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Category Archive: Monetary policy
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Debt Sustainability, Growth, Interest Rates, and Inflation: Some Charts for Discussion and Some Inconvenient Truths for MMT
In a series of posts[1] [2] [3] [4] [5] over the last couple of months, fellow Economonitor blogger L. Randall Wray and I have been exploring the conditions under which the government’s debt can be said to be sustainable. Wray writes from the point of view of Modern Monetary Theory (MMT), while I adopt a [...]
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US CPI Drops Sharply in November; Inflation Expectations Remain Well Anchored
U.S. Consumer price inflation, which has been unusually volatile over the past year, turned sharply negative in November. According to data released today by the Bureau of Labor Statistics, the all-items CPI fell at an annual rate of 3.7 percent during the month of November. That was the most rapid rate of decrease since the [...]
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Forward guidance: Does Bernanke Talk Too Much about How Good his Exit Strategy is?
In an October 1 speech to the Economics Club of Indiana, Chairman Ben Bernanke addressed the risk that the Fed’s latest round of quantitative easing (QE) could lead to inflation. Here is his resolutely reassuring answer, as quoted by Dave Altig on the Atlanta Fed’s Macroblog: I’m confident that we have the necessary tools to [...]
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Quantitative Easing: A Tutorial
On September 13, 2012, the Fed announced a further program of quantitative easing, or QE. The program, which we will all call by its unofficial name, QE3, will consist of purchases of some $40 billion in mortgage-backed securities each month plus continuation of some existing asset purchase programs. We are told that QE is the [...]
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Simplicity vs. Compexity, Goodhart’s Law, and the Financial Regulator’s Dilemma
One of the most interesting papers to come out of the Jackson Hole conference this year, both in title and content, was “The Dog and the Frisbee.” The paper, presented by Andrew G. Haldane, Executive Director for Financial Stability at the Bank of England and co-authored by Vasileios Madouros, an economist at the same institution, [...]
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Another Weak Jobs Report. Is it Time for the Fed to ‘Throw the Gun?’
A recent on-line discussion of the Fed’s continued inaction in the face of worsening economic data included the following exchange of comments: Commenter 1: When you got nothin’ but blanks left you just stand there with the gun and pretend you might pull the trigger Commenter 2: Maybe Bernanke should just throw the gun Now, [...]
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Some Charts that Explain Doubts about Quantitative Easing and What they Mean for the FOMC
In a recent speech, Atlanta Fed President Dennis P. Lockhart took note of divisions within the Federal Open Market Committee (FOMC) as to whether further quantitative easing (QE) would be effective. When I cited Lockhart’s remarks in a post, a commenter expressed surprise. Yes, said the comment, it is possible to see how some people [...]
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Easing Inflation Pressure Gives Fed Extra Room to Maneuver in Face of Euro Crisis
US inflation pressures continued to ease in October, according to the latest data from the Bureau of Labor Statistics. With the struggling US economy facing headwinds from the euro crisis, low inflation gives the Fed a welcome extra bit of room to maneuver. The headline CPI actually fell at a 1 percent rate during October. [...]
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NGDP Targeting is the Natural Heir to Monetarism
In a recent post, Daniel Alpert enlists Milton Friedman as an ally against the newly popular (but not new) idea of targeting nominal GDP. On the contrary, I see NGDP targeting as the natural heir to monetarist policy prescriptions of the 1960s and 70s. If we look at the textbook version of monetarism, the point [...]
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US GDP Growth Stronger in Q3 as Economy Enters Expansion
There was a bit of joy in yesterday’s advance estimate of U.S. Q3 GDP both for traditionalists who focus on the real value of output (RGDP) and for the growing number of economists who track the nominal value (NGDP). Real output was reported to have grown by 2.5 percent in the quarter, a bit stronger [...]
