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 [...]
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 [...]
I ended my previous post, Jobless Recoveries: A Look Back, by raising a question; how does the same monetary policy that fosters disinflation in the general economy foster an inflationary bubble in only one sector? By easing monetary policy, the Fed intended to address a very weak labor market, a jobless recovery that threatened to [...]
Gross Domestic Product (GDP) and real GDP are generated by total U.S. spending on final goods and services. The U.S. national income accounts use the spending categories of Consumption (C) plus Investment (I) plus Government spending (G) plus Exports minus Imports (X-M). GDP = C + I +G + X – M. (These categories roughly correspond to [...]
If I hadn't worked at the Fed for 36 years, I wouldn't know its history either. Several misconceptions muddy the current debate about the future role of the Fed as systemic risk regulator. The following statements, frequently heard in some forms, are very misleading. 1. The Fed was created to conduct monetary policy; so let [...]
It's Just Not a Recovery. . . Yet Last Friday's disappointing jobs report elicited some strange responses on financial TV. The idea that the recession is over is one I find hard to take seriously. Yet, some commentators have bought into it so completely that the jobs report caused them to start talking about [...]
In my guest appearance on CNBC's "The Call" program Tuesday morning, the topics were "Should the Fed Stick to Monetary Policy?" and "Is the Economy Back on Track?" On the economy, I made the same point about excess reserves and the Fed's mistake regarding excess reserves in the 1930s that I made in my June 10 posting.
I've had quite a few blog postings recently on various aspects of the financial crisis and the state of the economy. Scrolling through them to find something of interest is not the easiest thing to do. Since I'm out of pocket briefly, I thought it might be useful to present a list of recent postings [...]
Increasingly, I'm feeling the need to state the obvious. Partly, that's because others aren't doing it because it is obvious, and, partly, because it isn't obvious to everyone. Enough people miss it to matter. The obvious thing I have in mind right now is the similarity between the way the flu spreads and the way [...]
Guitar-picking virtuoso, Glen Campbell, was once asked, derisively I assume, if he could read music. He said he could read music, but not so much that it got in the way of his picking. Not to suggest a comparison, but I'm pretty sure that if I'd ever taken a course in writing poetry, I'd never [...]