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Showing posts from April, 2020

Fed Signals It Will Break the Economy. Wait Til Trump Finds Out

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Update; while the Fed did not break the economy as this article predicted, the Coronavirus did. And the Fed likely is relieved, being afraid of Trump, although we now face deflation. This article was first published by me on Talkmarkets:
https://talkmarkets.com/content/economics--politics-education/fed-signals-will-break-the-economy-wait-til-trump-finds-out?post=190135&uid=4798


Tim Duy, economist at University of Oregon and contributor to Bloomberg View has an ominous prediction. The Fed won't change, just like a leopard won't change its spots, and will likely establish the same policies that it has in the past to break the economy. Duy said:

...What I find most interesting is the adherence to these models even though, as Evans says, they will sustain the economy in the zone where the zero lower bound is likely to be an issue once again. One would think the Fed would continue to adjust policy accordingly in a dovish direction but increasingly is looks like many policymakers…

Scott Sumner Destroys Financial Times Fear of China

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This article was first published by me on Talkmarkets. The pandemic has complicated our relationship with China. Yet we have prospered from the relationship in recent times until the trade wars of Donald Trump reversed that prosperity. https://talkmarkets.com/content/global-markets/scott-sumner-destroys-financial-times-fear-of-china?post=186426&uid=4798

The Financial Times has come out with an article fearful of China. Scott Sumner of the Mercatus Centerdecimated it. For the FT, fear of losing a cultural war with China must be widely understood. The FT said:

 While tariffs are President Donald Trump’s personal preoccupation, fears over losing an economic and cultural war (and possibly a real one at some point) with China is a worry that is shared broadly in the US, no matter what circles you travel in.

Sumner destroys the FT author's arguments by pointing out a few choice facts:

1. The worry of losing a cultural war with China is not widespread. Both Sumner and I have never met…

Fed In a Box

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This article was first published by me on Talkmarkets: https://talkmarkets.com/content/bonds/fed-in-a-box?post=185070&uid=4798

There is an economic debate over the affect of rising interest rates upon the R*, otherwise known as the natural rate of interest, the Wicksellian rate, the Equilibrium rate, or the neutral rate. The definition of the natural rate is as follows:

The concept was originated by the Swedish economist Knut Wicksell who published a paper in 1898 defining it as a real short-term rate that makes output equal to natural output with constant inflation. Specifically, Wicksell defined the NRI as “a certain rate of interest on loans which is neutral in respect to commodity prices and tends neither to raise nor to lower them”. It is hard to argue that the Fed cares much about the natural rate, since commodities often rise forcefully, and the cost of living is pinching main street. However, it says it does care, that it cares about price stability as one mandate. So what…

The Lowdown Federal Reserve Bank

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This article was first published by me on Talkmarkets: https://talkmarkets.com/content/economics--politics-education/the-lowdown-federal-reserve-bank?post=183282&uid=4798

I will go so far to say that, in the remembrance of Boz Scaggs' famous lyrics, it is a "dirty lowdown" Fed Bank. This blogger has been arguing here at Talkmarkets that the Federal Reserve is a conspiratorial bank, mispricing risk and liquidating the ill fated results of speculation from mispricing risk!

Well, now, George Selgin Phd., esteemed lead economist at the CATO Institute and the Alt M blog, has confirmed the conspiracy in a recent blog post. I will try to encapsulate the main points of his work while adding what I have written before on the subject in order to help clarify the issue.

First, Professor Selgin probably knows more about excess reserves than anyone else outside the Fed. His blog post begins with a view that the Fed is trying to sell how good interest on excess reserves (IOER) po…