by Jerry O'Driscoll* The U.S. economy has been growing slowly but steadily since the trough of the Great Recession in June 2009. Deep recessions are typically followed sharp recoveries. Not so this time. More recently, there is the mystery of low inflation. The Fed’s preferred inflation measure, the core PCE index, has consistently fallen short … Continue reading Fed Policy and Velocity’s Dance
by Nicolás Cachanosky and Andreas Hoffmann Even when a policy is successful in achieving its desired ends, we have to consider its unintended and unforeseen consequences, resulting from cumulative market adjustments to policy changes that make it hard to judge the overall outcome of a policy in our complex economy. The Federal Reserve and European … Continue reading Two Tales of Unintended Consequences of Monetary Policy – Tale 1
by Gerald P. O’Driscoll, Jr. I have been reading Central Bank Governance & Oversight Reform, edited by John H. Cochrane and John B. Taylor. It is a conference volume of unusually high quality with all the discussions of presentations included. I plan to write more about the book later, but to highlight one chapter here. … Continue reading The Fed’s Institutional Design
by Jerry O’Driscoll The issue of banks viewed as too big to fail has been taken up several times on this site. In its Annual Report, the Federal Reserve Bank of Dallas has weighed in on the topic with an essay on “Choosing the Road to Prosperity: Why We Must End Too Big to Fail … Continue reading Too Big to Fail – Again
Gerald O’Driscoll explains how the Federal Reserve is bailing out European banks. Click for his insightful piece in the Wall Street Journal.
by Mario Rizzo In today's Wall Street Journal frequent contributor to ThinkMarkets, Jerry O'Driscoll, has an important opinion piece, "Why the Fed Is Not Independent." There has been much discussion recently of the importance of "preserving" Fed independence. But is the Fed independent? Independent of what? Jerry concentrates on the link between the Fed's monetary … Continue reading Is the Fed Independent?
by Mario Rizzo I read with interest Peter A. Diamond’s opinion piece in The New York Times, “When a Nobel Prize Isn’t Enough.” Professor Diamond, by all accounts a very competent economist at MIT, is complaining that he really IS qualified to be a member of the Board of Governors of the Federal Reserve System. … Continue reading What Peter Diamond Doesn’t Understand
by Jerry O’Driscoll Philadelphia Fed President Charles Plosser gave a major speech on Monday at the Central Bank of Chile. In the polite language of central bankers, the speech constitutes a systematic criticism of not only current Fed policy but of the Fed’s entire response to the financial crisis. Plosser’s speech updates Milton Friedman’s 1967 … Continue reading The Fed Has No Clothes
by Jerry O’Driscoll “Prices Soar on Crop Woes” reads the headline in today’s Wall Street Journal. Global output of key crops such as corn, soybeans and wheat is down, and their prices are up, respectively, 94%, 51% and 80% from June lows. Today’s PPI report has wholesale prices up 1.1% in December after rising 0.8% … Continue reading Inflation is Here
by Chidem Kurdas In two substantial New York Review of Books articles, Paul Krugman and Robin Wells offer their views on various explanations of the property bubble and ways to get out of the slump. On the latter front, they advocate aggressive deficit spending by the federal government and quantitative easing by the Federal Reserve— … Continue reading Taylor, Krugman and Quantitative Easing
by Jerry O’Driscoll In Tuesday’s Wall Street Journal, George Melloan makes the case that savers and investors lose under the Fed’s low-interest policy. He also argues that the policy leads to greater risk-taking by those pursuing yield. Presumably it is leading to the next asset bubble. But where?
by Andreas Hoffmann* The European Central Bank (ECB) and the Fed differ in many aspects. First, the ECB is considered to be more hawkish on fighting inflationary tendencies. Its primary goal is price stability and it has continued to watch money growth. Output gaps below full-employment are only considered secondary as instrument to forecast inflation. … Continue reading The European Central Bank Turns into the Fed?
by Mario Rizzo There seems to be broad agreement among economists that the current recovery from the recession will be characterized by a slowly falling unemployment rate. This makes a good deal of sense since the problem that created the recession was a misdirection of resources into a number of sectors including housing construction and … Continue reading The Fed’s Coming Indiscretion?
by Thomas McQuade In looking back over the many excellent posts and comments that have graced ThinkMarkets in its first year, I was struck by the fact that, while many of the literary virtues have been displayed, there has been – surprisingly – nothing that could pass as poetry. I hope to be forgiven the … Continue reading A Sad, Sorry Song
by Mario Rizzo In the course of doing some research about the late economist Charles Kindelberger I came across an obituary article in The Economist dated July 17, 2003. The article made reference to the question whether the Fed’s policies after the then-recent dot com bubble simply saved us from recession or laid the ground … Continue reading Retrospect Is Prospect?
by Jerry O'Driscoll Yesterday was Cato's annual monetary conference and Allan Meltzer gave the keynote address. Today at cato.org you can listen to a 7-minute Podcast of an interview with Meltzer summarizing his presentation. He has just completed the last 2 volumes of his history of the Fed. Meltzer delivers a tough message: no nation that is spending … Continue reading Inflation Alert
By Mario Rizzo I am not happy at the prospect of the Congress making monetary policy. I am also not happy about the Congress making “countercyclical” fiscal policy. But I am really not happy about the extraordinarily poor quality of the arguments being made by economists so desperate to maintain the “independence” of the Fed. … Continue reading Rule by Bernanke and Friends
by Jerry O'Driscoll In an interview with The Wall Street Journal, German Chancellor Merkel called for an end to risky growth policies built on asset bubbles. "In recent years we've had the Asian crisis, the new economy crisis, and now this great international financial and economic crisis -- we can't slide into a crisis every … Continue reading Bubble or Growth?
by Chidem Kurdas After causing a debacle by flooding the system with oodles of easy money, the Federal Reserve is to morph into the enforcer of systemic prudence. We’re told that Treasury secretary Tim Geithner wants to create a single systemic risk regulator to oversee the whole financial system and the Fed will probably … Continue reading Rewarding the Punch Provider