Tag Archives: Monetary Policy

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...

Interesting look at the history.Information Transfer EconomicsIt's the 80s!Jason Smith

Policymakers have helped to perpetuate an economic model that is ultimately unsustainable. The article is based on Bill Mitchell's analysis of US unemployment.AlterNetThe Fed Is on the Verge of Making a Major Policy ErrorMarshall Auerback / AlterNet

My reading of the consensus view is that the change in personnel at the Federal Reserve has coincided with a more hawkish outlook, although the tax cut presumably helped push matters. I do not have a strong reason to disagree with such a view; the Fed is probably going to revert back to its historical policy of gradualism -- which was a 25 basis point hike per meeting.... Bond Economics Back To GradualismBrian Romanchuk