Jackson Hole: the three tough questions central banks must ask themselves

The Telegraph ^ | 22 August 2016 • 5:32pm | Matthew Lynn

[expat_panama]

....men and women who control the global monetary system get together for three days to debate the challenges facing the world economy – and how they might use monetary policy to fix it.

This year’s title is “Designing Resilient Monetary Policy Frameworks for the Future”...

...Here are three good ones to start with: is quantitative easting actually working?

Have we broken the banking system?

And isn’t it time to update economic models that no longer tell us much about the real world? First, why isn’t QE working the way it was meant to?

For a long time, central bankers were confident that they could always generate inflation if they needed to....

...Secondly, are we destroying the banking system?

Zero rates and even negative rates seem to be doing very little to revive the economy. Despite slightly better growth figures in the US and the UK, there is very little evidence of a sustained revival in global output...

...Finally, the third question is perhaps the toughest of all.

...When rates come down to zero, it is impossible for banks to make money on the margin between deposits and loans. Credit:

In the past, economic policy has changed radically in response to a crisis. After the great depression of the 1930s, central bankers switched to Keynesian demand management, boosting demand when an economy turned down...

... In a proper science, when a model no longer works, the theory has to change to fit the facts.

Economics doesn’t work like that nearly as often as it should – just look at the way many of its leading figures are still hysterically predicting that Brexit will be a catastrophe for the economy even in the face of the resolutely upbeat data....

...far more valuable than wheeling out reheated platitudes about growth and stability.

[expat_panama]

Donno about y'all but I had too look this up to find out what the party was all about (from here):

Each year since 1978, the Federal Reserve Bank of Kansas City has sponsored a symposium on an important economic issue facing the U.S. and world economies. Symposium participants include prominent central bankers, finance ministers, academics, and financial market participants from around the world. The participants convene to discuss the economic issues, implications, and policy options pertaining to the symposium topic. The symposium proceedings include papers, commentary, and discussion. 

The 2016 Economic Symposium, "Designing Resilient Monetary Policy Frameworks for the Future," will take place Aug. 25-27, 2016.  (The program will be available at 6 p.m., MT, Aug. 25, 2016).

Personally, I've never seen the world economy as a central bank issue but rather a central leadership issue.  Rate hikes or zirp, doesn't matter when tax'n'spending is all the rage.

[expat_panama]

Good morning!  Silver's back down to $19 and what there was for a stock rally has closed flat in even weaker trade.  Looking ahead futures traders see stocks up a little and metals down a lot.

A half hour after opening: New Home Sales.

So w/ all this nothing we got lots to say about it:

Why Can't We See We're Living In Golden Age? - Johan Norberg, Spectator
Trump & Clinton's Manuf.-Job Promises Are Cruel - Geoff Colvin, Fortune
Millennial Retirement Will Be Easy: Get Into Stocks - Sean Williams, USA
Sector That Performs Best When Oil Is Slumping - Mark DeCambre, MW
Small Investors Worried, So You Shouldn't Be - Simon Constable, Street
Deutsche Bank's $10 Billion Russian Scandal - Ed Caesar, The New Yorker
Billionaires Will Take Us to Space - Christian Davenport, Washington Post
Trillions Spent on Climate, Lots of Harm - Richard Rahn,Washington Times

[2001convSVT]

Art Laffer, explained it all back in the 80’s, with his famous curve that show us a relationship between optimum economic activity, and the optimum rate of taxation, that suggests the existence of an optimum tax rate of 17%, and every percent over 17% slow down the economy. I have a feeling that around the world, you will find rates many times over 17%.

[AndyJackson]

I've never seen the world economy as a central bank issue but rather a central leadership issue. Rate hikes or zirp, doesn't matter when tax'n'spending is all the rage.

But they spend without taxing by making up the difference with "borrowing." There is no disincentive to borrowing when the true costs of borrowing are socialized by driving down interests rates to near zero.

It removes all incentive for frugality when spending taxpayer dollars. Central banks have been funding globalism.

[jjotto]

The $17 trillion US economy yields around $7 trillion in tax revenue to various levels of government.

[CincyRichieRich]

They are all paid very well, likely from some nebulous sources; ergo, there is no incentive for them to look out for us, only themselves and their beneficiaries.

[2001convSVT]

The rate is of most importance, after a shop keeper or farmer sees the cost of doing business rise past a certain level, the risks of continuing to do business is reduced and halted. At the 41% tax rate you site we are on the verge of stalling out (7/17).

[wbill]

the risks of continuing to do business is reduced and halted

This is absolutely the truth.

I know several consultants who only work 6-8 months a year. Anything more than that, and they're paying far more to the government than they're putting in their own pocket, so they say "Why Bother?".

Of course, there are ways around it - deferred pay and so on. One guy occasionally does some "pro bono" work for a longtime customer - he figures that the good will (and good references!) it generates is more valuable than a paycheck that would get taxed at well over 50%.

[Buckeye McFrog]

They don’t have an answer for any of those.

Hence the global game of Three Card Monte shall continue on indefinitely.

[expat_panama]

The markets are waiting for some clues from the Fed chairman  Janet Yellen on whether there will be another rate rise this year.

We were talking on this related thread about what affect a rate hike would have and my take is it would be a serious negative.   A year ago everyone was having this same conversaytion and the idea was that we needed a rate hike because, well, we just did --and it wouldn't hurt anything because the fact that even though there was no inflation at least we didn't have the runaway deflation like we did at the end of '08.

So come early December --even tho the price indexes were beginning to turn negative they hiked --and prices tanked.  For months. 

It may have been necessary for political reasons but imho it was pi$$poor monetary policy.

[expat_panama]

the optimum rate of taxation

That's what I meant by the issue being one for central leadership and not central banks, because while monetary policy has given us stable prices the reason econ activity's been slow is tax'n'spending. Fiscal policy.

[Wyatt's Torch]

Yep. There is zero need for a hike given conditions. December would now be earliest and unless something dramatically changes there won’t be a need then. In fact the chances of a cut are actually higher....

[2001convSVT]

Yes, the politicians have been raising tax rates without any understanding of how bad it is effecting the economy, all the while the central banks have been pumping money into the system to keep the economy working. Now that the tax rates are so out of balance, there is nothing the central bankers can do to keep up the economy. The way, I see it is the only way to get the economy working, in a positive way, is for tax rates to be cut, will it happen? Not without a major collapse somewhere.

[citizen]

“Central banks have been funding globalism. “

---

So what do we have? Cloward & Piven on a global scale?
Attempt to destroy nation-states by over-taxing every social program & handout in all countries? Force the savers’ returns to zero and thus kill off the savings life-style by starving them [of cash] to force them to go on the dole or die?

One could make a case for these events being the results of the efforts of the One-Worlders.