The Fed's monetary policy: Just follow the yellow brick road?
Paul H. Kupiec | AEIdeas
Early last month, Federal Reserve Board Chairman Jerome Powell said he does not see any evidence that the labor market is at risk of overheating and putting inflationary pressure on prices. He does not foresee a need to accelerate the central bank’s quarterly interest-rate increases or to signal the need for a more restrictive future policy rate path. Paul Kupiec discusses why Chairman Powell feels confident in his forecast of exceptionally low unemployment and low inflation. Kupiec argues that if unemployment and inflation conditions in the early 1950s represent the prime of monetary policy, the odds of future Federal Reserve policy disappointments are not insignificant.
Former Reserve Bank of India chief stresses its need for autonomy
BY ASIA TIMES STAFF
Raghuram Rajan feels disagreements between the government and the RBI should not escalate further
Govt And RBI Have To Respect Each Other's Turf, Says Raghuram Rajan
quoting Raghuram Rajan via Business Standard
'The aim of the board is to be Rahul Dravid - sensible, thoughtful and not, with due respect, Navjot Sidhu', says Raghuram Rajan, former RBI governor.
Raghuram Rajan Says RBI Is A Seat Belt For Government
featuring Raghuram Rajan via Live Mint
Once you have appointed these deputy governors and governor, you have to listen to them because that is what you have appointed them for, they are your safety belt: Former RBI governor Raghuram Rajan.
Big Fight For Big Money
quoting Raghuram Rajan via The Asian Age
The economic problems should not however make us gloss over the severe institutional stress between the government and RBI.
Economic Policy Challenges Facing California's Next Governor
via Hoover Institution
Hoover Institution economists have just written a new paper describing a number of significant economic problems within California and how to fix them.
John Tamny, RealClearPolitics & Forbes, and author of The End of Work and Who Needs the Fed? explains that the Fed is not a rate-setter, it's a rate-follower. It can't create an economy. Investors have known for a year or to that [rate increases] were coming. Draghi’s gloomy remark about the federal budget. The Fed is “large and powerful” —and relevant—because the US economy is the largest in the world. Mexico and Yemen and Nigeria have central banks, which we don’t talk about. Yemen is a war-torn, failed economy; it cannot be rescued by central bankers with unlimited spending. Banks lend to each other with overnight rates. . . . Why did we ever take the Fed so seriously?
China can’t afford to lose war on debt
BY CHRIS TAYLOR
Beijing knows ‘there is no bailout too big to avoid a crisis,’ which would bring down the ruling Communist Party government
Finding a quick fix for China’s economic and financial ills
BY GORDON WATTS
PBOC Governor Yi Gang has had to fight ‘fires’ on numerous fronts in his first eight months in the job
The Fed Has Not “Gone Crazy” as Trump Claims
Peter Ireland, E21
President Trump criticized the Federal Reserve again last week, singling out the central bank as the “biggest threat” to his administration’s success. Earlier, he accused the Fed of having “gone crazy” by raising interest rates too quickly. Many long-time Fed watchers were taken aback by these candid remarks, since previous Presidents have deliberately refrained from commenting on the Fed’s policy actions. Read more here....
How Does Economics Help Us Make Better Policy? Here Are Four Examples
quoting Thomas Sowell via Forbes
Economics: it’s the study of human action and its unintended consequences, and I think it teaches us a lot about wise Christian stewardship and compassionate, prudent public policy. Here are four examples I recently shared with students in a colleague’s class at Samford University.
The Robust Economy Has Hidden The Next Crisis
quoting Raghuram Rajan via The Washington Post
In the United States, recovery from the financial crisis a decade ago has continued on as one of the longest economic expansions in American history. Unemployment is at a 50-year low. Fueled by this momentum, while ignoring the intense political disruptions of the past two years, the stock market soared to new heights — until the big plunge this week following an earlier slide in February.
EXAMINING THE SELF-MADE MAN: BEZOS, TRUMP & AEI ECONOMISTS EXAMINE WAGE GROWTH, LABOR MARKETS AND MORE
Facts and falsehoods about the US labor market: A long-read Q&A
James Pethokoukis | AEIdeas
Moody’s Analytics economist Adam Ozimek joins James Pethokoukis to talk unemployment, wage growth, and all things economic policy.
