Saturday, September 13, 2014

Central Banks Jump The Shark


There was an episode of Happy Days where Fonzie jumped over a shark on water skis.  Since then the idiom Jumping the Shark has come to mean when the creators of a show have run out of good ideas.

Japan's central bank has made negative interest rates and also Europe’s central bank has made negative interest rates.   This means they have run out of good ideas.   These central banks have jumped the shark.   From here on the quality will go downhill.   It will not be fun any more.

13 comments:

  1. "It will not be fun any more."

    Lol... I'm sorry Vincent, but sometimes I think you're banking on that. Doing your share, however small, to try to ensure it's not going to be fun anymore. :D

    Yes, yes, I know that's not your point, etc. I'm just telling me the impression you give me.

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  2. Tom, this blog has 5 followers. I am not posting to make markets go up or down. I write to organize my thinking and have some chance of someone pointing out an error in my thinking. This post did amuse me some. :-)

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  3. Tom, you must have noticed that most of the comments on this blog are either by you or by me. :-)

    I added the formulas from my simulation to my simulation post. Just in case someone else looks at it. :-)

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  4. As far as banking on that, I will make money if the Yen goes down. Japan seems the best test of my theory. Smaller countries can be bailed out.

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  5. Jason has another one for you:

    http://informationtransfereconomics.blogspot.com/2014/09/update-on-japanese-inflation.html?showComment=1410720062470#c3841513050010089761

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  6. Vincent, I know I've pointed out the opposite nature of your avalanche theory vs Jason's before, but in his latest post he links to this older post in which he explains it a bit better: like sand that's piling up, with occasional exogenous shocks (which look like hits to NGDP) as more money is poured in. It took me more than one re-read to get a sense of it, and I'm not completely there yet with all the steps in his procedure (I left a question for him), but it's pretty interesting, and very reminiscent of your analogies... only you don't agree which way gravity pulls things. Lol.

    http://informationtransfereconomics.blogspot.com/2014/03/the-monetary-base-as-sand-pile.html

    For you, piling up the money causes avalanches of hyperinflation. For Jason, piling up the money causes avalanches of "exogenous shocks" which keeps NGDP depressed where it would otherwise be. In his world, the CB can fight this by piling on the money a little faster at times.

    Interesting how the same analogy (down to the piling on of money even!) can be used in two entirely different ways!

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  7. Jason has a new analogy up... and I have a related one that seems more suited to you in the comments.

    http://informationtransfereconomics.blogspot.com/2014/09/another-analogy-for-monetary-policy-and.html

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  8. Thanks Tom!

    So my CMMT theory got posted to an MMT site:
    http://mikenormaneconomics.blogspot.com/2014/09/vincent-cate-cmmt-cates-modern-monetary.html

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    Replies
    1. The above got a lot of comments and good discussion. It even resulted in another blog post, though not as interesting to me:

      http://www.bondeconomics.com/2014/09/a-mmt-view-on-theory-of-hyperinflations.html

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    2. Nice. You're fast becoming the web's favorite hyper-inflationist. :D

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    3. Mixing it up on an MMT site, me against the lot of them. I think I did just fine. :-)

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