Category Archives: Federal Reserve

Philip Pilkington: A Point of Real Interest in the Latest Fed Minutes

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

JK Galbraith, remarkably, regards the Federal Reserve as a largely powerless institution; he dismisses the idea that the Fed can end a recession by cutting interest rates as a “quasi-religious conviction” that “triumphs over conflicting experience.”… Because Galbraith believes monetary policy cannot increase demand, however, he has a sort of Depression-era vision of an economy in which anything that increases spending is good… And so Galbraith is oblivious to the most serious problem facing modern liberalism: reconciling social justice with full employment.

– Paul Krugman

As the above, rather embarrassing quote from Paul Krugman’s review of JK Galbraith’s classic book The Affluent Society shows, neoclassical economists and neoclassically-trained central bankers have long been enamoured with monetary policy – and are generally angered when it subject to questioning. Why? Well, there are a variety of reasons, some of these are ideological (monetary policy doesn’t stink too badly of nasty government interference with the Holy Market), some of these are purely functional (the central bank has independent control over rates) and some simply have to do with making economists’ silly toy-models work (monetary policy gives neoclassicals a feeling of power over the economy they would otherwise lack).

Anyway, in the present crisis – just as in the great depression – monetary policy has proved completely ineffective. This has caused some – myself included – to question the real efficacy of monetary policy altogether, but it has others continuing the search for that silver bullet.

Does Anybody Who Gets It Believe Central Banks Did All That Much Yesterday?

I’m still mystified as to the market reaction on Wednesday to the coordinated central bank effort at waving a bazooka at the escalating European financial crisis. But as readers pointed out in comments, the big move was overnight, in futures, when trading is thin, and there was no follow through when markets opened. And volume was underwhelming.

Central Banks Announce Coordinated Liquidity Effort to Alleviate Euromess

Any of you who are market oriented no doubt are all over the news of central bank coordinated liquidity efforts. This is from the Federal Reserve’s announcement:

The Fed Stress Tests While Europe Starts to Burn

Our headline at odds with the media reports on the newest confidence-bolstering ploy by the Federal Reserve, that of new, improved stress tests for the six banks at the apex of the US financial services industry looting operation: Bank of America, Citi, Goldman, J.P. Morgan, Morgan Stanley and Wells.

There’s a noteworthy gap between the scenarios employed in the 1.0 version, which took place in early 2009, when the banks were told to get more capital or else, and the ones about to be implemented.

German Finance Minister Schäuble Calls for a Eurozone Tobin Tax

A key German finance leader is talking tough about financial reform. But will his peers follow?

Helicopter Geithner’s NY Fed $40 Billion Iraq Money Drop

Reader 1SK sent me a story which I felt I had to call to the attention of Naked Capitalism readers. It strikes me as devious public relations ploy, in which an episode that sounds at best poorly executed and at worst a scandal is reframed by focusing on an account of alleged exceptional individual performance that also provides an unverifiable answer to a key question in an ongoing investigation.

The incident in question is the air shipping of a claimed $40 billion in cold hard cash airlifted from the New York Fed to Iraq from 2003 to 2008.

Quelle Surprise! GAO Finds the Fed is a Club of Backscratching, Well Connected, White Bankers

The GAO released a report yesterday that provided some anodyne but nevertheless useful confirmation of many of the things most of us knew or strongly suspected about the Fed: it’s a club of largely white male corporate insiders who do a bit too many favors for each other. But the GAO seemed peculiarly to fail to understand some basic shortcomings of its investigation.

Bank of America Deathwatch: Moves Risky Derivatives from Holding Company to Taxpayer-Backstopped Depository

If you have any doubt that Bank of America is going down, this development should settle it. I’m late to this important story broken this morning by Bob Ivry of Bloomberg, but both Bill Black (who I interviewed just now) and I see this as a desperate move by Bank of America’s management, a de facto admission that they know the bank is in serious trouble.

From QE to Communism

By Zarathustra, who is the founder of Hong Kong blog Also sprach Analyst. He was educated at the London School of Economics and the Chinese University of Hong Kong and was once a Hong Kong-based equity research analyst focusing on Hong Kong real estate (which he did not really like), with a secondary coverage on China real estate sector (which he actually hated). Cross posted from MacroBusiness

Zero interest rate policy and quantitative easing is not working to stimulate the real economy. No country has succeeded. The pioneer of quantitative easing, the Bank of Japan, failed (and Japanese yen is uber-strong). The Federal Reserve has failed, and the Bank of England has failed.

Manufacturing inflation in a wage deflationary world

Edward here. Earlier in the month, I wrote how the currency is the real release valve for a credit based economy using a nonconvertible freely floating currency. It’s not about interest rates. If currency revulsion takes hold from negative real rates and people want to flee a country’s assets, this will be reflected in the […]

Bernanke Scraps Bold Congress Testimony for Lukewarm Version

By Gal Noir, an undercover investigator of hijacked economic truths and an occasional blogger at New Economic Perspectives

In his Congressional testimony on October 4th, Federal Reserve Chairman Bernanke uncharacteristically praised the benefits of fiscal policy, calling it “of critical importance” and conveying concerns with the looming deficit reductions. He cautioned: “an important objective is to avoid fiscal actions that could impede the ongoing economic recovery.”

Many economists expressed worry that such advocacy of fiscal policy will erode America’s (already) wavering confidence in the Fed and will further weaken their support for austerity measures. More troubling still, the economists said, was the possibility that the public may follow suit and start demanding from Congress bolder government action on the jobs front.

A few dissenting scholars thought that it was high time for Bernanke to put his money where his mouth was, so to speak.

New York Fed to Take Propagandizing to New Level With More Intense Social Media Monitoring

We can all look forward to higher quality trolls in comments courtesy of the New York Fed (assuming we don’t have them already) thanks to a more thorough blogosphere/social media monitoring program the Fed is planing to launch (hat tip reader Tom via TPM):