Topic: Central Banking

Central Banking, Economic Education, Monetary Policy

Dry Tinder at the Fed

– January 7, 2021

“A more significant stash of dry tinder lurks in the Federal Reserve computers (hat tip: Cathie Wood). I refer to the reserves that commercial banks hold in their accounts at the Fed. At one time, they were required to hold balances equal to 10% of their demand deposit liabilities and were free to hold more—excess reserves. As banks chose to hold reserves far in excess of requirements, the Fed removed the nonbinding requirement. Bank reserves have risen above $3 trillion, nearly double the year-ago level.” ~ Warren Gibson

Central Banking, Financial Markets, Monetary Policy

Sovereign Debt After Covid-19: The Wrong View

– January 4, 2021

“Like many others, I am concerned about the sovereign debt market in the wake of Covid-19. But providing more funds to governments committed to maintaining an unsustainable course is not a solution. These countries need serious institutional reforms.” ~ Nicolás Cachanosky

Central Banking, Economic Education, Monetary Policy

Knowledge Problems With Discretionary Central Banking

– December 29, 2020

“You need to make some truly heroic assumptions in order for discretionary monetary policy to outperform rule-bound policy. Rarely do any of those assumptions hold. Never do they all hold. If we want a well-functioning central bank, the best we can do is to have rules.” ~ Alexander W. Salter

Central Banking, Monetary Policy, Policy

Making Money Lawful

– December 11, 2020

“In terms of incentives, politicians can’t meddle, and central bankers can’t distribute unnecessary largesse, if monetary policy is constrained by a rule. Given that the Fed exists, and isn’t going anywhere soon, the best course of action is to ditch the ‘discretion’ part of ‘constrained discretion.'” ~ Alexander W. Salter

Central Banking, Economic Education, Monetary Policy

The Biggest Janet Yellen Red Flag Is George Akerlof

– December 9, 2020

“While Yellen is surely smart in the book sense, there’s absolutely nothing remarkable about her economic knowledge. In truth, her ideology is very unoriginal, and is rooted in the hard-to-credit view that economic growth can be engineered via the forced redistribution of wealth from producers to consumers.” ~ John Tamny

Central Banking, Currency, Free Markets

Important Factors Driving Bitcoin’s Drastic Growth in 2020

– November 20, 2020

“The swift growth of Bitcoin signals a number of important financial milestones as well as warning signs. Signals that not only lend some support to the cryptocurrency’s value but also provide important insight into our current state of financial affairs.” ~ Ethan Yang

Central Banking, Currency, Monetary Policy

FedCoin Revisited

– November 19, 2020

“We don’t know whether the Fed would take steps to eliminate cash or impose negative rates on FedCoin balances. We don’t know how it would go about intermediating funds. But such speculations should make one thing clear: there are risks. At the least, we should develop strong institutional checks before permitting the Fed to plow ahead.” ~ Nicolás Cachanosky

Central Banking, Government, Monetary Policy

The Complexity of Monetary Policy and the Effectiveness of the Fed’s Commitment to a Higher Rate of Inflation

– November 19, 2020

“A better policy would be to bring greater clarity to the structure and effects of the Fed’s policy framework so as to improve the quality of investor expectations. So long as investors feel that they might as well be reading tea leaves to predict Fed policy, the Fed will struggle to anchor investor expectations of nominal and real income growth.” ~ James L. Caton

Central Banking, Government, Monetary Policy

Filling Fed Vacancies Would Leave Biden with Few Options to Replace Powell

– November 18, 2020

“Biden’s only other play would be to lean on historical norms. Fed Chairs rarely stick around to serve out their terms as mere Governors when they are not reappointed to the top spot. Janet Yellen resigned in 2018, when Trump replaced her as Chair with Powell, despite having nearly six years left on her term as Governor. Biden might hope Powell will follow suit.” ~ William J. Luther

Central Banking, Economic Education, Monetary Policy

The Fed Has A Commitment Problem

– November 12, 2020

“The whole point of a central bank is competently administering monetary policy. Right now, the Fed is failing at this basic task.” ~ Alexander W. Salter

Central Banking, Currency, Policy

FinCEN and Fed Proposal Means Less Privacy, More Exclusion

– October 29, 2020

“It could very well be that the benefits of reducing the threshold from $3,000 to $250 exceed the costs, defined as the sum of the administrative expenses, lost privacy, and increased financial exclusion. But all of these costs must be included in the final calculation. Not just some of them. As it is, FinCEN and the Fed have not done a sound accounting for their proposal.” ~ J.P. Koning

Central Banking, Economic Education, Monetary Policy

Does Anyone Trust the Fed?

– October 29, 2020

“Until the Fed acts to build trust and credibility with the public, its policy of Average Inflation Targeting will have little effect on inflation or economic activity.” ~ Thomas L. Hogan