Chris

@Mark_Graph @kit_lowe Read the paper . Happy ro argue specific points rather than “i just dont feel it”. BTW, CBs do way more that that. They are very necessary.

@real_bedwah @kit_lowe If QE is a placebo and QT is irrelevant and remittances are pointless and taxes do not fund spending, then most of what governments and central banks do is either unnecessary or theatrical. I am not persuaded.

Warsh starts as Fed chair today. looks like he has a battle on his hands with Barr. BARR SAYS SHRINKING FED'S BALANCE SHEET IS THE WRONG GOAL

@taipan168 Pretty good idea. Sadly they are not trying to solve anything but this

So here's my tax proposal. - Cut top two tax rates to 30%: cost $20-25bn - Increase GST to 17.5%: revenue $75bn - Lowest 60% income households receive compensation for higher GST: cost $40bn Solves all the problems with CGT, trusts, differential company vs individual tax rates.

Inflationary in that it enables the government to increase spending in real terms - which, can be inflationary. But not because of indexed brackets.

@Mark_Graph @kit_lowe Treasury pays fed - fed bonds holdings fall, reserves (cash) rise. Total fed assets unchanged. Treasury get cash from new issuance to banks (unless gvt running surplus). So in effect there is a swap. Nothing changes in private sector. The whole process is irrelevant.

@real_bedwah @kit_lowe Shrinking happens through passive runoff. Bonds mature, Treasury pays the Fed from the TGA, balance sheet falls. No new issuance to banks, no swap. The mechanism does not require what you describe.

@Mark_Graph @kit_lowe To make it smaller he would have to issue securities to the banks (a swap) which increase payments to the banks as the slope of yld curve is positive. He cant jsut make it smaller in isolation- there needs to be a transaction. Also, additional remittances to tsy is irrelevant

@real_bedwah @kit_lowe Warsh would say a smaller balance sheet restores Fed remittances to Treasury because interest is not being paid to banks. Tens of billions per year that would now flow back to taxpayers. Why is that not a good goal?

@Mark_Graph @kit_lowe I dont- but it is the wrong goal (due to its irrelevance.)

@real_bedwah @kit_lowe Why are you opposed to the Warsh unwind if it is immaterial to the economy?

@Mark_Graph @kit_lowe It doesn’t matter - just as my paper highlighted

@real_bedwah @kit_lowe If QE is just an asset swap with no real effects, why does unwinding it matter? The same logic that makes QE neutral should make QT neutral.

@Mark_Graph @kit_lowe No - Warsh is not correct. At best QE is a placebo. See mechanics of QE in paper attached quaygi.com/insights/artic…

The whole QE/QT post 2008/GFC is complex. It has resulted in massive asset inflation and massive wealth inequality. It is remarkably challenging to unwind. And 1990s Japan (and Japan since then) is the cautionary tale of stagnation that follows. My suspicion is that Warsh is technically more correct. But a slow pace of reform is critical to success.

Yep

At any point in time, rents are always maximized by landlords for a given demand / supply environment. The real issue is several years down the track as new supply collapses due to the impact of a disincentivized construction industry. And the impact is structural not cyclical.

@DrCameronMurray @BenPhillips_ANU Not sure that’s the plan…

@BenPhillips_ANU I don't really get it. If you are going to pick all these political fights, you would want some major outcome for it—like more tax from capital so you can tax work less. What's your take?

Much talk about the neg gearing/cap gains changes. Will increase revenue over the remainder of the decade (forwards) from about $3000b to $3003b

@Peter_Fitz A real journo would have ask if this was true why didn’t the same policy have the same effect on shares? Other assets?

Makes sense to me. You?

@AlboMP Page 158 from Budget paper 1...treasury estimates 35k FEWER houses in new supply due to your tax changes

PSA The role of the secondary market is to send price signals to the primary market. Policies designed to kill the secondary market will kill the primary market. #housing

@EdmundSimms Less incentive to build supply (short term end price uncertainty) coupled with higher required pre-tax yields on investment = ongoing under supply and higher rent per construction $ spent.

@real_bedwah How will this play out?

This government (and many Aussies) are about to get a crash course lesson in basic land economics.

Incredible that a suite of policies that benefited and has been monetised by an older generation (including the PM), is now denied to a younger generation and is somehow considered “generational equality”. Our electorate really is that dumb.

@thebeatles m.youtube.com/watch?v=M4vbJQ…

Time to show that song some love

I’m calling it. This is a parody account.

@Mark_Graph Tim Gurner. Made some comments about unemployment. Sounds like a good candidate for governor of RBA to me. bbc.com/news/business-…

@real_bedwah Who is he?

Warren is always worth listening to. Always insightful. afr.com/markets/debt-m…