Category Archives: Federal Reserve

Quelle Surprise! The Geithner Doctrine Not Only Puts Banks Above the Law, It Also Serves to Excuse Their Bad Behavior

Our Treasury Secretary, also known as the Bailouter in Chief and “Foamy,” has a default explanation for why ordinary citizens must bend over every time banking interests are threatened. The more formal statement of this policy is the Geithner Doctrine, which is “nothing must be done that will destablize the banking system.” However, Geithner also subscribes to the Humpty Dumpty School of Language, in which words mean what he chooses them to mean, nothing more or less. So “destabilize” means “hurts the profits or reputation of” and “banking system” means “any bank that is pretty big and/or well connected”.

Former Belgian Central Banker on Why the Money System is a Taboo Topic

Lively and provocative. Do yourself a favor and watch it. Hat tip Richard Smith via creditplumber.

Philip Pilkington: Monetary Policy and Metaphysics – How Economists Try to Naturalise Terrible Policies and Disappear Into Their Own Theories

Yves here. Philip Pilkington makes an interesting argument in this post, namely, that the method preferred among mainstream economists for managing the economy encourages investors to speculate in financial instruments rather than invest in real economy assets and projects.

Greenspan’s Switch to Debt Scaremongering

Stephanie Kelton provides two video clips to underscore the point that until quite recently, Greenspan made the point that MMT types do: that the US as a currency issuer, can always pay its debts.

Quelle Surprise! QE Zombifies Economies

Nobody has wanted to heed the lesson of post bubble Japan until way too late.

Pimco’s El-Erian Warns of Central Bank Put Bubble

Earlier today, El-Erian in the Financial Times released a short and apt note on the limits of the central bank put.

Richard Alford: Monetary Policy, Household Balance Sheets, and Recoveries from Financial Crises

By Richard Alford, a former New York Fed economist. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side.

Five years after the financial crisis and halfway to a lost decade, economists, policymakers and the public are looking for answers that will restore economic health and vibrancy. Their concern has increased recently with the approaching “fiscal cliff” and the possibility of a double-dip recession. To find remedies, they’ve examined past financial crises that were followed by protracted economic downturns. In the US, the precedent studied and cited most frequently has been the Great Depression of the 1930s, including the double dip of 1938. Unfortunately, economists have produced a variety of inconsistent explanations for both the initial contraction and the prolonged period without a self-sustained recovery.

Mirabile Dictu! The Media Notices the Sucking Sound of Growth (What Little There Was) Leaving the Economy and Underplays IMF Malpractice

Starting late last week, there’s been a marked shift in the mix of headlines in the major media outlets. While it may simply be post fall equinox moodiness or a confluence of downer reports leading to a rare moment of sobriety, suddenly the big venues are concerned about the economic outlook.

Philip Pilkington: Three Reasons Why Endogenous Money Matters

By Philip Pilkington, an Irish writer and journalist living in London. You can follow him on Twitter at @pilkingtonphil

There’s been a bit of confusion of late in blogland about whether endogenous money really matters all that much. Endogenous money is, of course, the theory that, contrary to what mainstream economics would have you believe, private banks in modern capitalist economies actually create money out of thin air. In my experience, theoretical economists grasp very quickly how much of an impact such a theory would have if it were accepted as true. Less theoretically inclined commentators who are generally more interested in policy and practical matters, however, often express confusion over what exactly all the fuss is about. “Does endogenous money really matter?” they ask.

In what follows I will lay out the three leading reasons why endogenous money does, in fact, matter.

Michael Hudson: QE3 – Another Fed Giveaway to the Banks

In this Real News Network interview, Michael Hudson gives a high level discussion of why the Fed’s claim that QE3 will help employment needs to be taken with a fistful of salt.

So How’s That QE3 Working?

Obviously, it’s a little early to reach a verdict on QE3, but market pundit love reading the tea leaves early and often, so we figured we’d join the fun and look at early reactions.

Central Banks Versus the People

By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

As you are surely aware by now, the US Federal Reserve has announced a new round of quantitative easing which like the ECB’s outright monetary transactions (OMT) is a new program of large scale asset purchases by a central bank. I thought I’d spend a bit of time today talking about these programs because once again I have noticed some large misconceptions in the media about what these operations are, and more importantly, what the likely outcome of them is.

Is QE3 Yet Another Stealth Bank Bailout?

It’s difficult to puzzle out what Bernanke thinks he is accomplishing with QE3. The level of bond buying, as various commentators have pointed out, is much lower than in the earlier QE programs. And pulling out bigger guns in the past was not terribly productive. As we wrote in April 2011 in a post titled “Mirabile Dictu! Economists Agree All the Fed Has Done is Goose Financial Markets!“:

Eugene Linden: In a World of Underpriced Risk, What Could Possibly Go Wrong?

By Eugene Linden, a journalist and author of seven books who has written extensively about animal behavior, environmental issues, and markets

On a recent conference call, the strategist of a major international bank (it was an off-the-record call for clients only) laid out the bare bones of what he called the world’s “giant experiment” in debt and interest rates. Never before have so many countries maintained such low base rates for so long; never before in peacetime have so many countries had such huge deficits and debt burdens; never before in U.S. history had long term rates been so low; never before has the U.S. gone so many decades without deflation following inflation. Because we live in these unprecedented times, it’s easy to lose sight just our strange they are… and how dangerous.