In my post yesterday, I was a bit puzzled about why the DOW was up after the rather disappointing FOMC statement that was released on Thursday afternoon. I realized that I missed something pretty big after waking up to the news that the BOJ decided to step QE up a few notches. Of course I thought from the beginning it should have cranked the printing presses up to 11 from the get go, and keep them going until the objective is hit.
This is sort of interesting for a few different reasons beyond the old inflation fallacy that printing money over and above what is in existence results in a corresponding increase in the price level. I’ve read Dr. Sumner explain that if the money supply doubles, the price level will double. But I don’t see that in Japan.
Perhaps that explanation was overly simplified for illustrative purposes, but it sort of detracts from several other points he makes about QE and the present predicament of PCE inflation moving only a few basis points over two years – which could be more or less noise while the majority of movement occurred after the taper was well under way.
When I wrote about a post David Glasner made that had to do with post traumatic inflation syndrome, I had some unpleasant things to say about the marching out of the debasement story, exclaiming that someone would have to walk me through the logic of how easy or difficult it might be to debase worthless paper. And apparently it is rather difficult, considering the BOJ announced 18 months ago it would be doubling the money supply and has barely budged the inflation needle. Wow. I wonder where all those yen could possibly be going… To a hungry supply side maybe? Oh, no. It can’t possibly be that the Japanese economy is soaking up all those yen and putting it to good use growing the pie.
Now we see the DOW shoot up 200 points across the board on the BOJ news. The supply side is global. There are 7.2 bn people on the planet. Thus, inflation targeting is a dead letter, about as useful as boobs on a boar.
Marcus Nunes has a new post about John Williams, President of the San Fran Fed, dishing about alternative nominal targets for the Fed to consider. I saw a similar article this morning on CNBC and saved it for a topic to write about. But Marcus has a much better article about it, and wrote a much better post about it than I could so I’ll defer that story to him. It’s great to hear more people talking about NGDI targeting. Market Monetarism has come a long way since Sumner started blogging his ideas in 2009 – we’re soon to be coming off the fringe.
In other news, I read a few days ago that IBM and Twitter have entered a data analytics agreement. I don’t have any of the details, but they don’t matter much for my purposes. The announcement of the deal came shortly after Twitter announced rather disappointing earnings; and I thought the timing of the deal to be sort of strange considering that Twitter was a spin-off from Big Blue. Though, I really am not surprised because there is only so much one can do with the Twitter platform other than watching politicians get themselves into trouble with it. It seems to me that it would be better suited for a non-profit organization as a sort of public good ensuring free speech, not something to make a big pile of cash from. Just thinking about it as a publicly traded company doesn’t feel right – want some McDonald’s ads with your free speech with everything you tweet analyzed, bottled and sold to the highest bidder at the same time? That’s just wrong.