Category Archives: Federal Reserve

Richard Alford: The Problem of Central Banks With Multiple Goals and Few Tools

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.

Current monetary policymakers (largely economists) have designed and employed macroeconomic models and a policy framework that allow only one goal for central banks: price stability. They did not solve the problem of how to allocate scare resources (in this case limited policy tools) in pursuit of competing ends, e.g., stable prices, full employment, sustainable growth, financial stability, external balance.

Russia’s Plan For The BRICS To Dismantle The Dollar System

The status of the US dollar as the world reserve currency gives the US tremendous advantages. Among them: it allows the Fed to export inflation, while the Federal Government can run a huge deficit with impunity. But now an angry Russia has had enough!

Bank “Zombie Title” Rises, Hurting Communities and Borrowers, as OCC and Fed Sit Pat

We’ve written before about the perverse phenomenon known as “zombie title.” Kate Berry of American Banker provides an update.

Dan Kervick: Bitcoin’s Deflationary Weirdness

Yves here. Some readers questioned the discussion of Bitcoin’s deflationary qualities in a recent post, so this discussion is a useful follow-on.

Independent Foreclosure Review Fiasco: OCC and Fed Decided Not to Find Harm

The last few days have had more and more ugly revelations emerge about the botched OCC and Fed Independent Foreclosure Review settlement, with some particularly important ones coming out of the hearings in Robert Menendez’s Senate Banking subcommittee today.

The GFC is Dead, Long Live the GFC!

By David Llewellyn-Smith, founding publisher and former editor-in-chief of The Diplomat magazine, now the Asia Pacific’s leading geo-politics website. Cross posted from MacroBusiness

PIMCO famously coined the phrase to “the new normal” to capture what it saw was a structural change to global markets in the wake of the GFC. It was to be period defined by lower returns on assets owing to a combination of delevering, deglobalization, and reregulation. Today that looks like fantasy.

QE Forever?

Ambrose Evans-Pritchard, in a provocative column, argues that the monetary authorities are not going retreating from QE, and that might not be a bad thing. But in its current form, it probably is.

Richard Alford: Fed Policy – Old Wine in New Bottles

Yves here. This is an important post, in that it describes how the Fed, despite the unconventional look of some of its measures, is using more extreme variants of traditional policy approaches, and why that is not such a hot idea.

Michael Hudson Explains How Deficit Hysterics Target the Wrong Type of Debt

I was at the Atlantic Economy conference the week before last, and Michael Hudson got in one of the best quips: “Helicopter Ben has taken off and has been dropping money all over Wall Street. But he hasn’t dropped any on Main Street.” He has an informative talk with Paul Jay of Real News Network on why the fixation on public debt is wrongheaded, and we should worry about private debt instead.

Treasury and Fed Officials Prevaricate Before Elizabeth Warren About Whether They Will Ever Get Tough With Banks

It’s a good thing Elizabeth Warren seems to regard contending with uncooperative, evasive and obviously misleading witnesses as a form of sport. I’d want to punch them.

As Dow Sprints to New High, the Middle Class and Manufacturing Languish

It’s hard to fathom the celebratory mood in the US markets, save that the moneyed classes are benefitting from a wall of liquidity reminiscent of early 2007, when risk spreads across virtually all types of lending shrank to scarily low levels. Then the culprit was not well understood, although Gillian Tett discerned that CDOs were a huge source of leverage, and in April 2007, an analyst, Henry Maxey at Ruffler, LLC, did an impressive job of piecing together how levered structured credit strategies were driving market liquidity.

Now it’s a lot easier to see what is afoot.

Big Bank Welfare Queens Unprofitable Without Government Subsidies, So Why Don’t We Regulate Them Like Utilities?

Quite a few readers excitedly sent a link to a Bloomberg editorial, “Why Should Taxpayers Give Big Banks $83 Billion a Year?” which summarizes a study by Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz that the editors used to extrapolate that the five biggest US banks are “barely profitable” if they weren’t able to borrow at artificially cheap rates thanks to the market perception that they are too big too fail.

The Bloomberg article, while analytically flawed, still winds up being too charitable.

The Dog That Isn’t Barking: Why So Little Pundit Attention to the Caliber of Statistics?

Ah, the halcyon days of early 2007, when economics and finance bloggers would study the clouds on the horizon and debate what they foretold. Maybe I’m not hanging out in the right circles these days but now that financial markets seem to be completely in thrall to central bankers, there isn’t much point in doing fundamental analysis. As a result, from what I can tell, the level of bullshitting among market pundits has risen considerably.

Modern Monetary Theory, Bears 2.0 Style

A Bears-style video on MMT was posted earlier this month. While I like the innovation of a Sharon Stone-ish head and her smashed up interlocutor, and I think this video is well done, I have my doubts as to whether this approach is an effective way to educate people about MMT.