Fed monetary policy is DC centered, not necessarily low rate

A lot of blogs are talking about the John Hussman analysis,  Mish and Zero Hedge, for example. John seems correct to me, but John's definition of terms seems inaccurate. When the Fed did QE, that turned out to be a curve steepening policy, long term rates rose.  When the Fed set interest on reserves, that was set above the current private sector overnight loan rate.

The Fed's main policy error is being DC centered, its member banks subject to regulation, the bank itself is too aggregated, and government debt has caused a debt cartel to form.

John may be right, the Fed should raise the rate on overnight reserves, but John fails to mention that is about the only action left for the Fed.  It has never really been the case,in the Fed's history, that the overnight reserve rate was a benchmark rate  and the effect of raising it is likely to be dominated by regulations and debt from Congress.  John may have simply identified a problem in which the damage has already been done a long time ago.

Why isn't Toni Atkins speaking out about the murder of Mexican students?

Our speaker of the house, here in California,  has not said one word about the murder of Mexican students.  Nor have I heard from Jerry Brown.  My favorite president, Nieto, is on a junket to China.

Mexican students are outraged, thank god, and they almost burned down the Mexican White House.  Try again, burn it down unless Nieto immedately returns to Mexico and solves the police corruption problem. 

These are 43 murdered fellow citizens, they were learning to be teachers. Yet what do California politicians do? They sit on their friggin ass and go begging for cookies from some swampland in DC, 3,000 miles away.

Toni Atkins, you are a coward.

Corrupt Mexican cops kill students, Jerry Brown ignores problem

Reuters) - Mexican President Enrique Pena Nieto on Sunday condemned violent protests over the apparent massacre of 43 students after demonstrators set fire to the door of his ceremonial palace in Mexico City on Saturday night.
Tens of thousands of Mexicans have taken to the streets to protest the government's handling of the case of the missing students, and last night protesters in central Mexico City set fire to the door of the National Palace.
"It's unacceptable that someone should try to use this tragedy to justify violence," Pena Nieto told reporters at the airport in Anchorage, Alaska where he was en route to China. "You can't demand justice while acting with violence."

The students were abducted by corrupt police in southwestern Mexico in September. Though the government said on Friday it looked as though the students had been killed, then incinerated by gangsters working with the police, it stopped short of confirming their deaths for lack of definitive evidence.

Jerry Brown and Pena Nieto need to issue joint declaration to hunt down the cops and have them arrested.  Those students belong to us, the Pacific Federation, they are our citizens.

Ronald Reagan Communist in chief

This chart from Josh Zumbrun needs no explanation, just notice the peak.

 And look at how much Ronald spent in interest expenses! The man was simply a raving Communist.

The Canadian fiat system

Nick Rowe refers us to Scott Sumner, let's take a close look at the problems with the Fed:

http://www.themoneyillusion.com/?p=27943
"When inflation is above target you need to reduce the growth rate of the money supply (relative to the growth rate of money demand) enough to bring inflation back down to the target. It just so happens that the sort of policy that would reduce the money supply growth by an adequate amount is also one that will result in nominal interest rates rising in the short run (due to the liquidity effect) by roughly 150% of the rise in inflation. But that rise in interest rates is not why inflation falls back to the target path (it’s an epiphenomenon), it falls back because you’ve reduced the growth rate of the money supply relative to demand. Inflation falls back for monetarist reasons, not Keynesian reasons."

A little thought and we can see how the Taylor rules fails. John assumes the central banker is in DC and the credit banker is local to the retail store. But the retail store is not connected to a far away place, it is connected to the warehouse a few miles down the road. By the time retail prices are too high, the retailer has already banked his winnings, and raising interest rates makes him do more investment and less retailing. 

John has deliberately put a nine month cycle in the banker loop, using Congressional regulations. By the time the loop cycles the retail store owner is already in Hawaii, and is in the banking business.  To see the problem more clearly reverse roles. Make the retailer a government goods store in DC. Then make the retail banker Goldman Sachs with their own office at the New York Fed. Its the same problem reversed. By the time Congress makes an price adjustment, Goldman Sachs is already in Hawaii, in the government goods business.


