What am I missing? I keep hearing people on financial TV say things like “The Fed keeps pumping out the dollars,” “The Fed keeps monetizing the debt.” Then I go look up money-growth charts. I can’t find all this excessive money creation that is monetizing the debt and is about to create a breakout in [...]
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 [...]
I’m afraid I’m about to state the obvious again. Most of you already know what I’m about to say, but as I listen to pundits talk about Greece on daytime TV it’s becoming obvious that not everyone does. The issue is sovereign debt: when is it a problem and when does it become a crisis? [...]
(A More Realistic Look) This is the year that the whole world apparently discovered the importance of the Fed's Balance Sheet. Unfortunately, their discovery was made when it suddenly doubled in the context of a severe financial panic. This is awful! Right? We've got to get it back down to size! Right? The suddenness [...]
When I was in graduate school in the olden days (1960s), Professor Waller hired me as his grader in his money and banking and monetary policy classes. At first, he limited my chores to multiple-choice and true-false questions, but he gradually trusted me with essay questions-following his strict guidelines of course. "Are budget deficits inflationary?" [...]
This morning on financial TV before the Federal Open Market Committee's (FOMC's) scheduled announcement today at 2:15 eastern, someone (Larry Kudlow) asked "Should the Fed begin its exit strategy?" Let me offer the view that it already has. The Fed's balance sheet ballooned last fall and peaked in December. Since then there has been no [...]
Once upon a time, people took rising interest rates as evidence of tighter money. Then, circumstances and growing sophistication led to recognition that rising inflation and/or rising inflationary expectations would show up in higher interest rates, especially longer-term rates. Then, apparently, everyone decided that rising long rates could ONLY be explained by easy money and [...]
Today's (06-23-09) Wall Street Journal editorial page, of which I'm a fan, contains a fascinating look back at the monetary policy debate in December 2003. During the FOMC meeting on December 9, 2003, then Governor Bernanke referred to a WSJ editorial of that same day (Speed Demons at the Fed) that wondered if the FOMC [...]
I've tried to straighten this out before, but it obviously didn't take; so I'll try again. Over and over on financial TV, I hear commentators and guests alike talk about how the Fed is printing money when it buys Treasuries (meaning long-term) and how runaway inflation is the inevitable result. *The Fed doesn't literally print [...]