Ellen Frank wrote:
... rentiers hoarding funds and businesses looking
to expand.
I don't remember this bit. Why would rentiers
want to hoard?
--
Barnet Wagman
email: [EMAIL PROTECTED]
Forgive me for being a bit dense. I haven't kept up
with this literature, but the idea that there is no market for
loanable funds seems to fly in the face of the evidence.
I mean someone issued all those corporate bonds and
took out all those CI loans, right? There is, I know, a
lot of
Yes, I understand that central banks prefer to operate in
bills and that this means the short market is subject to
different forces. But what I'm asking is, aren't these
market connected via the responses of financial
players? Right now, for example, a 6-month commercial
bill is paying
At 11:34 PM 3/21/00 -0800, you wrote:
Jim Devine wrote:
The Fed is driving up (and tomorrow probably will drive up) short rates
while the Treasury is driving down long rates. However, as Ellen notes,
there are real limits to this.
The Treasury probably has $220 billion to spend on long
Hi Ellen,
It's me that's dense for not being clear that I'm not defending Operation
Twist. I'm just saying that it provides the best historical precedent for
current monetary policy.
That there is no market for loanable funds does not fly in the face of the
evidence, just in the face of the
Ellen Frank wrote:
snip
...aren't these
market connected via the responses of financial
players?
I should hope so. Isn't everything connected to everything else in an
advanced capitalist economy? But the point of theory is to abstract from
some connections in order to emphasize others as
Jim Devine wrote:
is this a lot or a little? Tom, I must admit I find your comments on this
issue to be a bit obscure.
Sorry. I prefer to think that it's the issues that are obscure, but maybe
it's just me. $220 billion is a lot. For example, as an alternative to
loanable funds theory or
As I recall the explanation, long-term capital investment depends upon
long-term rates, while short-term consumption is affected by short-term
rates. In fact, of course, investment is pretty insensitive to interest
rates.
Ellen Frank wrote:
I don't know Jim, what do you think? Was it the
The Fed is driving up (and tomorrow probably will drive up) short rates
while the Treasury is driving down long rates. However, as Ellen notes,
there are real limits to this. The banks profited mightily from high long
rates and low short rates in the early nineties (allowing them to escape
Michael Perelman wrote:
As I recall the explanation, long-term capital investment depends upon
long-term rates, while short-term consumption is affected by short-term
rates. In fact, of course, investment is pretty insensitive to interest
rates.
Was this before the yield curve was seen as a
. That means that the long rate can only fall relative to the
current short rate if expected short-term rates are falling. That is, the
long rate can fall relative to the federal funds rate only if people
expect
the Fed to loosen up in the future (increasing the supply of funds) or
the
demand
I wrote:
That means that the long rate can only fall relative to the current
short rate if expected short-term rates are falling. That is, the long
rate can fall relative to the federal funds rate only if people expect
the Fed to loosen up in the future (increasing the supply of funds) or
Ellen Frank wrote:
I've never understood the reasoning behind operation twist.
Although a drop in long-rates would make it cheaper to
borrow and stimulate real spending, a rise in short rates,
it seems, would make lenders less willing lend long and finance
real investment. The reasoning
Michael Perelman wrote:
As I recall the explanation, long-term capital investment depends upon
long-term rates, while short-term consumption is affected by short-term
rates. In fact, of course, investment is pretty insensitive to interest
rates.
The argument has less to do with
Jim Devine wrote:
The Fed is driving up (and tomorrow probably will drive up) short rates
while the Treasury is driving down long rates. However, as Ellen notes,
there are real limits to this.
The Treasury probably has $220 billion to spend on long bonds between now
and November.
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