Mark Gilbert of Bloomberg writes about his experience playing a game published by the Fed:
The San Francisco branch of the Federal Reserve has a game on its website that lets you play at being Chair of the Federal Reserve. After tinkering with it, I’ve come to some conclusions: Modeling the economy is a mug’s game, short-term interest rates are a poor tool for steering the economy, and I should never be given the job of running a central bank.
The website sets out the objectives:
Your job is to set monetary policy to achieve full employment and low price inflation. Your term will last four years (16 quarters). Keep unemployment close to its natural rate of 5 percent. Keep inflation near the Fed’s 2 percent inflation target. Pay attention to the headlines for information about the economy.
Here’s how I did:
Click for Big
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1783 % | 1,695.9 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1783 % | 3,098.0 |
| Floater | 4.88 % | 4.62 % | 87,257 | 16.20 | 4 | -0.1783 % | 1,785.4 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0000 % | 2,880.8 |
| SplitShare | 5.05 % | 4.67 % | 80,091 | 2.16 | 5 | 0.0000 % | 3,440.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0000 % | 2,684.3 |
| Perpetual-Premium | 5.50 % | 4.65 % | 62,963 | 1.95 | 12 | 0.0098 % | 2,686.7 |
| Perpetual-Discount | 5.13 % | 5.13 % | 87,257 | 15.00 | 26 | 0.0934 % | 2,908.9 |
| FixedReset | 4.98 % | 4.27 % | 148,525 | 6.98 | 92 | 0.1106 % | 2,045.3 |
| Deemed-Retractible | 5.02 % | 4.77 % | 112,122 | 1.21 | 32 | 0.0789 % | 2,799.3 |
| FloatingReset | 2.86 % | 4.47 % | 32,969 | 4.97 | 12 | -0.1054 % | 2,191.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRP.PR.G | FixedReset | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-09-26 Maturity Price : 20.26 Evaluated at bid price : 20.26 Bid-YTW : 4.48 % |
| BAM.PR.T | FixedReset | -1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-09-26 Maturity Price : 15.38 Evaluated at bid price : 15.38 Bid-YTW : 4.81 % |
| TRP.PR.C | FixedReset | 1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-09-26 Maturity Price : 13.38 Evaluated at bid price : 13.38 Bid-YTW : 4.08 % |
| NA.PR.Q | FixedReset | 1.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.90 Bid-YTW : 4.22 % |
| BMO.PR.Q | FixedReset | 1.46 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.15 Bid-YTW : 6.16 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.H | FixedReset | 233,115 | YTW SCENARIO Maturity Type : Call Maturity Date : 2022-01-26 Maturity Price : 25.00 Evaluated at bid price : 25.51 Bid-YTW : 4.47 % |
| MFC.PR.G | FixedReset | 65,768 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.76 Bid-YTW : 6.87 % |
| CM.PR.Q | FixedReset | 43,100 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-09-26 Maturity Price : 20.02 Evaluated at bid price : 20.02 Bid-YTW : 4.27 % |
| TRP.PR.E | FixedReset | 40,516 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2046-09-26 Maturity Price : 18.73 Evaluated at bid price : 18.73 Bid-YTW : 4.27 % |
| TRP.PR.J | FixedReset | 37,100 | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-05-31 Maturity Price : 25.00 Evaluated at bid price : 26.59 Bid-YTW : 4.11 % |
| BNS.PR.O | Deemed-Retractible | 36,560 | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-10-26 Maturity Price : 25.25 Evaluated at bid price : 25.61 Bid-YTW : -1.26 % |
| There were 29 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| IFC.PR.A | FixedReset | Quote: 15.34 – 15.63 Spot Rate : 0.2900 Average : 0.1960 YTW SCENARIO |
| RY.PR.M | FixedReset | Quote: 20.00 – 20.26 Spot Rate : 0.2600 Average : 0.1800 YTW SCENARIO |
| HSE.PR.A | FixedReset | Quote: 11.88 – 12.14 Spot Rate : 0.2600 Average : 0.1946 YTW SCENARIO |
| POW.PR.G | Perpetual-Premium | Quote: 25.64 – 25.84 Spot Rate : 0.2000 Average : 0.1348 YTW SCENARIO |
| VNR.PR.A | FixedReset | Quote: 18.36 – 18.70 Spot Rate : 0.3400 Average : 0.2801 YTW SCENARIO |
| HSE.PR.C | FixedReset | Quote: 19.15 – 19.42 Spot Rate : 0.2700 Average : 0.2122 YTW SCENARIO |
Well, I was fired too eventhough I made America great again with opposite results to yours (6.54% inflation; unemployment at 2.05%)… In my final press conference, I proudly stated: “You will miss me!” and I was offered a similar jobs in Europe and Japan… In your teeth, unsatisfiable bunch!
Curiously if you set the fed funds rate to 0.25% and let it rip for 4 years, you get inflation of 11% and unemployment of 1.5%.
… But Szeven too got fired what leads me to believe that this unemployment rate of 1.5% is made of James, myself and him…:)
https://goo.gl/photos/xkocYajLgxB5bmsH7
After more than 5 tries.
Unemployment 4.03% Inflation 2.86% with a Financial Crisis in the middle.