Sunday, October 4, 2015

Scott Sumner: There’s no such thing as “out of ammo”

Scott Sumner writes:
There’s no such thing as “out of ammo”
 First of all, there is no evidence that central bankers are not achieving their goals.
The Fed is about to raise rates.  
There is not much else I agree with in the Sumner post. other than the headline and the two sentences quoted, but this puts him way ahead of most economists, even some so-called Austrian economist. who think the Fed is out of ammo.

(Note: As far as the rate hike, I believe it is completely determined at this point on short-term stock market trends. Stock market activity could go either way between now and the October and December FOMC monetary policy meetings. But it appears, at this point. that we are setting up for a strong first quarter of 2016 for the stock market---though I reserve the right to change my view on 2016 as money growth numbers come in between now and the end of the year.)


(ht Nick Badalamenti)


  1. I can't imagine Schiff being wrong about how the Fed is trapped on rate hikes, and that is much more likely to expect QE4.

    Labour participation is down, most "new" jobs are part time, temporary, and in low wage industries. Yellen has said over and over that she will raise rates when the labor market improves, but it is a disaster.

    Furthermore the economy is addicted to credit and CPI is low. Production is trending down too. Raising interest rates will lead to massive layoffs.

    1. The unemployment rate is the interesting part of the debate. You have RW on one side, & a lot of people on the other side- including Austrians like Ron Paul- saying the unemployment rate is a BS number rigged for political reasons and it's much worse than we are being led to believe.

      I'm really just watching the whole thing with interest as I don't know who is right, but I am holding to the view that the money supply is a leading indicator of what to expect from the economy even over the unemployment rate given it is a fundamental of ABCT.

      Purely anecdotally, it's very hard to find qualified people in my field...but there are a lot of unqualified people trying to find jobs in again the whole question of what unemployment "is" and it's role in the bigger economic picture is somewhat enigmatic to me for now.

      I find it ironic that the Fed claims it's "data driven", yet the only metric we consistently get is "2% inflation"....we don't know what they think is the "right" amount of unemployment, the right amount of GDP or stock market growth, or much anything else. I really do think the Fed is flying by the seat of their pants.

  2. "Out of ammo" is poor way to describe the situation the Fed finds itself in. It could do all sorts of crazy things that would constitute "firing ammo", such as hiking rates 10% overnight, publicly buying equities, or selling off its Trillions iin bond holdings all at once. In my opinion, a better colloquialism is the Fed is "stuck between a rock and a hard place" or "damned if they do, damned if they don't."