Bill Dudley, never one to shy from causing controversy, regained the throne of most honest Fed official. Speaking at an economics conference, the President of the New York Branch, the one with all the QE assets, Dudley admitted, "We don't understand fully how large-scale asset purchase programs work to ease financial market conditions, there's still a lot of debate ..." [...]
After the results from this summer, it was clear that if there was ever going to be a reduction in the pace of QE it would “have” to be accompanied by something more amenable to fickle “markets.” I leaned more toward the camp that saw taper coupled to a decrease in the IOER, particularly now that the reverse repo program [...]
Last week, Rasmussen released results of a survey it conducted regarding the Federal Reserve. According to the statistical analysis, 74% of adults “favor auditing the Federal Reserve and making the results available to the public.” That was a strikingly high number and thus can lend itself to dramatic interpretations. I don’t have subscription access to Rasmussen’s details on the poll, [...]
Consistency perhaps should not be expected in rationalizing the emotional and illogical. It is easy to accept the premise that because everyone else believes something it is true. The wisdom of crowds always seems wise in the moment, until the “obvious” is revealed in gory detail. I say “obvious” only as a countenance for James Bullard, President of the St. [...]
The fact that companies coming out of the Great Recession have been running lean in terms of labor costs cuts both ways. It is a negative factor for employment growth since businesses have been very reluctant to add to staff levels without sustained revenue growth (which never materialized outside of currency translations). However, it also meant that those lucky, official [...]
I have plotted a chart of the S&P 500 (taken from the research of Robert Shiller) for a particular period in time. It shows the sometimes tenuous relationship between stock prices and underlying earnings. Prices and earnings largely behave as you would expect in the first half of the chart above – prices anticipating changes in the earnings environment (economy) [...]
I have never liked the word “inflation” in any context. It is far too subjective despite the various ideological attachments that have been assigned. However, humans, as economic agents, perceive “inflation” and it has very real effects on economic decisions and performance, so it has to be accounted for in some way. Inflation in the conventional economics sense is narrowly [...]
To me the idea of taper is easily explained by two words: asset inflation. You may feel compelled to add a third, uncontrolled, but until more empirical evidence is garnered (price collapses) I will at present refuse the license. The cloak to this game has been “the improving economy”, as the former Fed doves tell it, the economy is now [...]
While our focus is usually trained on markets, volatility as a concept can apply to much more than asset inflation extremities. The Japanese bond and stock markets are conforming to the QE script, as US markets begin to correlate (across the JPY-USD). What’s really interesting, however, is that despite now four years into a "recovery" a lot of economic data [...]
When even Eric Rosengren, Boston Fed President, is thinking about “tapering” you know something is a tad askew in FOMC-land. Again and again, these doves (including Charles Evans at the head of the Chicago Fed branch) had advocated the heaviest of hands of monetary intervention. QE 3 & 4 could not have been big enough for this cabal. Now in [...]
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