We’ve been conditioned by numerous post-FOMC press releases to expect a continuation of a near-zero target Federal Funds rates for an extended period. Unfortunately, that “promise” means that it has to be withdrawn before a modification can be made—else it becomes a broken promise. I say unfortunately because the time has come to increase the [...]
It may be my imagination, but every time I’ve argued that the Fed’s lending (including securities purchases) will not cost the taxpayers I’ve felt eyes rolling. The low level of much financial reporting over the past two years has left the impression that Fed lending is done with taxpayer funds and is tantamount to government [...]
Chairman Bernanke is testifying before Congress today about the Fed’s exit strategy. CNBC will broadcast this event and I will be part of a discussion panel scrutinizing it. If you’re interested, tune in to Squawk Box from 10am to 11 am (ET) to catch the action.
As I pointed out in my last post on inflation, the expansion of the Fed’s balance sheet assets has been largely offset on the liability side of its balance sheet by excess reserves held by banks. Those reserves are assets to the banks and liabilities to the Fed. They are “excess” reserves because they exceed the [...]
It’s taken for granted in some circles that a sharp acceleration of inflation is the inevitable result of the monetary and fiscal policies of the past year or so. I disagree for the following reasons. *While budget deficits have grown dramatically, in absolute terms and as a percentage of GDP, for the most part they [...]
Last week I argued that the “considerable period” language in the FOMC’s post-meeting announcements is not a good idea. It robs the FOMC of flexibility it might need, and it gives the markets too much near term certainty. That does not mean that I think the FOMC should tighten monetary policy immediately. Monetary policy is [...]
________________________________________________________________ “The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions . . . are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” – FOMC Press Release 27 January 2010 _________________________________________________________________ “I support your recommendation. [...]
To understand yesterday’s increase in the Fed’s discount rate, one must review its context in recent history. The Fed’s first policy action during the mounting financial crisis in the fall of 2007 was a half percentage point reduction in its discount rate from 6.25 percent to 5.75 percent. While this action surprised most observers who [...]
A favorite game at my school was “lets you and him fight” whereby A would tell B that C had been talking trash about him and would often tell C the same thing about B. It was hard for B and C to avoid getting sucked in. I sat beside Gentle Ben Bernanke at the [...]
The first and so-far the only person I’ve heard call himself a “hard money populist” was my friend, Wayne Angell. That was several years ago when he was a member of the Board of Governors of the Federal Reserve and we served together on the FOMC. I wanted to give Wayne credit for the expression [...]