Describing the latest Fed pronouncement, David Andolfatto writes,
how new are these buzzwords? They’re not new at all. Consider this from the December 09, 2003 FOMC statement
I have said before that the economy resembles 2003. Output has recovered more strongly than employment. Long-term bond rates are puzzlingly low. House prices have been rising (quite rapidly near us in suburban Maryland). Policy makers are trying to loosen mortgage credit.
UPDATE: See also Mark Thoma/Tim Duy.
Money velocity is down by near 30% which makes a difference. Velocity will be noticably higher before rates start to rise, suddenly. The other difference is that up to today, government spending has been relatively flat.
The black swan would be a fair sized correction in the stock market and suddenly all the pension planners want to exit the same door. I can easily see the California pension system try to exit and grab dollar gains all at the same time, a typical move for California. That in turn causes large layoffs and who knows what Caifornia government does then.