As this financial disaster grinds through its fifth year, US economists haven’t seemed to change much about their analysis or explanations. The people who got it wrong continue to push their false theories, insisting that if we clap louder their reputations will be saved. It’s working for the hyper-rich.
|By: William Black Saturday January 5, 2013 1:59 pm|
I am hosting the Firedoglake discussion of my colleague Randy Wray’s new “Primer” on macroeconomics. Macroeconomics is the study of the overall economy – economic growth, recessions, depressions, inflation, unemployment, and employment are big issues that macroeconomics studies. The key policies it addresses are usually divided into fiscal (tax and spending) and monetary policies (the growth of the money supply and setting interest rates).
The concept of monetary tools has broadened as we have seen the Federal Reserve change what had been a severely constrained “lender of last resort” function of the central bank into the most massive bailout program in history. Similarly, the central bank’s interest rate setting function that was long focused on short-term rates has expanded into large experiments that attempt to lower long-term interest rates (“quantitative easing”).
|By: David Dayen Tuesday November 20, 2012 7:05 pm|
Ben Bernanke’s speech on the economy today offered no new information. It was more of an overview on the state of the economy, and it hit on many very familiar themes which Bernanke has expressed for a long time now, including the need to loosen lending standards in a type of reinflation of the housing bubble, which infuriates me. But give Bernanke credit for actually depicting the economy as it is rather than as someone hopes it to be; a weak economy with troublingly high unemployment. In other words, the wrong time to engage in a fiscal cutback through austerity.
|By: David Dayen Wednesday November 14, 2012 6:10 pm|
The President opened his press conference by designating the top two priorities as jobs and growth, and then spent the next 60 minutes answering questions about David Petraeus and Susan Rice and tax rates and Benghazi and deficit reduction. And Obama didn’t seek to break out of that constraint and suggest actual near-term job creation strategies. So it’s pretty clear that jobs are a dead end as far as the legislative process is concerned.
On monetary policy, however, things have suddenly become a bit more promising. Janet Yellen, the Vice-Chair of the Federal Reserve, delivered a speech yesterday that strongly endorsed the idea of “forward guidance” in the economy, tying monetary policy actions to a specific employment target. The idea was first brooched by Charles Evans, the President of the Chicago Federal Reserve, who because of the rotation of regional Fed Presidents on the Federal Open Market Committee, will actually get a policymaking slot in 2013.
|By: David Dayen Monday October 22, 2012 9:40 am|
It’s an intriguing question: why can’t central banks around the world, practically all of whom have bought up sovereign debt, just cancel it?
Countries would get more headroom on their debts, inflation would rise but not necessarily at an unmanageable rate. It would have the effect of hitting the reset button.
|By: David Dayen Tuesday October 2, 2012 6:33 pm|
Contrast the plans of Congress to give up on job creation and move expeditiously to deficit reduction with the plans of the Federal Reserve to belatedly but nonetheless insistently and with near-unanimous participation engage in the monetary tools at their disposal to boost the economy and lower unemployment.
|By: David Dayen Friday September 21, 2012 6:45 am|
I don’t know whether this is a positive sign about policymakers recognizing the depth of our economic problems, or a negative sign about the depth of our economic problems. But the President of the Minneapolis Federal Reserve, Narayana Kocherlakota, set a target unemployment rate he would like to see before the Fed raises the federal funds rate from its current position at 0%. This is seen as a shift for Kocherlakota, who had a far greater fear about inflation in the past.
|By: David Dayen Friday September 14, 2012 4:00 pm|
Most analysts take for granted that this new QE3 will work, in fact, better than the first two rounds despite its smaller footprint. That stems from the use of the expectations channel, and the Fed communicating that they will continue to take steps at monetary easing even after the recovery takes hold and the labor market improves. This represents a kind of admission of guilt on the part of Ben Bernanke, whose Jackson Hole speech was full of defenses of his prior view of the monetary situation. Basically, Bernanke said “we didn’t do enough, we’re changing course.”
|By: David Dayen Thursday September 13, 2012 12:00 pm|
The Federal Reserve made a major and dramatic change to their monetary policy today, moving forward with a third round of quantitative easing that is actually more modest than the first two. However, the much more crucial component to the policy action was the open-ended nature of the commitment, including a promise to keep interest rates low even after the recovery takes hold.
|By: David Dayen Thursday September 6, 2012 9:55 am|
European Central Bank President Mario Draghi wrapped up his major press conference this morning, and the news was pretty much what we heard yesterday. Draghi announced the formation of the OMT, or Outright Monetary Transactions. It’s an unlimited sovereign debt purchase scheme for those countries which submit to giving the ECB a vote on their fiscal policies.