Why is Monetary Policy Focusing on the Overnight Lending Market?

– July 21, 2021

“Borrowing in the overnight lending market allows for the Federal Reserve to access a larger pool of funds from a diversity of financial institutions. As a result, the Fed can borrow these funds at lower rates and avoid attracting negative attention that would be generated by an increase in the interest rate target and the interest rate paid on reserves.” ~ James L. Caton


Higher Inflation Depresses Equity Valuation

– July 9, 2021

“The CPI will probably increase by 3-5% for all of 2021. That is not nearly as bad as the 1970s, when the rate averaged 7.4% p.a. (and peaked at 13.3% in late 1979), but it’s still bad for equity valuations.” ~ Richard M. Salsman


Is Inflation Below the Fed’s Target? Yes and No.

– June 30, 2021

“Adjusting for oil and auto prices puts the rate of inflation below the Fed’s 2 percent average target rate. Still, high rates of NGDP growth and mounting bank reserves should cause Fed officials to be leery of high inflation going forward.” ~ Thomas L. Hogan


Does “Expected Inflation” Explain or Predict Inflation?

– June 21, 2021

“There might be higher inflation ahead, but neither year-to-year CPI changes, the 2020 lockdowns, or news-based monthly opinion polls about expected inflation provide reliable advance clues about what lies ahead. Meanwhile, the low break-even rate offers a good reason to be skeptical of high inflation forecasts.” ~ Alan Reynolds


The Horrors of Hyperinflation

– June 16, 2021

“Governments have few universally accepted goals. National defense, protection of property, and stability of the unit of account are arguably the three most important because all else rides on them. Hyperinflation destroys all three, so any serious risk of hyperinflation is simply unacceptable from a policy standpoint.” ~ Robert E. Wright


Why Do Inflation Expectations Matter?

– June 3, 2021

“Powell is telegraphing to the market that he hears their concerns about inflation. We will have to wait through the next several months to learn whether or not investors will be convinced.” ~ James L. Caton


The Fed Targets a Crafted Measure of Inflation: A Cautionary Tale

– May 28, 2021

“Understanding government data for what they are and what they are not is vital to understanding the impossibility of targeting the cost of living, even though the Fed is targeting a crafted measure of price inflation.” ~ Gregory van Kipnis


Unemployment and Bankruptcies – Is This Time Different?

– May 27, 2021

“The recovery we are witnessing today is built on the crumbling foundations of the serial malinvestments which resulted from previous attempts to avoid the recessionary pain caused by the GFC. If structural inflation can be engendered, an escape from the worst ravages of overindebtedness may be nigh, but, until markets clear and zombies die, what economic growth there is will remain suboptimal.” ~ Colin Lloyd


Lift Your Gaze, Please: the April Inflation Overshoot is Not the Problem

– May 18, 2021

“A betting man, if he wants to remain a betting man, updates his priors. So, I side with Jason Bloom at the asset manager Invesco: ‘There is so much dislocation in the economy from the reopening and base effects from a year ago that it will take at least six to 12 months before we get a clear view of the underlying inflation trend.’ I will make a different sort of prediction, though: no matter what the future holds, the Chickens will be there to squawk about it.” ~ Joakim Book


Monetary Inflation’s Game of Hide-and-Seek

– May 18, 2021

“Whether the CPI records a higher or a lower rate of general price inflation, the more deleterious effects resulting from monetary inflation are those relative price and wage distortions, and resource, labor and capital misallocations and misdirection, that are hidden beneath the ‘surface’ of the general price level, but nonetheless set in motion the phases and consequences of the business cycle.” ~ Richard M. Ebeling


Lumber, Labor, and Gas Markets Tell SAD Stories

– May 17, 2021

“As economists emphasize whenever price gouging rules kick in, ignoring what supply and demand analysis has to teach us usually means making the problem worse rather than better.” ~ Art Carden


War Of Words Over Inflation Stirs Questions for the Fed

– May 15, 2021

“Does it make sense, for a nation founded on the notion of individual liberty, equality under the law, and personal property rights, to allow a government agency to manipulate the value of the currency used by its citizens? Would it be better to have a stable monetary foundation to facilitate free-market outcomes, rather than empower the Federal Reserve to distort interest rates and dilute dollars in the service of government policy?” ~ Judy Shelton