FT on Oz as well http://ftalphaville.ft.com/blog/2012/08/28/1134681/is-australia-in-the-same-boat-as-europe/ As John McClane might say, "welcome to the party pal"
Do something nice for Australia - short AUDUSD Given the "obvious" nature of some of these monster trades, why do so few traders profit? A couple reasons: For one, a lot of traders are focused on short to intermediate term time frames - which is no bad thing at all, but it means they wind up jumping in and out for small bites rather than building a big position over time and catching a monster trend by the tail... Read full notes here
The Magical World of Charles Evans Why would a Federal Reserve official assume any direct connection between buying bonds and lowering the jobless rate? Is there any sort of logic or rationale whatsoever behind this view? Can someone, anyone, make a credible case for the chain of logic that Evans assumes - the if / then assertion that "if" the Fed buys more bonds, "then" unemployment will fall? Read full piece here
If I may, how about a (somewhat rhetorical) question in response to your question... Is there a direct connection between the main short rate (FedFunds, in this case) and the jobless rate?
Ah, my friend, what sort of a macro shag are you if you don't know and luv the infamous Taylor Rule? Especially if Taylor gets picked by Romney to replace Benjy... The Taylor Rule-like frameworks have been the basis for all the rate machinations and QE is just treated as the extension of rate policy by other means.
Ah, right. I assumed you meant an actual real-world cause and effect connection, as opposed to an overly simplified bullshit theory that nicely sums up the failings of artificially rigid neoclassical economics... if Evans' rebuttal boils down to "because this is what the textbook says to do," then he is just as big a buffoon as I thought.
Well, to be sure, there's probably some reasonable empirical grounds to believe that the Taylor Rule is a reasonable model (with the emphasis on model). Many central banks across the world (BoE, BoC, RBNZ, etc) use these approaches. Like all models, these aren't perfect, but then what in life is?
Right, so what exactly are those empirical grounds? What is the boots on the ground explanation? That is what I'm trying to figure out... my strong suspicion, growing close to certainty now, is that the assumptions of whatever model is being used (to justify Evans' thinking) are ham-fisted at best, wholly inappropriate at worst... an appeal to tradition and academic authority that takes the place of actual sound reasoning... we already know via convincing argument by Ray Dalio, for example, that standard policy as applied to normal cyclical downturns is either ineffective or possibly even highly counterproductive in a deleveraging.
The empirical grounds are, basically, a bunch of regressions performed over periods of non-zero interest rates. And yes, you see, that's the meat of the debate... Let's say you loosely believe the Taylor Rule, as it's applied during "normal" periods. Given that it operates with nominal rates, the big question that naturally arises is what to do with it when you are at the zero bound. That is where QE and the whole "dropping money from helicopters" idea comes in. There's a belief that QE can be a way of lowering nominal rates in a roundabout way. Whether you agree with this and whether there are costs associated with stuffing the system full of bank reserves is all a matter of personal preference. Clearly, Evans is a super-dovish guy who is at the far end of the spectrum and thinks that QE is a good thing, come hell or high water. I, as well as you and many others, disagree, but that's the nature of the debate, innit?