Author Archive

Current Monetary Policy: A Keynesian Distortion

One amusing thing about watching financial TV these days is that no analyst wants to be identified as Keynesian even as they use the Keynesian framework almost exclusively in their analysis. One example is their treatment of monetary policy exclusively in terms of interest rates. They never acknowledge a direct impact of the money supply […]

Inflation Targeting or Deflation Avoidance?

Back in the day when I served on the FOMC (February 1991-November 2004) under Alan Greenspan, the subject of inflation targeting came up from time to time. I never liked the idea, but a few of my colleagues expressed an interest. Fortunately, from my point of view, Chairman Greenspan didn’t like it and never scheduled […]

A Strong Dollar Doesn’t Attract Foreign Capital–Expectation of a Stronger Dollar Does

Whether the dollar is strong or weak matters for our exports and imports because their prices change in foreign currencies. Many people on the financial news networks appear to believe that similar reasoning applies to capital flows, i.e., that a strong dollar attracts foreign capital. Not so! Think about it. If a foreigner wants to […]

Fourth Quarter GDP Reverts to the Weak New Norm

Real GDP increased at only a 2.6 percent annual rate from the third to the fourth quarter 2014, about half the 5 percent increase in the third quarter. Without inventory accumulation, the increase would have been 1.8 percent, down from 5 percent in the third quarter. Consumption added 2.9 percent to the growth (more than […]

Congratulations to Congress on the Pipeline

I’m no expert, but I don’t think you have to be an expert to favor the Keystone XL pipeline. It has always seemed like a no-brainer to me. The President has hidden behind six years of “study” when it was obvious to all that he was pandering to the far-left environmental religion. It was a […]

Are All QE’s the Same?

The evolution of viewpoints about the Fed’s QE programs has been astounding. Among the chattering classes on the financial networks, sentiment went from “it’s dangerous and will cause hyper-inflation and a collapse of the dollar” to “we need QE for the stock market” to “why is the ECB dragging its feet in adopting a similar […]

Is a Strong Dollar a Good Thing or a Bad Thing?

You are probably way ahead of me on this, but I’ll say it anyway: It depends.   A rising or declining dollar both affect different groups in the economy differently. A rising dollar relative to the currencies of our trading partners generally makes our imports cheaper to our consumers and our exports more expensive to […]

Patience

She promised us patience in 2015 No premature rush to tighten So, I’ll be patient too The Fed, I won’t be fightin.’ My forecast this year Is the same as in the past Rates will stir eventually And finally rise at last. (Or not!) Inflation’s low and falling Growth is in a mini-boom The dollar […]

Rolexes Just Got More Expensive–You Can’t Keep A Strong Currency Down

The Swiss National Bank, Switzerland’s Central Bank, surprised the world yesterday by removing its self-imposed cap of 1.20 francs per euro and letting the franc float higher. It also lowered its deposit rate for banks to -0.75 percent to discourage inflows of bank funds into the central bank. Yes, that’s minus 0.75 percent. (The comparable […]

Rolexes Just Got More Expensive–Or, You Can’t Keep A Good Currency Down

The Swiss National Bank, Switzerland’s Central Bank, surprised the world this morning by removing its self-imposed cap of 1.20 francs per euro and letting the franc float higher. It also lowered its deposit rate for banks to -0.75 percent to discourage inflows of bank funds into the central bank. Yes, that’s minus 0.75 percent. (The […]