Tag Archives: Monetary Policy

A bit wonkish (but no math), but interesting if you are into interest rates and how they affect the economy.Bond Economics No More Neutral Rate?Brian Romanchuk

On August 1, 2018, the 10-year Japanese government bond yield, shot through the roof (albeit a very low one). Yields shifted from 0.05 per cent on July 31 to 0.129 on August 1, which was the largest one-day rise since July 29, 2016 (when the yield rose 0.101 per cent). The Financial Times article (August 1, 2018) – Japanese bond market jolted as traders test BoJ resolve – wrote that “traders wasted no time in testing the Bank of Japan’s resolve to loosen its target range for the debt...

John Maynard Keynes - for the Times Literary Supplement It was his internationalism, together with his insights into the functioning of the world’s financial architecture that first drew me to the work of John Maynard Keynes.  His genius is, perhaps, most comparable to that of Charles Darwin. But whereas Darwin is widely recognized for developing the science of evolution, Keynes’s development of the science of macroeconomics goes largely unacknowledged by a profession still...

One of the questions that often comes up in economic discussions is: why is a positive inflation rate seen as a good thing? There are a few angles to this question, which makes it somewhat more complex. I am somewhat ambivalent on the subject, but I believe the best answer lies in the area of political economy, not economic theory.… Bond EconomicsWhy Is A Positive Inflation Rate A Good Thing?Brian Romanchuk

What if U.S. retail prices were not denominated in U.S. dollars, but instead were denominated in gold or Bitcoin? Paying for a loaf of bread with gold wouldn’t be very practical, as you’d need a very small speck of the precious metal. But one can imagine a system of gold substitutes, such as notes giving you ownership of a fraction of an ounce of gold, thereby overcoming the small-change problem. With Bitcoin, it’d be much easier, as a virtual currency can be divided any way you want. Now,...

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...

Image with acknowledgment to http://carolinaparrothead.blogspot.com/2016/05/breaking-camels-back.html Abstract: The world’s financial markets are hurtling towards a new phase of crises ranging from currency to balance of payments  to sovereign debt to banking crises. The monetary tightening policies of...

Making policy based on fairy tales.Lars P. Syll’s BlogBusting the NAIRU mythLars P. Syll | Professor, Malmo University

Federal Reserve always wants millions of people to be out of work… Put more bluntly, it’s worth at least thinking about what Bernie Sanders would do to mitigate the impact of Jerome Powell. Buffer stock of employed versus buffer stock of unemployed.MarketWatchOpinion: Proposals to guarantee jobs spotlight uncomfortable truth about Fed Steve Goldstein | DC Bureau ChiefSee alsoWhy the Fed should give everyone a checking account Greg Robb | Senior Economics ReporterSee also But the threat...

This week a friend casually explained that he and his wife considered having a second child. But having recently moved into a new house, they were having to fork out a large share of their income on mortgage interest payments. Hearing talk of potential rate rises had therefore persuaded them not to risk another pregnancy.Such are the life-changing impacts of decisions (or non-decisions) made by a group of men (and one woman) on the Monetary Policy Committee (MPC) of the Bank...