N-gDp is a subset of money flows, M*Vt, in American Yale Professor Irving Fisher's truistic "equation of exchange" (total physical transactions, T, that finance both goods and services).
N-gDp is determined by the volume of goods & services coming on the market relative to the actual, transactions, flow of money. Thus M*Vt serves as a “guidepost” for N-gDp trajectories.
The rate-of-change in M*Vt didn't bottom until Nov. 2002. The stock market bottomed during the same time frame. I.e., N-gDp didn't bottom until Greenspan eased monetary policy.
The rate-of-change in M*Vt didn't bottom until March 2009. That's also when the stock market bottomed.
So, it is obvious that these Chairman ignored the course of N-gDp.
re: "Interest rates do not define the stance of monetary policy"
Exactly, Greenspan never tightened, and Bernanke never eased. Every interest rate move was "behind the inflationary curve". Monetarism involved controlling total legal reserves and reserve ratios.
But as Dr. Richard G. Anderson, the world's leading authority on bank reserves said in 2006 "There is general agreement that, for almost all banks throughout the world, statutory reserve requirements are not binding." They weren't binding on the expansion of credit and new money, but they definitely were on the downside. Bankrupt u Bernanke caused the GFC all by himself. Bernanke drained legal reserves until he created a recession.
The fallout was so bad that the commercial banking system experienced the first contraction of credit since the GD. It was so because the welfare of the DFIs is dependent upon the welfare of the NBFIs. The remuneration of interbank demand deposits decimated the NBFIs as the payment of interest was at a level that exceeded short-term interest rates which was explicitly illegal per the FSRRA of 2006. That is, we had a severe "credit crunch" or a destruction in the velocity of circulation, the curtailment in the activation of savings.
Apparently, Bernanke was scared of the explosion in excess reserves he created:
I am not a fan of "forward guidance" about what policy instrument setting will be in the future. It can only reduce Fed flexibility to react to new information. It's find to say "We will continue doing what it takes to maintain/achieve 2% PCE in a reasonable period." I believe that if the Fed had not been signaling no change in instruments in Sept '21 and December '23 it coud have started disinflation sooner and easing off of disinflation sooner.
In fall 2008 it should have given "forward guidance" that it would not to allow inflation to fall below target and then done what it took to fulfill that commitment. Instead it repeatedly promised NOT to do more than x billion of QE even when inflation was below target! A disaster of upside down "forward guidance."
N-gDp is a subset of money flows, M*Vt, in American Yale Professor Irving Fisher's truistic "equation of exchange" (total physical transactions, T, that finance both goods and services).
N-gDp is determined by the volume of goods & services coming on the market relative to the actual, transactions, flow of money. Thus M*Vt serves as a “guidepost” for N-gDp trajectories.
The rate-of-change in M*Vt didn't bottom until Nov. 2002. The stock market bottomed during the same time frame. I.e., N-gDp didn't bottom until Greenspan eased monetary policy.
The rate-of-change in M*Vt didn't bottom until March 2009. That's also when the stock market bottomed.
So, it is obvious that these Chairman ignored the course of N-gDp.
re: "Interest rates do not define the stance of monetary policy"
Exactly, Greenspan never tightened, and Bernanke never eased. Every interest rate move was "behind the inflationary curve". Monetarism involved controlling total legal reserves and reserve ratios.
But as Dr. Richard G. Anderson, the world's leading authority on bank reserves said in 2006 "There is general agreement that, for almost all banks throughout the world, statutory reserve requirements are not binding." They weren't binding on the expansion of credit and new money, but they definitely were on the downside. Bankrupt u Bernanke caused the GFC all by himself. Bernanke drained legal reserves until he created a recession.
The fallout was so bad that the commercial banking system experienced the first contraction of credit since the GD. It was so because the welfare of the DFIs is dependent upon the welfare of the NBFIs. The remuneration of interbank demand deposits decimated the NBFIs as the payment of interest was at a level that exceeded short-term interest rates which was explicitly illegal per the FSRRA of 2006. That is, we had a severe "credit crunch" or a destruction in the velocity of circulation, the curtailment in the activation of savings.
Apparently, Bernanke was scared of the explosion in excess reserves he created:
https://fred.stlouisfed.org/series/EXCRESNS
Bernanke still has no idea that he "did it again".
I am not a fan of "forward guidance" about what policy instrument setting will be in the future. It can only reduce Fed flexibility to react to new information. It's find to say "We will continue doing what it takes to maintain/achieve 2% PCE in a reasonable period." I believe that if the Fed had not been signaling no change in instruments in Sept '21 and December '23 it coud have started disinflation sooner and easing off of disinflation sooner.
In fall 2008 it should have given "forward guidance" that it would not to allow inflation to fall below target and then done what it took to fulfill that commitment. Instead it repeatedly promised NOT to do more than x billion of QE even when inflation was below target! A disaster of upside down "forward guidance."