May 8, 2012 Leave a comment
May 4, 2012 Leave a comment
We live in an age when central bankers grace magazine covers like pop stars. But what if they don’t actually know what they are doing? In the United States, at least, quantitative easing and low short-term interest rates may have done as much harm as good.
December 8, 2011 Leave a comment
According to one common view, monetary policy works by influencing household (and to a lesser extent business) preferences for investing, saving, borrowing, and spending. Bernanke’s stated justification for quantitative easing was that he could stimulate the economy by getting people to move money from their checking accounts into the stock market and from their money-market funds into car dealerships.
Risk preferences are not determined solely, or even primarily, by monetary policy. When times are good and you are confident in the future, you put more of your savings in long-duration, risky, illiquid assets like equities and housing. When times are bad, cash is king. Using data from the flow of funds, we can see how American households’ risk preferences have changed over time. The crisis has caused many people to retrench and solidify their balance sheets, yet it turns out that there could be a long way to go.
December 1, 2011
Yesterday I asked whether the fans of NGDP-targeting had thought through the full implications of their models. Today I will look at another sort of level-targeting recently proposed by a former Fed economist who now works at Citi.
November 17, 2011
Thanks to my work, I was able to spend most of Wednesday attending the Cato Institute’s 29th Annual Monetary Conference. The speakers were a pretty diverse group ranging from Rep. Ron Paul to Richmond Fed President Jeff Lacker to Professor Allan Meltzer.
The attendees came from even further afield. There were representatives from establishment organizations including the Bank of Korea and the IMF, but there was also a convicted “domestic terrorist.” I sat next to the former general manager of the Wu-Tang Clan. He now makes a living as an adviser to investors interested in sub-Saharn Africa, although he claimed that his real passion is monetary policy. Who can blame him?
The conference was divided into four panel presentations, two speeches, and a lunchtime conversation. I did not stay until the end but I was there for most of it. Additionally, I got a packet of all the papers that were presented during the panels. Some of the topics that were discussed: the role of a central bank, historical and international monetary arrangements, and ways to reform the existing system.
October 21, 2011
Today’s Wall Street Journal has an article by Jon Hilsenrath about what the Fed is likely to consider in its upcoming meeting on November 1 and 2 in response to the stubborn weakness of the U.S. economy. This is significant because Hilsenrath is the journalist that the Fed trusts the most for conveying its views to the public. A close reading of what he wrote can tell us a great deal about what the members of the FOMC are thinking. Worryingly, it appears that they are out of good ideas.
October 13, 2011