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
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
- Fed’s $4 Trillion in Assets Draw Lawmakers’ Scrutiny, Jeff Kearns, Bloomberg
- The Bernanke Doctrine, Editorial, Bloomberg
- Fed Swaps Bonds for Word Qualifiers, Caroline Baum, Bloomberg
- Fed Trims QE Pace to $75 Billion on Labor Market Outlook, Joshua Zumbrun, Bloomberg
- Stumbling Toward the Next Crash, Gordon Brown, NYTimes.com
Posted in Banking, Business, Economy, History
Tagged Business, Capital, Federal Reserve System, Industrial economy, Jobs, Leadership, Monetary policy, Quantitative easing, United States
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
Posted in Banking, Business, Economy, Regulations
Tagged Business, Capital, Federal funds, Federal Reserve System, IOER, Monetary policy, Quantitative easing, Regulations, United States
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
Posted in Banking, Business, Economy, Leadership
Tagged Bank of Israel, Business, Federal Reserve System, Government, Leadership, Massachusetts Institute of Technology, Monetary policy, Stanley Fischer, United States
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
By By Matthew C. Klein – When confronted with concerns about people struggling to live off fixed incomes, Yellen agreed that “low interest rates harm savers, it’s absolutely true.” Harming at least some savers, however, may be part of the plan, at least if Yellen agrees with Charles Evans, the president of the Federal Reserve Bank of Chicago. He has argued that the threat of wealth confiscation by negative interest rates is necessary to restore spending and “risk-taking” back to “normal levels.”
These admissions suggest the Fed’s leaders believe that the central bank boosts the economy chiefly by enriching certain people in the hope that they go out and spend their newfound wealth.
Congress could get around these unsavory side effects by enacting broad-based tax cuts or by having the Treasury send checks directly to every American. more> http://tinyurl.com/k2jysr3
- Central banks have checked into Hotel California ↓
- Madame Chairman Holds Her Own, Caroline Baum, Bloomberg
- Yellen Signals Continued QE Undeterred by Bubble Risk, Joshua Zumbrun & Jeff Kearns, Bloomberg [VIDEO 16:52]
- Fed’s Dudley ‘hopeful’ on recovery; Plosser calls for capping QE, Jonathan Spicer and Dan Kelley, Reuters
- This Former Fed Official Thinks Quantitative Easing Has Been a Disaster, Christopher Matthews, TIME
- The Yellen Doctrine: Robust Growth Is the Priority, but Bubbles Matter, John Cassidy, New Yorker
Posted in Banking, Business, CONGRESS WATCH, Economic development, Economy, Leadership
Tagged Business, Capital, Central bank, Congress Watch, Federal Reserve System, Monetary policy, United States
CONGRESS WATCH Federal Reserve Steals From the Poor and Gives to the Rich, Ron Paul