THE ATTRIBUTES OF A SUSTAINABLE, GLOBAL ORDER IN MACRO FINANCE & US ECONOMY HAS MORE ROOM TO GROW PAST 4% GDP
The Fed’s monetary policy: Just follow the yellow brick road?
Paul H. Kupiec | AEIdeas
Tight labor markets, low real interest rates, and large federal budget deficits are a textbook recipe for inflation, and yet inflationary expectations remain contained. What makes Chairman Jerome Powell think he can sustain the current expansion while maintaining historically low unemployment and a low and stable inflation rate? Join AEI on Friday when a panel of experts will discuss these and other issues related to Federal Reserve monetary policy.
What Worries Me About The U.S. Economy
by Raghuram Rajan via The Washington Post
The U.S. economy certainly appears as if it is in an ideal place: unemployment is at its lowest in nearly half a century, and the number of people voluntarily leaving jobs to find new ones, an indicator of their confidence in the economy, is at a 20-year high. Economic growth this year is likely to be around 3 percent, more than what most economists think the economy is capable of in the medium term. Inflation is moderate.
Fed Is On To A 'New Kind Of Policy,' Stanford's John Taylor Says
interview with John B. Taylor via Bloomberg
Hoover Institution fellow John Taylor talks about Federal Reserve policy including the raising of interest rates.
How Fed Rate Increases Affect the Economy
Mickey Levy, E21
My colleagues and I recently analyzed every Federal Reserve interest rate increase episode between 1983 and 2015 and found several patterns emerge: bond yields rose, the yield curve flattened, the U.S. stock market either chopped sideways or rose, the U.S. dollar fell as frequently as it appreciated, and as the Fed raised rates from accommodative to a neutral monetary policy, the economy continued to grow, largely unaffected by the rate increases and removal of monetary accommodation. Read more here....
Continually Mistaken, Chronically Admired
The work of Nobel Prize-winning economist Joseph Stiglitz is a study in elite myopia.
How the Sun Foreshadowed the Trump Era
By IRA STOLL, Special to the Sun | September 25, 2018
Don't blame business for slow wage growth
Michael R. Strain | Bloomberg Opinion
Are wages determined by market forces, or do businesses get to decide what pay they offer to workers? Michael Strain believes that determining why wage growth has been sluggish for years is at the heart of the debate about the economy. Despite several other important factors, Strain argues that worker productivity remains the dominant force in setting wages. Mobility costs are much stronger in the near term than over longer periods of time, and intuitively there is a limit to how far an employer can push its wages below the market wage. The strength of market forces can be dispiriting for those who want wages to grow faster; after all it is much harder for government policy to spur productivity growth than to clamp down on anticompetitive corporate practices.
The economics and emotions behind slow wage growth
Michael R. Strain | Bloomberg Opinion
Unemployment continues to fall, and the number of jobs is increasing, yet wages are failing to rise. Michael Strain asks why this is happening and proposes several explanations for why wage growth is slower than we'd expect. Strain proposes that there might be “hidden slack" in the labor market and that the rate of employment for people in their prime working years is still below its prerecession peak, showing that the official jobless rate isn't giving the full picture. Another possibility he proposes is that the composition of the workforce is changing in ways that affect pay. Strain concludes that some combination of several factors is likely the culprit, making him hopeful that a healthy rate of wage growth is likely in the future.
Who Really Creates Value in an Economy?
Mariana Mazzucato takes aim at neoliberalism and its academic cousin, "public choice" theory.
The Makings of a 2020 Recession and Financial Crisis
Nouriel Roubini and Brunello Rosa list ten factors all pointing toward an economic downturn that will be more severe than the last.
The crisis next time
Carmen M. Reinhart and Vincent R. Reinhart | Foreign Affairs
At the turn of this century, most economists in the developed world believed that major economic disasters were a thing of the past or at least relegated to volatile emerging markets. Financial systems in rich countries were too sophisticated to collapse, and recessions would remain short, shallow, and rare. There remains a central warning of 2008: Countries should never grow complacent about the risk of financial disaster. The next crisis will come, and the more the world forgets the lessons of the last one, the greater the damage will be.