That brings us to the Canadian system. They have a lend and deposit rate, and the difference is called the corridor. Move both those up and down, and maybe widen the corridor a bit to change response time. Then just accumulate the interest rates in and out, not the principle;  keeping the flow in target requires a thousand lines of code, open source even. Modify the corridor width the change principle balance levels. The only real responsibility is keeping loan defaults near zero. I doubt that they even know inflation, their regression will make them think so, but really inflation will follow the flow. Its a very simple system, something  a three year old could do with a mud puddle. 

What algorithm might a corridor system use?  I would try this one:

 This is my favorite differential equation. Let f be the ratio of the out over the in rate and then let f move along its trajectory.  The corridor width and in/out ratio will remain balanced so principle does not accumulate. Doing this, then, the third moment of out/in and the first moment will always be balanced by the flow momentum. I think this works, I am pretty sure the universe uses this so it should work for Canada. In its current form it may target a net flow of zero.  But a bit of a scale factor on f and it might just radiate a bit of the old NGDPs. Another game to play it to set the step size, trying to match the Krugman angle of specialization.  One should be able to derive a yield curve from it, and that should match the structure of the Canadian economy.

Where do the good economists hang out?

They need their own journal, something like Prescott suggests, a Journal of Aggregate Sciences. Where the Hamilton, Sims, Cochrane, Farmer, and a host of others. They need to be separates from the sun spotters, the expectationists and forward guiders, the prior confirmationists; especially the time travelling economists. Most importantly, we need to identify universities which make the aggregate sciences and upper division specialty of probability and statistics. If you took undergraduate economics and got confused, you are likely a smart person.  I avoided the class, spotting it for fraud as soon as I looked at the chapter on banking theory. University presidents need to consider this problem. I make it my pledge, avoid commenting on the systematic fraud. When I find the good stuff, I will report on it.

What broke the Camel's back?
Romer, doing Ito's calculus where it was not valid.  The boneheads started taking expectations at the time, then treating that as a stochastic process squared, yet again, which is to much even for Ito's Calculus. The claim was Friedman did it in his book, and he was mostly wrong. Then it simply became a magic formula mostly considered trash in any sound statistics class.  That whole branch of economists needs to be moved into religious philosophy.

Then the reading of tea leaves soon followed as described by Jon Faust:

First, I believe that the Fed now strives for “no tea leaves” approach to communication. The FOMC declares in its strategy document that it “seeks to explain its monetary policy decisions to the public as clearly as possible.” This is a dramatic change from the situation not so long ago, when speaking about the future course of policy was viewed, both inside the Fed and by most central banks, as a mortal sin. The transparency revolution began tentatively decades ago, with the FOMC offering occasional terse hints about policy. Interested observers justifiably gazed at the few words offered up like so many tea leaves, seeking to divine the future course of policy. Expertise in this form of divination was much prized on Wall Street.

The Fed is bound by estimation theory, the data they see at the time is no where near the data plotted years later.  The nonsense is yet more of the expectation squared long after the fact.

California bored with our affirmative action apointees to DC Snore Zone

LA Times: Although U.S. Sens. Barbara Boxer and Dianne Feinstein — two of California's most experienced political figures — remain popular, a majority of state voters say they should not run for reelection, according to a new USC Dornsife/Los Angeles Times poll.
As analysts speculate about whether the Democratic stalwarts will seek additional six-year terms in coming years, 59% of registered voters said the state would be better off with new candidates for the two seats.
That sentiment was expressed by 79% of Republicans. But even many Democrats said it was time for new representation.
Forty-four percent of Democratic respondents preferred new candidates, compared with 43% who said Boxer and Feinstein should run again.

The two are about 143, years old, last time I counted.  I didn't even know Diane was alive, I thought we voted to leave her corpse back at the Swamp.

