As I listen to commentary on cable TV about the Fed’s quantitative easing, I find it amazing that people smarter than I, as well as better trained and more knowledgeable about many things, keep making the same mistake they have made for the past three or four years. Their predictions of an inflationary break-out and/or [...]
In my previous post, I noted that the FOMC has apparently begun to think of its low interest rate policy and its quantitative easing/balance sheet expansion policy as two different things. Their latest minutes suggest sentiment by some members for slowing or ending the announced open market purchases by the end of 2013, or possibly [...]
Arguments for: The dual mandate is getting lopsided. Inflation is low and falling; employment growth has stalled, and the unemployment rate is stuck above 8 %. Whatever trade-off or balance before, it has tipped recently. We may have a double dip. We are on the verge of the third consecutive weak GDP quarter, if you [...]
This is not an argument for more quantitative easing, or QE3, as it would inevitably be called. Instead, this is about the logic of the argument for more quantitative easing. It is intended as a response to the oft-heard argument that more quantitative easing wouldn’t stimulate the economy because past quantitative easing hasn’t produced the [...]
All day today, I’ve heard people say that there was no good news in the employment report. That is substantially true, but not totally true. For some time now, labor force drop-outs (shrinkage) have artificially lowered the official unemployment rate. Most pundits recognized that eventually that would reverse and returnees to the labor force would [...]
Not a good metaphor for monetary policy I know that the acronym, QE2, for Quantitative Easing 2 must have been irresistible, but it has been unfortunate. By making open market purchases, which should be routine, sound like such a big harry deal—printing money, debasing the currency, etc.—the term has, temporarily at least, delayed needed policy [...]
A Toxic Phrase for a Routine Policy When the Fed “eases” monetary policy by stepping up its purchases of government securities,bank reserves and deposits usually expand by the amount of the purchases, and, because of the fractional reserve system, further multiple expansion of bank credit and money ensues. This process is also usually associated with [...]
Click here to see my CNBC interview today on St. Louis Fed President Bullard’s comments on possible deflation and the potential need for more quantitative easing by the Fed.
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 [...]
The stance of monetary policy is confusing these days. The target Federal funds rate is near zero, but that's the nominal rate. With inflation low, the real rate cannot move as far into negative territory as it could if inflation were higher. It's not "zero bound," but it's much closer than usual. I've always regarded [...]