France appears to have taken its public relations strategy for dealing with $8.9 billion fine against BNP Paribas from an old saying among lawyers: “If you have the facts on your side, pound the facts. If you have the law on your side, pound the law. If you have neither on your side, pound the table.” Here’s the guts of the French compliant, which is that the US is abusing the power of dollar dominance:
Read more...The Financial Times has an article on how corporate bond dealers are going to create a new trading hub to try to preserve their market position while “boosting liquidity” in the market. Narrowly speaking, there’s nothing wrong with the piece as a description of investor unhappiness and planned bank responses. But it curiously missed how Fed policy has helped generate conditions that are reducing corporate bond market liquidity.
Read more...Yves here. Former Fed Chairman William McChesney Martin famously said that the job of the central bank was “to take away the punch bowl just as the party gets going.” That line of thinking went out of fashion under Alan Greenspan. Now we have the perverse spectacle of the most bank-cronyistic regulator, the Office of the Comptroller of the Currency, berating the Fed for spiking the punch via overly accommodative monetary policy.
Read more...A set of articles in the Financial Times puts a nasty spotlight on what mission creep, or more accurately, mission leap, at the Fed. The central bank is moving unabashedly into price-setting, and stealth or formally backstopping, of more and more markets
Read more...If central banks start pulling the rug out in the form of stopping, or even slowing down stimulus – heaven forfend they raise rates – it could be a rocky ride for the rest of the year for stocks.
Read more...Yves here. It’s been astonishing to see members of the Fed in denial about their own handiwork, so when St. Louis Fed President James Bullard berates his fellow central bankers for their abject refusal to notice pre-crisis bubbles, it’s an all too rare departure from their usual insularity and willful blindness.
Read more...How the Fed has gotten itself caught in its own underwear by ignoring Hyman Minsky and in persisting in the clearly failed strategy of super lax monetary policy rather than calling for more government spending.
Read more...Thomas Piketty’s views on inflation and interest rates are decidedly un-Keynesian and wrong to boot.
Read more...MMT argues that “taxes drive money” in the sense that imposition of a tax that is payable in the national government’s own currency will create demand for that currency. Sovereign government does not really need revenue in its own currency in order to spend.
Read more...Understanding the odds and possible impact of forecasting error should be a important element of policy design. But it isn’t!
Read more...Truth be told, I had really wanted to ignore Andrew Ross Sorkin’s artfully packaged Timothy Geithner puff piece in the Sunday New York Times magazine. But it makes for a useful study in a not-well-recognized propaganda technique, three card monte.
Read more...Quantitative easing has been a controversial policy even among the financiers who benefitted from it.
Read more...Yves here. I managed to miss this VoxEU post from last month, and it is still timely. It argues that economists have generally been using the wrong measure of relative dollar strength to assess how the level of the currency played into the loss of manufacturing jobs and insufficient internal demand, now better known as “secular stagnation”.
Read more...Yves here. This post is a devastating critique of current Fed policy. But Alford sets his stage carefully before delivering his conclusions, so don’t be deceived by the tone of the early sections.
Read more...One of the nicest stylised facts in applied economics is that if the Fed inverts the yield curve it will cause a recession. But how applicable is it?
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