employed" to the state "not in the labor force." If more people are becoming unemployed or are leaving the labor force, then a falling vacancy rate is probably not a good thing.
Thus, a falling vacancy rate can be a good thing or a bad thing. To interpret it, one needs support from other data. In other words (and I may be wrong), the model doesn't stand on its own. Without historical or current context, the model is unhelpful.
The answer: The Fed has actually been trying to run a FIAT. I thought they were a little too F in September 2021 and not F enough recently, but it has the big picture right. It also helps that the relative price changes that tit needed inflation to facilitate (COVID, Putin/Oil, supply chains) were temporary so maybe that counts as luck, but its the kind luck that FIAT is designed to deal with. Likewise the fiscal deficits, while bad for growth in the long run, were not so large that they were easily offset with higher interest rates that pulled enough resources out of private investment (and some consumption?)
AND it is still possible that the "not F enough recently" will turn out to be disastrously not F enough and we will still get a big beautiful Trump-electing recession in 2024.
" ... and then warn everyone very strongly that the range of future macroeconomic possibilities is very, very wide indeed. The veils of time and ignorance are extremely thick…"
Blue line/red line That is 100% a change in Fed policy to actually execute its mandate not to allow inflation to be too low, so low that it cannot facilitate charges in relative prices enough to avoid failures of markets to clear:
This is not to say that fiscal policy in 2009 did not also fail by not following the NPV rule, spending up to the point at which (with inputs evaluated at MC instead of market prices) NPV=0, which would have been largely prevented by tying spending to the state of the economy rather than dollar amounts and calendar dates. If fiscal policy had not failed so badly it might have covered the Fed's failure, but who knows. The Bernanke-Yellin Fed was just weird!
"Putting the pedal to the metal, not doing that again, and leaving rubber on the road as the economy rejoined the highway at speed in 2021—that was a really, really good idea."
Yes!!
A colorful description of FAIT. :)
Although the rubber track was a little bit too long, more than necessary to achieve highway speed and subsequently required a bit o brake. This is excellent management but still not 1500.
"But the increase in the unemployment rate did not come. The recession did not come. And the vacancy rate fell, and is falling, smoothly, anyway. " ..."The veils of time and ignorance are extremely thick…"
If I may:
Despite a tight model relating vacancy rates to other variables, the interpretation attached to the vacancy rate is ambiguous. For instance, a falling vacancy rate doesn't necessarily mean that the employment situation is cooling off, for the vacancy rate can decline if:
(1) The vacancies are being filled and the job ads are being closed. To confirm this, one needs to look at additional data, say, the underlying Labor Force Status Flows from the state of unemployed to employed or from the state "not in the labor force" to employed. If employment is improving while vacancies/job ads are being removed, then the labor market is probably strengthening -- not cooling off!
(2) In the opposite direction, vacancies can fall if businesses do not wish to expand due to, say, poorer prospects. They eliminate the vacancy without filling it. This is probably more of a cooling off and signifies a weakening labor market. This too needs confirmation from elsewhere. One may want to see, for instance, the Labor Force Status Flows from the state "employed" to the state "unemployed" or from the state of "employed" to the state "not in the labor force." If more people are becoming unemployed or are leaving the labor force, then a falling vacancy rate is probably not a good thing.
Thus, a falling vacancy rate can be a good thing or a bad thing. To interpret it, one needs support from other data. In other words (and I may be wrong), the model doesn't stand on its own. Without historical or current context, the model is unhelpful.
And I thought _I_ was hard to please! :)
The answer: The Fed has actually been trying to run a FIAT. I thought they were a little too F in September 2021 and not F enough recently, but it has the big picture right. It also helps that the relative price changes that tit needed inflation to facilitate (COVID, Putin/Oil, supply chains) were temporary so maybe that counts as luck, but its the kind luck that FIAT is designed to deal with. Likewise the fiscal deficits, while bad for growth in the long run, were not so large that they were easily offset with higher interest rates that pulled enough resources out of private investment (and some consumption?)
AND it is still possible that the "not F enough recently" will turn out to be disastrously not F enough and we will still get a big beautiful Trump-electing recession in 2024.
" ... and then warn everyone very strongly that the range of future macroeconomic possibilities is very, very wide indeed. The veils of time and ignorance are extremely thick…"
Bingo!
Especially regularities that do not have any claim to being structural parameters.