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interest rate targeting

Are These Magic Beans?

By |2020-10-09T18:56:27-04:00October 9th, 2020|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

China’s Caixin Composite PMI came down a little bit in the month of September 2020. According to the latest update, the country’s manufacturing sector index declined by a small amount while services accelerated only modestly. Combined, the manufacturing side worked out to contribute more to the composite than services, so the score for last month dropped to 54.5 from 55.1 [...]

Greenspan’s Massacre Masterpiece

By |2019-03-13T13:16:33-04:00March 13th, 2019|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

What most Economists “learned” from the Great Inflation was how important psychological factors had become. You would think that such a huge monetary disconnect would teach especially monetary officials the importance of monetary competence. However, as Upton Sinclair once wrote, paraphrasing, it’s difficult to get a central banker to understand money when his paycheck can be saved by blaming you [...]

Rationing Rational Rationalizations

By |2018-12-21T15:30:06-05:00December 21st, 2018|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

What is the Greenspan or Fed put? It is an idea, the legend that says the US central bank will only allow a little downside in stocks. The 1929 crash despite being so long ago has been indelibly imprinted upon the machinations of policymakers. Some say they can’t see a big slide without the Great Depression. Therefore, they will do [...]

Making (of) A Statement

By |2018-05-02T15:58:37-04:00May 2nd, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

I am decidedly in favor of going back to the way it was twenty-five years ago. These constant communications from the Federal Reserve, designed to increase transparency, have accomplished the opposite. Alan Greenspan was made famous for first being an accidental genius (no, it wasn’t massive offshore monetary growth that made the Great “Moderation”, it was 25 bps moves one [...]

Harvey and Irma Passed, Back To Same Procyclical Housing

By |2018-03-23T12:19:49-04:00March 23rd, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Why does monetary policy pay so much attention to housing? The easy answer over the last twelve years is the bubble. It was hard not to, though for a very long time policymakers did attempt a systemic disavowal. But beyond the middle 2000’s housing mania, central banks have had a very keen interest in real estate from the beginning. The [...]

Inflation Is Not About Consumer Prices

By |2017-07-26T18:58:44-04:00July 26th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

I suspect President Trump has been told that markets don’t like radical changes. If there is one thing that any elected official is afraid of, it’s the internet flooded with reports of grave financial instability. We need only go back a year to find otherwise confident authorities suddenly reassessing their whole outlook. On the campaign trail, candidate Trump was very [...]

Systemic Blindness

By |2017-05-31T19:31:56-04:00May 31st, 2017|Commodities, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

MF Global failed on a trade that would have made it enormously profitable. AIG’s portfolios of “toxic waste” ended up making money – for the Federal Reserve. Bear Stearns and Lehman Brothers were ended like the others by liquidity, not losses. SemGroup was another firm that went into bankruptcy during that period, but one that practically no one has heard [...]

Further Unanchoring Is Not Strictly About Inflation

By |2017-03-17T16:22:06-04:00March 17th, 2017|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

According to Alan Greenspan in a speech delivered at Stanford University in September 1997, monetary policy in the United States had been shed of M1 by late 1982. The Fed has never been explicit about exactly when, or even why, monetary policy changed dramatically in the 1980’s to a regime of pure interest rate targeting of the federal funds rate. [...]

Where Do We Begin? No More Targets

By |2016-11-02T18:11:42-04:00November 2nd, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

In the seventeenth episode of the second season of the Comedy Central cartoon South Park, the show introduces one of its longest lasting memes that has survived despite the first airing being nearly twenty years ago, and all the vulgarity and seemingly gratuitous violence in between. Titled Gnomes, we find one of the main character’s underpants (seriously) being stolen by [...]

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