Saturday, January 27, 2024

Official NGDPLT peg calculations for Q42023

(copied from GitHub)

NGDP was $27,938.8 billion, per Table 3 (p. 10), line 1, column 6 of the advance GDP report, which came out Thursday at 1330Z.  Per CoinGecko XCHUSD was approximately $29.64 as of that time.  Token price calculations are as follows:

  • 2007Q4 NGDP = $14715 billion (base)
  • 2023Q3 NGDP = $27938.8 billion (current)
  • Inflation factor = 1.05/yr
  • N yrs = 16
  • $/NGDPLT = (27938.8/14715)/(1.05^16) = $0.8698
  • $/INGDP = 2-0.8698 = 1.1302
  • $/XCH = 29.64
  • XCH/NGDPLT = 0.8698/29.64 = 0.02935
  • XCH/INGDP = 1.1302/29.64 = 0.03813

I have done transactions on TibetSwap this morning to adjust the prices to target. Peg offers to defend these targets should be in later day. Peg offers will remain up for about a week after being posted.

Thursday, January 25, 2024

Saturday, December 9, 2023

US Nominal GDP Chia Asset Token

The token is described here.  The value of the NDGP token (symbol NGDPLT in the Chia ecosystem) is meant to track US GDP minus 5% per year, starting from Q4 2007.  The value of the inverse token (symbol INGDP) should be $2 minus the value of the NGDP token.  But they're priced in XCH (Chia), since everything in the Chia ecosystem trades in XCH—and since XCHUSD fluctuates, the actual available prices on TibetSwap go up and down between fixings.  I set the official price when the advance GDP report comes out, with offers on, which last for at least a week.

Monday, December 4, 2023

Touching Base

Because my domain registry reminded me that I'm forwarding, I wanted to make sure it still exists, and that Google doesn't delete it for inactivity. Wow, it's been almost 4 years now since I posted! Maybe I'll start again, seeing how the microblogging world has become so fractured and messy. I can talk about my NGDP token on the Chia network. But I don't have time to go into that now, so this is just a placeholder.

Friday, March 20, 2020

Nothing in Particular

This is me just making sure I still know how to post on this blog. Maybe I can still write more than 280 characters at a time.  I see that everything here, even my bio, is out of date.  And you only have to scroll down three posts to find one that subsequent experience has rendered embarrassingly wrong in its implications.  And the comments sections are overrun with so much spam that a real comment would wither and die from lack of water.  And I no longer look like my profile picture (in part because I never wear a tux anymore, but I think age has something to do with it too).

And I've made a career transition away from economics.

But economic times have gotten interesting again—horribly, horribly interesting.  So maybe I'll have something to say here.

Thursday, August 16, 2018

Is the Fed's Floor Falling Out?

David Beckworth has a piece up at Alt-M arguing that Trump's fiscal policy is causing problems for the "floor" system the Fed now uses to implement monetary policy.  Under the floor system, the Fed sets the rate of interest it pays on bank reserves, and it can then keep the banking system flush with cash without overstimulating the economy, since banks will prefer to hold excess cash as reserves.  It only works if the interest rate on reserves is above the rate banks can earn in the private market, otherwise they will drain their reserves to buy other assets.  A loose fiscal policy, David argues, is raising market rates through Treasury borrowing, thereby making it hard to maintain the floor system.

I take a different view: the Fed's current predicament, I would argue, says only a little about current fiscal policy but a lot about past monetary policy.  In particular, it says that, contrary to much conventional market wisdom at the time, monetary policy was too tight during the zero interest rate period.  But I'll get to that.

First, let's ask: is the floor system really in danger? I would say, no, or rather, it is only in danger if the Fed doesn't really like it.  In principle there is no particular problem with continuing the floor system if the Fed wishes to do so.

The floor system always depends on having an adequate supply of base money.  If there's not enough base money, the market rate rises, and the intended floor is no longer binding.  How much base money is enough?  That's something the Fed has to make an educated guess about.  If it's expecting a normal fiscal policy and instead gets a big tax cut paired with a lot of new spending, then it will find that its educated guess was wrong and the required amount of base money is more than it expected.  That's what's happening now.

But the situation is easily remedied. If the Fed wishes to continue the floor system, it simply has to create more base money through open market operations.  Or alternatively, it can raise the interest rate on reserves so that it is no longer in danger of being below the market interest rate.  But the Fed doesn't seem inclined to do the latter: there is no particular sign that interest rate pressure from fiscal policy is causing it to adopt a faster schedule for raising rates.

And the Fed has good reason not to raise rates more quickly.  We can debate about the particulars, but overall the Fed sees no strong sign that the economy is about to overheat, and even if it did, there's a case for allowing the inflation rate to rise temporarily to compensate for years of undershooting the target.  But surely fiscal policy is stimulating the US economy.  Presumably the Fed feels that this stimulus is appropriate for now, and in the absence of such fiscal stimulus, the Fed would be providing its own stimulus by slowing the increases in the interest rate it pays on reserves.

And in that case it would end up in the same predicament it is in now.  Interest rates overall would be lower, but market interest rates would still be rising more quickly than the Fed's floor rate.

So what is special about the Fed's current predicament?  Why do people suggest that the floor system is in trouble, rather than just saying the Fed needs to create more base money through open market operations, as one would normally do when the current floor is becoming problematic?

I think the answer is clear: the Fed created so much base money via open market operations during the zero interest rate period—via the Large Scale Asset Purchases (LSAP's), or Quantitative Easing (QE), as they were commonly known—that it figured it wouldn't have to create much more any time in the near future. It's kind of like when I spend $400 at the supermarket and then think, "I'll never have to go shopping again." It always turns out that I have to resume my market operations sooner than expected.

The upshot is this: the Fed thought it was doing a huge, huge thing with those LSAP's, but with the benefit of today's hindsight, it turns out they weren't so huge.  (Despite my $400 grocery purchase, I'm already running out of sandwich bread, and I don't have time to go shopping today.)  The Fed could have done a lot more.  And maybe if it had done more, the recovery would have been faster.

Tuesday, June 6, 2017

Record Job Openings Not As Impressive As It Sounds

I'm seeing a lot of headlines about a record high number of job openings.  While it's technically true that the number of job openings (as reported in the Job Openings and Labor Turnover Survey from the US Bureau of Labor Statistics) is at a record high, this statement needs lots and lots and lots of qualification.

The most important qualification is that the data only go back to December 2000.  If you were paying attention at the time, you remember that the dotcom bubble had already burst, and the US economy was heading into a recession.  And the subsequent housing boom wasn't really a broad hiring boom, so the JOLTS data don't give us an appropriate comparison for record job openings.

The second qualification is that the US economy has gotten larger over time, and the raw number of job openings largely reflects this scale increase rather than a boom in hiring.  The job openings rate is 4%, which is high for the series but has already been hit twice (July 2015 and July 2016).

The third qualification is that the jump in job openings in April was mostly in hotel and restaurant businesses, so it isn't a broad-based increase.

To put April's report in perspective, I estimated the job openings rate going back to 1951.  Prior to 1997, the estimates are based on the Conference Board's newspaper Help Wanted Index, normalized by total non-farm payrolls.  From 1997 to 2000, I adjusted the Help Wanted Index to reflect the increasing market share of online job advertising.  And I linked these data with the JOLTS data (which I use since December 2000) to allow interpreting the earlier data in terms of job openings rate.

From this chart it looks like today's 4% is historically typical.  Others may link the data differently and have somewhat different results, but in any case we're not in an unprecedented job opening boom.