Category Archives: Federal Reserve

Willem Buiter Heaps Scorn on Fed’s 75 Basis Point Rate Cut

Willem Buiter’s immediate reaction to the Fed’s emergency rate cut earlier this week was sharply negative, and upon reflection, his view has become even more critical. Buiter sees the reason for the cut as a “knee jerk” response to the prospect of a sharp fall in equity prices. He looks at the proximate causes of […]

When Sensible People Advocate Continued Credit Dependence (George Magnus/Fed Edition)

George Magnus, the UBS economist who popularized the concept of a Minsky Moment and has been prescient in his bearish calls on the credit markets, veered today and, in a Financial Times comment, “More is needed to unblock credit arteries,” gave unqualified support for aggressive monetary easing. Put it another way, when mere New York […]

Fed Taken to the Woodshed at Davos

A panel of blue chip authorities, including former Treasury Secretary Larry Summers, legendary investor George Soros, and well respected economists such as Stephen Roach and Nouriel Roubini were sharply critical of the stewardship of central banks in recent years, particularly the Fed. We’ve noted before that not all central bankers were asleep at the switch. […]

Some Very Blunt Warnings from Soros, El-Erian, Setser, and Other Sensible People

Sentiment has gotten so bad even among CEOs that there is reason to expect a bounce in equities in the not-so-distant future once frayed nerves have calmed a bit, particularly given the report in Bloomberg that Bernanke & Co. are much more sanguine about inflation and therefore are perceived to be ready to make further […]

Less Than Respectful Commentary on the Fed Put and Fiscal Rescue Efforts

It wasn’t enough that the Administration’s fiscal stimulus plan announced last Friday was sufficiently off beam so as to precipitate a global stock market rout. The Fed then put its credibility and some of its remaining firepower on the line to try reverse the gap-downward stock market opening with the in-panic-mode pre-session 75 basis point […]

Fed: Emergency 75 Basis Point Rate Cut

The Fed accelerated what was its now expected level of rate cut, 75 basis points, from its scheduled January 29 Fed Open Market Committee Meeting to today, putting the target Fed funds rate at 3.5% and the discount window rate at 4%, The prospect of the S&P and Dow opening down appears to have focused […]

Inflation or Deflation?

Mere mortal investors and their professional colleagues are (at least if they are honest and have a modicum of sense) a bit confounded as to what to do at this juncture. By all measures, inflationary pressures are gaining strength, and yet recessions lower aggregate demand and with it, price pressures. Ah, but what about the […]

Mohamed El-Erian: A Backhanded Indictment of Central Banks

Mohamed El-Erian, in “A route back to potency for central banks,” in today’s Financial Times, gives a short but persuasive analysis of what ails central banks today and what they need to do to strengthen their role. El-Erian is insightful and his opinions often carry some weight, by virtue of being both a Serious Economist […]

Ben Stein and the Slapstick Approach to Economics

Today, Ben Stein, in his New York Times column, “Larry, Curly, Moe and the Economy,” uses the Three Stooges as metaphor for the Fed’s actions: the central bank, like the celluloid comics, keep hitting the wrong person on the head. According to Stein, the Fed is unduly preoccupied with inflation and it should instead engage […]

Advisor to the Fed Argues Against Further Rate Cuts (Plus a Wee Rant About Japan)

Ray Dalio, founder and chief investment officer of Bridgewater Associates, is no doubt far from alone in being someone whose opinion is solicited by the Fed. Nevertheless, in an interview in today’s Financial Times, he takes a position diametrically opposed to conventional wisdom. He argues that the remedy for our current economic, particularly credit, woes, […]

Henry Kaufman Takes the Fed to the Woodshed

For those who may be too young to have been around in his heyday, Henry Kaufman, aka Dr. Doom, was one of the preeminent economists during the early to mid 1980s, when his firm, Salomon Brothers, ruled the bond markets. Kaufman had a particularly well honed ability to read interest rate trends, no mean skill […]

Fed Policy Leaders’ Forecasts Deemed a "Waste of Effort"

Anyone who has worked in a large organization knows the syndrome: top executives are briefed by their subordinates and go and make pronouncements even though they are stretched too thin to have a full understanding. A study by two University of California (Berkeley) economists concludes that that pattern applies to the Fed. Christina and David […]

Are the Recent Central Bank Liquidity Injections a Sham?

Two readers pointed us to very good post by John Hussman that goes through the Fed’s open market desk operations in detail, and then looks at similar work done on the European Central Bank’s activities (including its widely reported $500 billion liquidity injection). He concludes that in fact liquidity, meaning bank reserves plus money in […]

"No more easy cash: banks must take their losses"

A solid, well argued case against further central bank accommodation by Charles Wyplosz, professor of economics at the Graduate Institute of International Studies in Geneva, in the Financial Times. The centerpiece of his argument is that by providing ample liquidity and low interest rates, monetary authorities are delaying the very steps necessary for banks to […]