Written October 21, 2022 The fundamental question for the U.S. macroeconomic forecast is if the pandemic recovery can continue or if the economy is heading into a recession. This outcome will be determined largely by Federal Reserve actions during the quarters ahead. Given how long the Fed waited to fight the current bought of inflation,… Read more

The January 4 Federal Reserve Chairs Joint Interview panel at the largest and most prestigious economics conference in the country was a standing room only affair with a massive media presence.  I got there fifteen minutes early and almost did not get a seat.  New York Times senior economics correspondent Neil Irwin provided an early… Read more

The Federal Open Market Committee began its two day September meeting yesterday, where it will consider raising the short-term policy rate, or the guidance on that rate. It has been nine years since the committee has raised this rate. The prospect of higher rates has financial markets and their commentators very nervous. The rate-raising event,… Read more

I just finished John Taylor’s new book, First Principles. It’s a very good and fast read. It’s a little over 200 pages, and not a derivative in it. I don’t think there is even an explicit formula in it. Taylor writes very well, especially for an academic economist. Maybe that is from all his years… Read more

It’s not everyday that Greg Mankiw and Paul Krugman agree.  When they do, it’s worth thinking about.  Here are their blog posts: Krugman & Mankiw. The topic is a Taylor Rule, which is a method, proposed John Taylor, for determining what Fed Policy should be.  That is, what is the interest rate that the Fed… Read more

Europe has created a $1 trillion bailout fund. The United States Federal Reserve Bank has apparently agreed to unlimited currency swaps to support the bailout effort. By comparison, Freddie Mac’s request for another $8.4 billion looks pretty small, but they are all symptoms of the same disease. Let’s call the disease bailoutitis. It is not… Read more

Vince Reinhart released a fascinating piece on February 25, 2010. I highly recommend reading it in its entirety. Here, I’d like to talk about two paragraphs: How will the Fed raise the short-term market interest rate? The old-fashioned way of tightening monetary policy is to shrink the amount of reserves outstanding by selling assets. Over… Read more

There has been a fair amount of chatter lately saying that the Feds are keeping banks from lending. The story goes something like this: Banks can borrow from the Fed at rates near zero. Then, they can purchase Treasuries for about three percent. Voila, banks have a three percent risk-free return, and no incentive to… Read more

I had to pause when I read George Melloan’s Wall Street Journal piece today. Seems he sees a conspiracy between Treasury and the Federal Reserve to fund the national deficit with bank funds to the detriment of business and economic growth. In Melloan’s world, the co-conspirators do this by regulation, giving banks little choice but… Read more

After the kids went to bed last night, I checked the web to see if there was anything new. The Wall Street Journal posts the next day’s op-eds the evening before print publication. So, I checked those out. I started reading a piece by Judy Shelton provocatively titled The Fed’s Woody Allen Policy. Hey, I… Read more