tag:blogger.com,1999:blog-5776375569387669394.post5538260533916414263..comments2023-10-19T10:43:38.825-04:00Comments on Free Advice: How (Falsely!) Low Interest Rates Contributed to the Housing BoomBob Murphyhttp://www.blogger.com/profile/04001108408649311528noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-5776375569387669394.post-76757731014573597332010-01-12T11:34:49.521-05:002010-01-12T11:34:49.521-05:00Gene, your counterexample also occured to me after...Gene, your counterexample also occured to me after I wrote my post. So, no, the new gold would not push the interest rate artificially low (it could actually push the interest rate up if it was immediately spent instead of lent, right?). I would consider it as a genuine (market) influence on the interest rate, since gold is a commodity and a genuine saving.Fredriknoreply@blogger.comtag:blogger.com,1999:blog-5776375569387669394.post-27807036374211475282010-01-11T14:12:14.825-05:002010-01-11T14:12:14.825-05:00So Frederik, if, under the 100%-reserve gold stand...So Frederik, if, under the 100%-reserve gold standard, anyone in the world is mining gold, then the interest rate must be too low?gcallahhttps://www.blogger.com/profile/10065877215969589482noreply@blogger.comtag:blogger.com,1999:blog-5776375569387669394.post-76205638180111001182010-01-11T13:11:47.293-05:002010-01-11T13:11:47.293-05:00Regarding whether the fed interest rate is below o...Regarding whether the fed interest rate is below or above the market rate: Given that a market rate would prevail under a fixed money supply, isn't the sign of a fed target rate being below the market rate precisely that the money supply (M0) is increasing?Fredriknoreply@blogger.comtag:blogger.com,1999:blog-5776375569387669394.post-50814009726705968852010-01-11T10:36:33.042-05:002010-01-11T10:36:33.042-05:00Bob you are indeed misrepresenting Tyler's ana...Bob you are indeed misrepresenting Tyler's analogy. Thats not what he said. He said something more like: If the state subsidizes banana purchases, and then people put a bunch of bananas on roofs (on their own), and roofs collapse, is it the state's fauls?Contemplationistnoreply@blogger.comtag:blogger.com,1999:blog-5776375569387669394.post-23444978352704344432010-01-09T18:07:49.775-05:002010-01-09T18:07:49.775-05:00"Suppose the government started paying people..."Suppose the government started paying people to store bananas on their roofs. After a while, if a bunch of roofs started caving in, would that be a sign of irrational homeowners or bad government policies? Surely the people who believe in the free market should be troubled that homeowners would respond so stupidly to a government incentive that they had the option of refusing."<br /><br />A better analogy, using Carilli and Dempster: Let's the government rewarded you nicely for storing the bananas, and penalized you harshly for not storing them. Let's say they made it so that, given their terms, it was perfectly rational to store bananas on the roof, even given the vastly greater risk of roof collapse.<br /><br />Then homeowners are not responding stupidly, even given the "collapse" of the housing market. And this is exactly the kind of situation that Carilli and Dempster say is going on in an ABC -- and I think they are correct.gcallahhttps://www.blogger.com/profile/10065877215969589482noreply@blogger.comtag:blogger.com,1999:blog-5776375569387669394.post-27684697179473177172010-01-09T18:06:26.564-05:002010-01-09T18:06:26.564-05:00This comment has been removed by the author.gcallahhttps://www.blogger.com/profile/10065877215969589482noreply@blogger.comtag:blogger.com,1999:blog-5776375569387669394.post-84211855217306536522010-01-09T14:11:57.564-05:002010-01-09T14:11:57.564-05:00...or not manipulate the interest rate.
Yep, you&......or not manipulate the interest rate.<br /><br />Yep, you're right, we get some more regulations that distort incentives.von Pepenoreply@blogger.comtag:blogger.com,1999:blog-5776375569387669394.post-45424883654875422102010-01-09T14:04:43.679-05:002010-01-09T14:04:43.679-05:00Yes that's true von Pepe. I guess Tyler (and I...Yes that's true von Pepe. I guess Tyler (and I hope I'm not getting mixed up, but I'm pretty sure it was him) would say that at least some of the houseflippers and i-banks etc. wished they had done nothing at all, versus what they ended up doing.<br /><br />But yeah you make a good point. A lot of these "stupid" executives were still way up during the 2000s, even if they got fired in disgrace. Of course that just means Geithner needs to regulate corporate bonuses etc., right?Bob Murphyhttps://www.blogger.com/profile/04001108408649311528noreply@blogger.comtag:blogger.com,1999:blog-5776375569387669394.post-72767547059448515612010-01-09T13:51:15.572-05:002010-01-09T13:51:15.572-05:00If the governemnt paid them more to store the bana...If the governemnt paid them more to store the banannas over the TIME until the collapse than the cost to replace the roof weren't the 'free-marketers' being rational?von Pepenoreply@blogger.comtag:blogger.com,1999:blog-5776375569387669394.post-12697862239453675722010-01-09T12:56:35.524-05:002010-01-09T12:56:35.524-05:00What do you make of this claim that the current re...What do you make of this claim that the current recession was brought on by a shortage of money?<br /><br />http://www.facebook.com/photo.php?pid=735982&op=4&o=global&view=global&subj=2204459400&id=795827458#/photo.php?pid=2059743&op=4&o=global&view=global&subj=2204459400&id=637688546&fbid=91364983546<br /><br />The graph used there shows falling M1 y/y growth between 2004-07, which the author claims is what caused commodity prices to fall and credit to collapse. <br /><br />I would think that <a href="http://research.stlouisfed.org/fred2/graph/?chart_type=line&s%5B1%5D%5Bid%5D=M1&s%5B1%5D%5Brange%5D=10yrs" rel="nofollow">this</a> graph from Fed showing the absolute growth in M1, especially since 2001, would be used as a good counter. <br /><br />Also <a href="http://www.facebook.com/photo.php?pid=2017769&op=4&o=all&view=all&subj=2204459400&aid=-1&oid=2204459400&id=867955004" rel="nofollow">this</a> is a funny picture from the same group. Make sure to read the second comment!Unknownhttps://www.blogger.com/profile/08990715051451620558noreply@blogger.com