Category Archives: Federal Reserve

Nouriel Roubini’s Doomsday Scenario

In today’s post, “The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster,” the bearish and prescient professor Nouriel Roubini sets forth how a systemic financial crisis could play out. The most troubling thing about this piece is that it is quite plausible. Of Roubini’s twelve steps, the first eight are […]

"Bernanke Makes Bulls From Dollar Bears"

Long term, the dollar is not a good bet unless the US increases its savings rate and reduces its current account deficit considerably. Monetary easing and fiscal stimulus only exacerbate the problem. But never forget the Wall Street saying, “Don’t fight the tape.” From Bloomberg: Ben S. Bernanke’s decision to lower interest rates 1.25 percentage […]

Stiglitz: On the Fallen Standing of the US High Finance

This article from Project Syndicate (hat tip Mark Thoma) is a report from Davos by Nobel Prize winner Joesph Stiglitz on the considerable skepticism abroad toward US financial and business practice, particularly our faith in deregulation. It is a telling indicator of how rapidly the world is changing, yet many in the US are still […]

"Stop behaving as whiner of first resort"

A comment by Ricardo Hausmann in today’s Financial Times takes US policymakers to task for trying to prop up demand and stave off a recession. We’ve pointed out repeatedly, as have various economists quoted here, that consumption as a percentage of US GDP is unsustainably high and saving correspondingly too low. It can only continue […]

Central Bankers: Securitization is Dead, Long Live Banking

John Dizard, in “Prepare for return of a direct lending world,” argues that central bankers believe that securitization is not coming back in any meaningful way in the foreseeable future, and banks will therefore have to roll up their sleeves and do old-fashioned lending in much greater volumes than before. That may seem like a […]

Non-Borrowed Bank Reserves Now Negative (Updated)

Reader Carl about ten days ago had sent me a link to a Federal Reserve data series “Aggregate Reserves of Depositary Institutions Adjusted for Reserve Requirements.” The series goes back to 1975. What caught Carl’s attention was that the “”non-borrowed reserves” column, under the “not seasonally adjusted” heading, to the right, shows negative values for […]

Bond Insurer Update: Surprisingly Positive Noises from the FT; Egan Jones Conference Call

Despite the seeming absence of news on the bond insurer rescue front (the only development reported was the selection of the boutique M&A advisory firm Perella Weinberg to assist the State of New York in its efforts to put a deal together), the Financial Times has four articles on it today, from the neutral to […]

Fed Approaches Negative Real Interest Rate Territory

While the question of whether the Fed will lower interest rates again after its emergency cut last week is still up in the air, it is pretty clear that further cuts in the Fed’s target rates are in the offing. And the markets believe the Fed will continue to cut quickly, putting the odds of […]

IMF, Larry Summers: The Wile E. Coyote Moment Has Arrived

There has been a fair bit of discussion of the so-called Minsky Moment, when an economy that has build a house of cards of speculation and over-leveraged “Ponzi units” (creditor that could never make good on their commitments, and are viable only by finding new suckers to give them new debt to pay old lenders) […]

"Welfare for Wall Street, Federal Reserve-Style"

Thomas Palley posts only occasionally, but just about everything he writes is first rate, and today’s offering is no exception. Palley argues one of our favorite views, that the Federal Reserve interest rate cuts have had more to do with trying to prop up asset values than with stimulating growth. He points out that this […]

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 […]