Tag Archives: monetary operations

The relentless flattening of the Treasury yield curve has been a topic of ongoing debate -- is this a signal that a recession is near? The key to interpreting the flattening is that bond market participants are not paid to to anticipate economic outcomes (outside the corner case of the inflation-linked market), rather to anticipate the path of short-term rates (and the term premium). The flattening yield curve tells us that market participants (on average) believe that we are near the end...

The dominant view of banks and other financial institutions is that they function primarily as intermediaries, managing flows of scarce funds from those who have accumulated them to those who have need of them and can pay for their use. This understanding pervades textbooks, scholarly writings, and policy discussions – yet it is fundamentally false as a description of how a modern financial system works. Finance today is no more primarily “intermediated” than it is pre-accumulated or...