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Tag Archives: Monetary Policy

Transitory’s Japanese Cousin

Thomas Hoenig was President of the Federal Reserve’s Kansas City branch for two decades. He left that post in 2011 to become Vice Chairman of the FDIC. Before that, Mr. Hoenig as a voting member of the FOMC in 2010 cast the lone dissenting vote in each of the eight policy meetings that year (meaning he was against QE2, too). This makes him, apparently, the hawk of all hawks. In January 2011, in his capacity as still...

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Monetary Policy and the Wealth Distribution

In a Staff Working Paper, the Bank of England’s Philip Bunn, Alice Pugh, and Chris Yeates discuss how monetary policy easing following the financial crisis affected income and wealth of different age groups. The authors analyze survey panel data (ONS Wealth and Assets Survey) on households’ characteristics and balance sheet positions. They argue that the overall effect of monetary policy on standard relative measures of income and wealth inequality has been small. Given the pre-existing...

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China Going Boom

For a very long time, they tried it “our” way. It isn’t working out so well for them any longer, so in one sense you can’t blame them for seeking answers elsewhere. It was a good run while it lasted. The big problem is that what “it” was wasn’t ever our way. Not really. The Chinese for decades followed not a free market paradigm but an orthodox Economics one. This is no trivial difference, as the latter is far more...

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ECB Bond Purchases: Fiscal or Monetary Policy?

In an NBER working paper, Arvind Krishnamurthy, Stefan Nagel, and Annette Vissing-Jorgensen analyze which components of bond yields were affected by the European Central Bank’s government bond purchasing programs. Given the institutional restrictions on monetary policy in the Euro area, the ECB had to carefully argue why it intervened in the first place. (To many, the case was obvious; the ECB intervention amounted to quasi-fiscal policy. But an intervention with this objective would not...

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Global Asset Allocation Update:

There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. Despite the selloff of the last week I don’t believe any portfolio action is warranted. While the overbought condition has largely been corrected now, the S&P 500 is far from the opposite condition, oversold. At the lows this morning, the S&P 500 was officially in...

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Globally Synchronized What?

In one of those rare turns, the term “globally synchronized growth” actually means what the words do. It is economic growth that for the first time in ten years has all the major economies of the world participating in it. It’s the kind of big idea that seems like a big thing we all should pay attention to. In The New York Times this weekend, we learn: A decade after the world descended into a devastating economic...

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Price Effects of Purchases of Greek Sovereign Debt by the ECB

In a CEPR discussion paper, Christoph Trebesch and Jeromin Zettelmeyer argue that ECB bond buying had a large impact on the price of short and medium maturity bonds … However, the effects were limited to those sovereign bonds actually bought. We find little evidence for positive effects on market quality, or spillovers to close substitute bonds, CDS markets, or corporate bonds. A multiple equilibria view of the crisis would probably suggest otherwise.

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Central Bank Transparency, Or Doing Deliberate Dollar Deals With The Devil

The advent of open and transparent central banks is a relatively new one. For most of their history, these quasi-government institutions operated in secret and they liked it that way. As late as October 1993, for example, Alan Greenspan was testifying before Congress intentionally trying to cloud the issue as to whether verbatim transcripts of FOMC meetings actually existed. Representative Toby Roth (R-WI) quizzed the...

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What About 2.62percent?

There’s nothing especially special about 2.62%. It’s a level pretty much like any other, given significance by only one phrase: the highest since 2014. It sounds impressive, which is the point. But that only lasts until you remember the same thing was said not all that long ago. Back last March, the 10-year yield had then, like now, broke above 2.60%. In doing so, it surpassed the previous recent high set in December...

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If Bitcoin Is A Bubble…

Our earlier articles on bitcoin discuss the crypto asset as a currency and a commodity. Both papers focused on the consequences of bitcoin’s defining feature: the asymptotic supply limit of 21 million coins. This gives it an unusual juxtaposition of demand uncertainty and supply certainty (as well as inelasticity). As a currency, it gives rise to a tension between its use as a store of value and as medium of exchange....

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