Category Archives: Federal Reserve

Former Fed Economist: Central Bank Using Wrong Playbook

A reader pointed me to a great post at Institutional Risk Analytics, which consists of an interview with Richard Alford, an economist in the Federal Reserve Bank of New York’s foreign department during the heady years of the Plaza Accord and active FX intervention by the Group of Seven who now works as an expert […]

Commodities Spike: Vote of No Confidence in Central Bankers?

Steve Waldman, in a colorful post, “A run on central banks?” contends that the rapid rise of commodities prices isn’t the result of mundane factors like negative real interest rates, but a more fundamental cause: loss of faith in the monetary authorities: Just as the fear of a bank’s insolvency can precipitate a run that […]

Should We Be Worried About Rising M3?

Let me make a wee confession: I tend not to follow money supply figures closely, in part because I am not a fund manager (there are only so many things you can watch on the side) and in part because we are missing some key underpinnings that might help make it a useful metric. In […]

Trichet Says Worst of Credit Crisis May Lie Ahead

The warning from the ECB’s chief Jean-Claude Trichet. that the worst of the credit crunch may lie ahead, deserves to be taken far more seriously than other cautionary warnings. First, he has a reasonably good reading on what is happening with European banks (and our sources with inside connections have maintained for some time that […]

TIPS Prices Dispute Commodities Market, Consumer Inflation Views

Conventional wisdom is that markets are the best place to get unbiased forecasts, but we see a sharp divergence of views between what TIPS buyers and Treasury traders in general anticipate inflation rates will be versus consumer expectations and the continued high inflows of new funds into commodities. We’ve seen this sort of divergence before. […]

Tim Duy With A Housing Bubble Case Study

Mark Thoma has posted a nice little piece by his colleague Tim Duy on what a housing bubble looks like (as in charts, not in those “what were they thinking” pictures of overpriced shoeboxes now going begging). It illustrates very nicely the most basic symptom of pricing gone awry: how housing prices hit unprecedented highs […]

Noland: Don’t Get Hopeful About Fed Interest in Asset Bubbles

There has been a raft of articles about the Federal Reserve’s new found interest in the question of asset bubbles, suggesting that the Fed might be ready to shift policy and exhibit more willingness to rein them in. Yesterday, a page one Wall Street Journal story discussed at length research central bank chairman Bernanke has […]

"Inflation here, there and everywhere"

Willem Buiter argues that the focus on oil and food price shocks, which economists view as relative price changes rather than inflation, is muddying the discussion about inflation. He sees considerable evidence of widespread inflation and it’s central bankers’ fault. From Buiter: Inflation is rising just about everywhere. Why is this and what can be […]

Volcker Calls for Regulation, Questions Loyalties of GSEs

Former Fed Chair Paul Volcker reiterated some of his concerns about the Fed’s recent moves and the evolution of the financial system in prepared remarks before the Joint Economic Committee of Congress. From the WSJEconomicsBlog: “Whatever claims might be made about the uniqueness of current circumstances, it seems inevitable that the nature of the Fed’s […]

Jim Hamilton Scolds Bernanke for Regulatory Neglect

Jim Hamilton must feel like a Cassandra. Last August, he warned that the GSEs were in danger of having the ambiguous status of their implied guarantee tested. That came in January, and was finessed with various new Fed facilities. Hamilton has also warned repeatedly that the Fed needs to consider institutional reform, not merely bailing […]

Waldman: Halt the Fed’s Mission Creep

Steve Waldman has a typically top notch post at Interfluidity,”Let’s not write the Fed a blank check,” in which he dissects the implications of the Fed’s request to Congress to pay interest on bank reserves. Waldman explains the technical workings and the pros, and gets to the real issue. This represents a change from a […]

Joseph Stiglitz Lambasts Inflation Targeting

In Project Syndicate (hat tip Mark Thoma), Joseph Stiglitz takes on an increasingly common approach among central banks, namely, to announce a formal target for inflation and use interest rate policy to attempt to achieve it. Note the US does not use this approach, although one of the Fed’s responsibilities is to maintain price stability. […]

Mirable Dictu! The Journal Says a Few Discouraging Words About the Markets and Economy

The Wall Street Journal so often presents the optimistic case that it’s important to reinforce those occasions when it provides a less than cheery view. Of course, a journalist is only as good as his sources, and the bullish bias is in large measure due to the insistent upbeat posture of CEOs and sell-side analysts […]

Is the Credit Crisis Really Over? Minsky Would Say No

The “end of the credit crisis” apostates looks to be a small and shrinking group (and we don’t mean just the downbeat but nevertheless accurate Nouriel Roubini or Michael Panzner). I’m amazed our number is as small as it is, given the overwhelming counterevidence in the form of the increase in the Term Auction Facility […]

Why Such Timid Financial Reform Proposals? (Alan Blinder Edition)

Here we are, in the midst of the worst financial crisis since the Great Depression, and what do we see? Central banks madly pumping water out of leaky, listing vessels, some discussion of how to patch the most visible holes, but perilous little consideration of how to correct the defects of construction, poor choice of […]