By experience of different kinds and settings of balance sheet expansion in the United States, Europe, and Japan, we can only conclude that monetary policy with these intentions has no effect, direct or otherwise, on inflation in each of these jurisdictions. The varied forms and exact nature of central bank execution allows us a broad and nearly comprehensive examination of [...]
Offering the longest track record of balance sheet policy, the Bank of Japan should have been a cautionary tale for the central banks that have since followed. Unfortunately, ideology at the center of monetary policy in all jurisdictions leaves no room for objective interpretation such as this. Economists and policymakers (redundant) believe QE works, full stop. When it doesn’t, such [...]
The ECB’s experimentation with balance sheet expansion, both as a matter of bank “reserves” and overall balance sheet size, encompasses at least two distinct episodes. The first began in earnest in May 2010 with the initial concerns being limited to Greece and eventually PIIGS nations, finally exploding in later 2011 as a full-blown crisis (and far more than euros, it [...]
Yesterday’s publication of PCE and Personal Income also included the monthly update for the PCE Deflator, the Federal Reserve’s stated preference for measuring inflation in the economy. The June 2016 figures for the deflator were also negative in terms of both short and longer term perspectives. The year-over-year change in the index was just 0.88%, down slightly from 0.94% in [...]
There was more bad news for the FOMC over the past few days beside the once again near-zero GDP estimate. If the labor market were truly growing as is claimed, we should be finding “inflation” in a broad set of different economic views. From the standard inflation calculations to various estimates for wages or income, by now it should be [...]
While on the other side of the Pacific economists try to decipher what China has truly gotten itself into, over the Atlantic the Europeans are admitting that trillion is again not “enough.” As I have written repeatedly, the adjectives attached to QE depend on the tense. Ahead of time, peering into the unwritten future, QE “will be” powerful and able, [...]
There probably should be a cottage industry trying to figure out what Albert Einstein actually said or wrote quite against what is typically attributed to him (or Abraham Lincoln, Winston Churchill and many others). One such nugget purported from his genius was that compound interest is the most powerful force in the universe. That is how the sentiment seems to [...]
They cannot say they weren’t warned. Though the World Bank’s (and IMF) proclamation was a bit condescending and parochial, it was very much fitting. There was a short window, which more than suggests high level discussion among central bank figures, into which these “emerging market” economies might begin painful adjustments in order to better weather the coming dollar storm. Despite [...]
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