Nothing says “fixed” quite like bureaucrats responding to a past crisis they did not foresee (and in the case of European bureaucrats, actively denied while it was happening) by establishing more layers of bureaucracies to “prevent” it from happening again. It is the most predictable result in all of finance and money as the government acting so busily to assure [...]
For the 55th consecutive month, the PCE Deflator came in under the 2% inflation target for the Federal Reserve’s inflation mandate. The Bureau of Economic Analysis reported last week that inflation in November 2016 actually decelerated slightly from its meandering pace set more by oil price base effects than $4.5 trillion on the Fed’s balance sheet. Year-over-year the PCE Deflator [...]
At one point in time not all that long ago, basic economics (small “e”) ruled central banking. There was really no other choice, as out of necessity bred change and understanding. The English were perhaps first in that lead, as the Empire with greatest economic and financial reach. It is interesting what we take for granted today as if it [...]
The whole monetary issue as it pertains to the eurodollar system can be succinctly summed up as balance sheet capacity. In pure monetary terms, that is an enormous distinction. What counts as money is not what almost everyone still thinks it is, though those view should have been shifted almost a decade ago in August 2007. Money is instead “money”, [...]
For years it was uncontested convention that the lower the rate the better. Stimulus was, after all, intended as a borrower boost. Make the cost of adding debt low and lower, then it was assumed borrowers would borrow more than they otherwise might have with recovery the promising result. Every time rates went lower, the common refrain of “stimulus” went [...]
The entire idea of quantitative easing is supposed to be exceedingly simple. As I showed here, in the middle of 1917 it was. The US economy and the global monetary system moving into 2017 is nothing like that one, yet the intellectual foundations for monetary policy remain as if it was. Even in operation, QE was more PR than money; [...]
I think it necessary to qualify and clarify the conventional stance on the unemployment rate. In the mainstream, as noted yesterday, it has been something of an absolute. The lower it goes the more provocative the rhetoric on the positive side. After all, an economy at full employment cannot possibly be unhealthy, can it? That has been the great dividing [...]
Part 1 is here. Part 2 is here. From the point of the Great Crash forward the interbank market mostly ceased to exist. Having first learned the hard way about money and liquidity, the federal funds market as well as the trend for recirculating borrowed reserves largely died out. Banks overall carried massive reserve balances far in excess of what [...]
Part 1 is here. Having used monetary policy and proved its ability to manage big things and even force onto the monetary system and the economy big changes, the Federal Reserve grew in esteem and prestige so that what followed was the hardening assumption that monetary policy could be used similarly for all circumstances. It was not just the burgeoning class [...]
One of the biggest intellectual impediments to understanding where we are in the arc of monetary evolution is Positive Economics. As Milton Friedman described it in 1953, it was essentially the doctrine of trying to explain a lot knowing very little. In such a simple description it sounds ridiculous, but in the reality of complex systems growing only more complex [...]
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