zcase's comments

zcase | 6 years ago | on: Fed cuts half point in emergency move amid spreading virus

50 bps cut, initial rally, faded super fast and now down for the day. Would be interested to see if Fed cuts further.

The first order effects weren't so large to stem the selloff (first order meaning the PV effect of lowering discount rate).

As for second order effects (rate cuts to spur economic activity), I'm not even bullish about the mechanism to transmit rate cuts to the real economy normally, but I think in a quarantine situation, those mechanisms are even more diminished as there's less economic activity. Thinking out loud, demand will probably just hit a wall--there's no elasticity here when people are worried about their lives.

The only mechanism that sounds plausible to flow through to the real economy is fiscal. Government buys Pampers, burns them, buys them again. Or keep lowering rates to raise asset prices by a purely mechanical lowering of discount factor.

zcase | 8 years ago | on: The Western Elite from a Chinese Perspective

"Rather, the increase in inflation was due to things like tax increases, exchange rate fluctuations, oil price moves, etc."

It seems to me that tax cutting could lead to increased consumption and therefore a reduction in GDP slack and upward pressure on prices (inflation). Why is it that tax increases would lead to inflation?

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