Tag Archives: Monetary Policy

As central banks try (yet again) to bolster faltering growth and inflation, it is important to grasp how the ‘style’ and aims of monetary policy-making have changed over time and how they need to evolve in the future.The world is being disrupted by structural trends such as populism, demographic and climate change and technological innovation. Likewise, with previous approaches producing fewer results, we believe it is time to envisage monetary policies that address these sources of...

Huw van Steenis’ summarizes his report as follows (my emphasis): A new economy is emerging driven by changes in technology, demographics and the environment. The UK is also undergoing several major transitions that finance has to respond to. What this means for finance Finance is likely to undergo intense change over the coming decade. The shift to digitally-enabled services and firms is already profound and appears to be accelerating. The shift from banks to market-based finance is...

In the world of assets classes, I don’t believe it is equities which hold the Federal Reserve’s attention. After the 2006-11 debacle, the big bust, you can at least understand why policymakers might be more attuned to real estate no matter how the NYSE trades. It may be a decade ago, but that’s the one thing out of the Global Financial Crisis which was seared into the consciousness of everyone who lived through it....

Finanz und Wirtschaft, June 29, 2019. PDF. It is not central bank digital currency (CBDC) per se which might act as a game changer in financial markets. What will be key is how central banks accommodate the introduction of CBDC. In principle, this accommodation can go very far, to the point where the introduction of CBDC does not affect macroeconomic outcomes. But such complete accommodation is unlikely. On the one hand, central banks will want to exploit the new monetary policy options...

NZZ, April 25, 2019. PDF. Modern monetary theory (MMT) is neither a theory, nor modern, nor exclusively monetary. I discuss fallacies related to MMT. Dynamic inefficiency requires permanent, not transitory, r<g. For now, policy makers should rely on common sense rather than MMT.

NZZ, April 25, 2019. PDF. Modern monetary theory (MMT) is neither a theory, nor modern, nor exclusively monetary. I discuss fallacies related to MMT. Dynamic inefficiency requires permanent, not transitory, r<g. For now, policy makers should rely on common sense rather than MMT.

We have written much about the notion of inflation. We don’t want to rehash our many previous points, but to look at the idea of purchasing power from a new angle. Purchasing power is assumed to be intrinsic to the currency. We have said that the problem with the word inflation is that it treats two different phenomena as if they are the same. One is the presumed effect of rising quantity of dollars. The other is the...

As widely expected, the Reserve Bank of India announced a cut to its policy interest rate last week. We expect that monetary policy will likely stay accommodative in order to support growth going forward.The Reserve Bank of India (RBI) cut its policy interest rate (RBI repo rate) by 25 basis points (bps) last week, bringing it down to 6.0%. This was the RBI’s second interest rate cut this year under its new governor Shaktikanta Das. With this move, the RBI has fully reversed last year’s rate...

Eariler this week, when the San Fran Fed published a paper that suggested that the recovery would have been stronger if only the Fed had cut rates to negative, we proposed that this is nothing more than a trial balloon for the next recession/depression, one in which the Federal Reserve will seek affirmative “empirical evidence” that greenlights this unprecedented NIRPy step (in addition to QE of course). Today, in his...

The secret of health for both mind and body is not to mourn for the past, nor to worry about the future, but to live in the present moment wisely and earnestly. Buddha Review It’s that time of year again, time to cast the runes, consult the iChing, shake the Magic Eight Ball and read the tea leaves. What will happen in 2019? Will it be as bad as 2018 when positive returns were hard to come by, as rare as affordable...