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Home Publications Blogs Beat the Press NYT Says That the Rise of Manufacturing Output Almost to December Levels Is Grounds for the Fed to Tighten

NYT Says That the Rise of Manufacturing Output Almost to December Levels Is Grounds for the Fed to Tighten

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Monday, 17 March 2014 17:04

The headline of the piece was "manufacturing gains likely to spur Fed's stimulus cuts." The actual news was that manufacturing output was reported as rising 0.8 percent in February, reversing most of a 0.9 percent decline in January. It's a bit hard to see this as solid growth. If we add in December, manufacturing has grown at a 0.4 percent annual rate over the last three months.

Manufacturing output is just 1.5 percent above its year ago level. This has led to a drop in the capacity utilization rate of 0.1 percentage point to 76.4 percent. It is pretty hard to see this as an argument for cutting back stimulus.

Comments (5)Add Comment
Hyper Inflation I Tells Ya!
written by Paul Mathis, March 17, 2014 8:01
Maybe the NYT has hired German reporters for economics stories. Any growth above 1% is simply too risky. And these are the same guys who drive 200 mph on the autobahn.
Yellin' at Yellen
written by Squeezed Turnip, March 18, 2014 4:15
The banksters are just setting up for an attack on Yellen, after she gets the FOMC to do the right thing.
.....................
written by DJB, March 18, 2014 7:49

yes but who asked you because its

"likely to spur Fed's stimulus cuts"

stop interrupting a perfectly good delusion

...
written by Kat, March 18, 2014 8:24
Aren't inventories high?
Fed QE is NOT STIMULUS
written by Potomac Oracle, March 25, 2014 11:32
As you know, QE (Quantitative Easing) is the Fed’s purchase of privately-owned T-securities. The above-mentioned article states Fed stimulus needs to be wound down. QE is an austerity tool, and austerity is a lie, sold to the populace — a lie that absolutely is guaranteed to depress an economy. It’s part of the BIG LIE.

QE does not stimulate the economy, because it was not designed to stimulate the economy.

By “redeeming” T-securities before their redemption date, the Fed reduces the supply, which increases the price of those T-securities still available. As with all fixed interest securities, when the price goes up, the interest rate goes down.

The sole purpose of QE was to reduce long term interest rates, and by all available evidence, reducing interest rates does not stimulate anything. In fact, it is recessionary.

QE does not add dollars to the economy, for the simple reason that those dollars already are in the economy. T-securities are nothing more than deposits (similar to savings accounts) at the Federal Reserve Bank. To redeem your T-securities, the federal government merely transfers your dollars from your T-security account to your checking account.

The process is identical with transferring dollars from your savings account to your checking account. No new dollars created.

Unless you believe that transferring dollars from your savings account to your checking account is stimulative, you readily can see that QE adds no dollars to the economy, and so stimulates nothing.

But, why is QE recessionary? Because by lowering interest rates, QE reduces the amount of interest the federal government pays into the private economy.

QE was designed not to work, because by reducing the amount of interest the federal government pays, QE reduces the deficit — and that was the goal all along.



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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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