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This article was first published by me on Talkmarkets:  www.talkmarkets.com/content/us-markets/fed-monetary-errors-could-have-made-the-great-recession-much-worse?post=82876&uid=4798

The Federal Reserve ignored its own data when it came to the percentage drop off in growth in the Great Recession. The Fed targeted inflation, which seemed to be humming along, and yet, GDP, the Nominal GDP, was dropping way before inflation dropped. This chart tells it all:


The Fed was looking at inflation, the red line, when it should have been looking at the percentage change of (N)GDP, the blue line.

NGDP was dropping by percentage in early 2007, actually starting in 2005, while inflation did not drop until nearly 2009. Of course we have to look at sticky wages for the private sector and we see the greatest percentage drop is attributed to the Great Recession, as many well paying jobs were lost in fall of 2008, leading to the greatest percentage of hourly earnings drop in 2009.


The "…

This article was first published by me on Talkmarkets: www.talkmarkets.com/content/us-markets/nominal-gdp-targeting-and-market-monetarism-made-easy-with-graphs?post=82536&uid=4798

NGDP Targeting is an easy concept to understand and so I will try to share it here. I am sharing this as a layman, a financial contributor, not as an economist. I have not made a judgement about the merit of the system, only that it makes perfect sense and that monetary policy has been unnecessarily blind to the reality on the ground.

The economists who target NGDP are known as market monetarists. Sharing this relatively new school of economics on a basic level has to then be, a sharing by example, not by abstract academic thinking.

I have written a little article showing the terms involved in a more thorough understanding of the subject, and why I think it could work except for the problem of recent bond behavior. And of course, serious students can learn from the many blogs that exist teaching the ab…

This article was first published by me on Talkmarkets: www.talkmarkets.com/content/us-markets/mm-boys-and-tight-money-market-monetarist-terms-listed-for-you?post=82308&uid=4798

The New MM Boys are attempting to aim for the fences, and develop a new economic school of thought that will cause the economy to prosper through stabilizaton of Nominal GDP. But so far they are just hitting singles and doubles. Before I continue, here are a list of terms that apply to the New MM bloggers:

Terms Market Monetarists are most interested in. Google them if you are not familiar with them:

Phillips Curve broken down
Nominal GDP (NGDP)
NGDP Targeting and Inflation Targeting
ZIRP and NIRP
Money Illusion
Rational Expectations
NGDP Futures
Nominal Income Target
Monetary Disequilibrium Theory
Sticky Wages/Sticky Prices
Hot Potato Effect
Wicksellian Dilemma
Wicksellian Natural Rate of Interest
Keynesian Liquidity Trap
Interest on Reserves (IOR)
Aggregate Demand Determined by Future Path of NGDP
Base …

This article was first published by me on Talkmarkets: www.talkmarkets.com/content/us-markets/sumner-and-his-market-monetarists-compared-to-mish-libertarians-and-keynesians?post=81981&uid=4798 

Scott Sumner and his market monetarist buddies have made a name for themselves. All the way back to articles on Business Insider, mostly written by Joe Weisenthal, they have maintained that the Fed was too tight in late 2007, leading to the Great Recession. They say that the cause of the Great Recession was tight money, including Interest On Reserves, IOR paid to keep banks from lending.

Now, please note, they do not deny a housing recession. But they say what happened was much deeper than that. The argument is compelling. They are opposed by Keynesians, Mish Shedlock, and Mises (Austrian economists). Please bear with me as I attempt to sort this out for you.

This accusation of tightening on the part of the Fed has become a hot economic topic because of  Ted Cruz's comments ab…

This is what the Fed says about the dollar, about our money:
http://www.federalreserve.gov/faqs/currency_12770.htm
Is U.S. currency still backed by gold? Federal Reserve notes are not redeemable in gold, silver, or any other commodity. Federal Reserve notes have not been redeemable in gold since January 30, 1934, when the Congress amended Section 16 of the Federal Reserve Act to read: "The said [Federal Reserve] notes shall be obligations of the United States….They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank." Federal Reserve notes have not been redeemable in silver since the 1960s.
The Congress has specified that Federal Reserve Banks must hold collateral equal in value to the Federal Reserve notes that the Federal Reserve Bank puts in to circulation. This collateral is chiefly held in the form of U.S. Treasury, federal agency,…

This article was first published by me on Talkmarkets:  http://www.talkmarkets.com/content/us-markets/fed-premeditated-mispricing-of-risk-in-housing-oil-junk-bonds-and-other-markets?post=81636

I have written that skeptics of Wall Street view the housing bubble of the mid 2000's as a premeditated mispricing of risk. More on that at the end of this article. Now that we have Bank of America coming out and saying that stocks and other assets are mispriced regarding risk and the Fed is behind it, so we have to wonder what else is mispriced regarding risk.

It looks as though investors may be buying financial assets that were meant to fail, but are inflated for a time before failure, due to this mispricing. This allowed assets to reach pricing heights not possible had the risk been priced correctly and crashes to be delayed. To a certain extent, we often see what finance wants us to see, and we don't see the big picture until after the fact. But Bank of America has put th…

This article was first published by me on Talkmarkets: http://www.talkmarkets.com/content/bonds/the-federal-reserve-knew-libor-was-exploding-in-2007-and-did-nothing?post=81296

The Federal Reserve did nothing when LIBOR exploded in 2007 (chart at the end of this article). But since then, the Fed has taken the four steps listed below. The result of these steps will be a slow economy going forward.

Jeffrey Rogers Hummel recently posted an article spelling out the relationship of the Fed to banks and the government. I have no clue whether his main argument is valid although we know the Fed is paying banks 12 billion dollars in 2016 in interest on reserves (IOR). That seems like real money to me.

But the most interesting aspect of the article for me is Mr. Hummel stated that the big banks who are members of the Fed get few perks from that position. I think the big banks get massive perks from the Fed. I want to share again what I posted on Talkmarkets. I said:

So, we need to look at the …