The release of the 2011 FOMC transcripts has provided some useful clarity on the thinking of Federal Reserve officials. Unlike in 2008, policymakers were a little better acquainted with wholesale money and its possible points of failure. They never did solve or even identify all of them, of course, but the repo market in particular seems to have finally been [...]
For Ben Bernanke, characterizing a successful tenure is exceedingly hard. Afterward writing a memoir about his time at the Fed, however, made such a task a necessary one. Given so few options from which to define his legacy, the former Chairman decided very carefully about how to frame his efforts. And still all he could come up with was a [...]
If you are an enterprising financial firm with spare cash toward the end of the business day, you have several options for it. Primary among them is the Fed’s Reverse Repo (RRP) desk which will pay you 50 bps interest with your cash secured by both the reputation of the Federal Reserve as well as UST collateral. Given that option, [...]
The amount of liquidity being added to the big Chinese banks has been astounding. The vast majority of it is coming from the PBOC itself. In July 2015, just before everything broke, PBOC funding of the Big 4 State-Owned Banks was less than RMB 100 billion. As of the latest figures for December 2016, it was RMB 1.17 trillion. In [...]
It may seem strange that one of the primary forces behind the Bretton Woods arrangement was John Maynard Keynes. That is because what goes on in his name today is often nothing like what he proposed. This is not an endorsement of those ideas, only recognition and deep appreciation that during the worst consequences of the worst kinds of economic [...]
Did CNY flash crash yesterday? That it is even being contemplated and argued is itself an indication of these times. According to pretty much all market data, CNY fell below 7.0 to the dollar just prior to the US open. It had been trading its usual (for the past week or so) artificial, non-volatile sideways at around 6.96 when for [...]
There are usually ceteris paribus assumptions lurking behind every mistaken impression in economics, including monetary economics. If Central Bank X does Y, where Y is a plus sign it is believed to be “accommodation” or “loosening.” Rarely if ever is there an account of money outside of this condition, except in only the most extreme of circumstances. In the past, [...]
This is a repost; originally published Dec. 22, 2016. The federal funds rate target is essentially nothing more than a communication tool. You don’t have to take my word for it, the same conclusion has been reached at the level of the FOMC itself. There was, in fact, some debate, though limited in scope, in 2013 and 2014 about changing [...]
At one point in time not all that long ago, basic economics (small “e”) ruled central banking. There was really no other choice, as out of necessity bred change and understanding. The English were perhaps first in that lead, as the Empire with greatest economic and financial reach. It is interesting what we take for granted today as if it [...]
Since the ECB began the Public Sector Purchase Program (QE) in the middle of March 2015, it has purchased (through the end of November 2016) almost €1.2 trillion in securities from the financial sector. In addition to that, the central bank has bought €46.2 billion in corporate bonds, and €148 billion of covered bonds in a third iteration in that [...]
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