Nine Lessons from the Financial Crisis – Mohamed El-Erian, Bloomberg
A Manifesto for Renewing Liberalism
From The Economist: “In all sorts of ways, the liberal meritocracy is closed and self-sustaining.
Conference on the 10th anniversary of the 2008 financial crisis
Peter J. Wallison | AEI event
Today at AEI, expert panelists will outline the principal reasons that have been advanced as causes of the financial 2008 crisis. They will discuss how conceptions about the causes of the crisis influenced the reforms that were ultimately adopted and whether these reforms have been or will be effective. Tune in for a special lunchtime discussion with House Committee on Financial Services Chairman Jeb Hensarling (R-TX).
Public opinion 10 years after the financial crash
Karlyn Bowman | American Enterprise Institute
Using survey data collected before the 2008 financial crisis, Karlyn Bowman shows that Americans have long had doubts about Wall Street, banks, and financial institutions. The 2008 crash profoundly affected people’s views of Wall Street, the economy, and their family’s prospects. For example, in a November 2009 Gallup poll, the view that it was a good time to find a quality job dropped to its lowest level ever, 8 percent. There has been a small recovery in the major confidence-in-institutions indicators, and most Americans do not feel the economic system is more secure today than it was before the financial crisis.
Government ignorance is no excuse for another dreadful financial crisis
Peter J. Wallison | The Hill
In light of the 10-year anniversary of the 2008 financial crash, Peter Wallison assesses the current state of the economy. He argues that without a halt in current government housing policies, there is likely to be another financial crisis, again caused by a government-dominated housing finance system. The system is functioning in substantially the way it functioned before the crisis. Wallison identifies rising housing prices and notes that of particular concern is that the highest rate of increase is occurring for the lowest price homes, exactly the opposite of what a sensible housing policy would produce.
Lessons Not Learnt From The Global Financial Meltdown
quoting Raghuram Rajan via The Navhind Times
Ten years ago, on September 15, 2008, Lehman Brothers filed for chapter 11 bankruptcy. The mayhem that followed led to the worst global financial crisis after the Great Depression. Like the latter, the 2008 financial crisis has been a matter of much discussion – from Congressional testimonies to saucy Hollywood productions leave alone the academic garbage that it generated.
The Case for Monetary Policy Rules
Peter Ireland, E21
Speaking at last month’s economic policy symposium in Jackson Hole, Wyoming, Federal Reserve Chair Jerome Powell described vividly the challenges that central bankers face in a world of constant change and uncertainty. These challenges make it impossible for the Fed to perfectly fine-tune the economy. Chair Powell’s preferred, gradual approach to raising interest rates is therefore justified. The Fed could meet these challenges even more effectively, however, by adopting and following a monetary policy rule. Read more here....
GREGORY COPLEY, THE FIGHT OF THE CENTURY: SOVEREIGNTY VS. GLOBALISM, THE NATIONALISTS IN AMERICA ARE WINNING
Why We Don’t Prepare for the Future
Robert Samuelson, Washington Post
The Failures of Globalism
By Molly Dinneen, Strategy Bridge: “Globally, unemployment insecurities develop in parallel with technological improvements fostered by globalism that are expected to lead to factory workers losing their jobs to machines or because they lack the necessary technical education.”
Analysis: How Do Developed Economies Maintain Their Low Interest Rates?
quoting John B. Taylor via Hurriyet Daily News
How do developed economies maintain their low interest rates? The Taylor rule is a mathematical formula developed by American economist John Taylor to help central banks set short-term interest rates based on economic conditions and inflation. Its aim is to help central bankers make rational monetary policy decisions. In this sense, it acts as an objective benchmark by setting the optimal rate that balances inflation and growth targets.
An authority on Civil-Military Relations; Southwest Asian Political Economy, and Pentagon Acquisition Reform .
KEYNES VS. HAYEK RAP
KEYNES VS. HAYEK RAP ROUND 2