Tag Archives: Federal Reserve System

Farewell QE, you have been a magnificent success

By Ambrose Evans-Pritchard – The diverging fortunes of the QE bloc and the EMU bloc prove beyond doubt that monetary stimulus packs a powerful punch.

America has this year weathered the most drastic austerity cuts since demobilisation at the end of the Korean War in the 1950s. Net fiscal tightening has been 2.5pc of GDP, yet the economy has muddled through. The Fed‘s $85bn monthly bond purchases – soon to be $75bn – have blunted the shock. more> http://tinyurl.com/kgzrut8


Fed cuts bond buying in first step away from historic stimulus

English: The Marriner S. Eccles Federal Reserv...

English: The Marriner S. Eccles Federal Reserve Board Building (commonly known as the Eccles Building or Federal Reserve Building) located at 20th Street & Constitution Avenue, NW in the Foggy Bottom neighborhood of Washington, D.C. Designed by architect Paul Philippe Cret in 1935, construction of the Art Deco building was completed in 1937. Its 2009 property value is $109,029,200.
(Photo credit: Wikipedia)

By Jonathan Spicer and Jason Lange – The Fed’s extraordinary money-printing has helped drive stocks to record highs and sparked sharp gyrations in foreign currencies, including a drop in emerging markets earlier this year as investors anticipated an end to the easing.

The central bank‘s asset purchase programs, a centerpiece of its crisis-era policy, have left it holding roughly $4 trillion of bonds, and the path it must follow in dialing it down is rife with numerous risks, including the possibility of higher-than-targeted interest rates and a loss of investor confidence. more> http://tinyurl.com/ks8t5m4


The Fed Doesn’t Really Trust the Banks Either

By Matt Levine – The Fed is having trouble influencing short-term rates because banks are not the seamless transition mechanism you might once have expected. Nobody trusts the banks, so they can’t increase their borrowing in the unsecured market just by raising the price.

Regulation makes the banks so creaky and complicated that they actually don’t want to make risk-free money by borrowing all they can from the fed funds market and lending to the Fed at IOER rates, because it would mess them up for capital or whatever.

Also: Banks are jerks, and keep the spreads wide by borrowing from lenders with “less bargaining power.” more> http://tinyurl.com/mdjtaqt


Fischer Seen Bringing Crisis-Fighting Skills to No. 2 Fed Post

By Joshua Zumbrun and Rich Miller – The former Bank of Israel governor, though a newcomer to the Fed, also brings continuity and strong academic credentials: as a professor of economics at Massachusetts Institute of Technology, he taught Fed Chairman Ben S. Bernanke, whose term ends in January, and European Central Bank chief Mario Draghi.

If confirmed by the Senate, Fischer would assume the vice chairmanship of a central bank struggling to convince investors that policy will remain easy even after it winds down its quantitative easing program. more> http://tinyurl.com/kczjw2d

The Eight Fictions Of Central Banking

By Steve Denning – Fiction: “The absence of higher inflation is sufficient license for the Fed to continue its present course.”

Reality: The real danger of long periods of free money and subsidized credit is significant capital misallocation and mal-investment, which undermine long-term growth or financial stability.

Fiction: “Highly accommodative monetary policy through QE provides broad support to the economy.”

Reality: Current policy helps the rich, but does little for workers and retirees or those seeking unemployment. more> http://tinyurl.com/pvsps83