The hyperbola and hyperbolic

Just as the sine and cosine functions give a parametric equation for the ellipse, so the hyperbolic sine and hyperbolic cosine give a parametric equation for the hyperbola.
As

one has for any hyperbolic angle that the point

satisfies the equation

which is the equation of a hyperbola relative its canonical coordinate system.

This passage is from Wiki. All it means, from a dimesnional point of view, is that the Lucas numbers have reached their limit and the system is no longer hyperbolic, so it will be at disequiibrium, not adiabatic in its motion. Hence solar systems are still packing sphere, but the planets are not flexible so the eccentricity is very narrow, 3 degrees instead of 90 degrees. Hence the center emits light and protons. The protons emitted are just a shift in the Wythoff Array distributed to restore sphere packing. Eentually the star equilibriates, migrating back to the optimum dimensions, trying to get back to the Lucas numbers.

When the imbalance is great enough, the center acts like a quasar for some time, the accretion angle is near the fine structure, the effect is to rebuild the baryons. This likely happens when protons near the end of their lifetime. This would be a cycling universe, naturally rebuilding the very vacuum itself. In other words, the system is bound by the optimum sphere packing dimension, likely 12 or 15, and that dimensionality has to be maintained so the span across which the system moves up and down the Wythoff array is limited by the sphere packing dynamics.  The black hole is the extreme and Hawking radiation is simply the most extreme eccentricity allowed, and at that point protons will recycle through the baryon process.

Markov numbers and the Wythoff array are likely related, and there is a bounded region in which the configuration of sphere packing must be contained. The universe is stuck, everywhere it can only get Pi computed to the dimensional optimum, other wise additive combinatorics do not work and causality is erased. The answer is 'because', the because why game has a finite terminal.

If the Fed raises IOER, will Republican Communists scream and cry?

This is the rate of growth of excess reserves, mainly a demand deposit account for the member banks.  Note the period from 2011 through 2012 when the rate of growth bounced around zero.  I would consider this normal for a demand deposit account, perhaps a little more growth maybe, but near normal.  Note that after the QE ended, the excess reserves start to look like a normal demand deposit account, once again.

Note the frequency at which the funds change, about once a quarter, likely because the member banks and non member banks use these funds to adjust liquidity levels on a quarterly basis.

What happens if the Fed raises the interest paid on these reserves? Member banks will likely do a combination of adjustments.  They might raise the rates they pay on demand deposits for large non-member banks, and likely the debt cartel will raise the interest DC pays on two year money, and DC will be pushed farther out on the curve.

If all this works, excess reserves will be two year stable, deposits offered by member banks to large institutions will be one year stable, and the Republican Communist party will scream bloody murder.  They intend to spend money like madmen.

It is literally impossible to raise rates at all as long as a bunch of lunatic Republican Communist Party members controls Congress.

This seems rather stupid

LA Times: Facing a deadline of Jan. 2 to begin issuing driver’s licenses to Californians in the country illegally, state officials said Friday they will pursue emergency approval of regulations that spell out which documents must be provided to prove identity and state residency.
The Legislature and governor in 2013 approved a new law that requires the state Department of Motor Vehicles to issue a driver’s license, starting in 2015, to anyone who can prove their identity and California residence as well as pass a driving-knowledge and road-skills test.

The public process for approving the documentation has taken months so the normal 180-day timeline for enacting regulations will take too long to meet the Jan. 2 deadline. The state will pursue the normal process but also an emergency process that takes 15 days and goes through the state Office of Administrative Law.

A couple of points.  What kind of documentation do I need to prove I am illegal? Can I register to vote in say, Lithuania, so as to prove my illegality.

Second,  I would have thought that California's secession and formation of the Pacific Federation would have already made us all completely illegal in the eyes of the Swamplanders on the East Coast. My favorite president,  Peña Nieto, is equally forbidden to vote for swamp creatures as me. We are all rebels now.

My favorite president may not be popular in Mexico, but he is still my president and I think Mexicans are nuts for not liking the guy. So Mexico should quit  picking on  the official president of the Pacific Federation and let the guy drive his damn car wherever he wants in California.