Post Tagged with: "monetary policy"

The limits of monetary policy in today’s fiat currency world

The limits of monetary policy in today’s fiat currency world

As the Federal Reserve meets at Jackson Hole this week, I thought now would be a good time to talk about the limits of monetary policy – and why monetary policy alone cannot restore robust growth. And as I write this I want to make clear the goal of policy and the assumptions I am making.

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Understanding what a neutral macro-economic policy looks like

This is going to be a quick follow-on to the last post on monetary policy as the only game in town. I feel like the obvious question that post doesn’t answer is this one: what other policy tools we should use? And I want to tee up that question with this post.

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Some thoughts on full employment and this asset-based economic recovery

Some thoughts on full employment and this asset-based economic recovery

I see that Dartmouth economics professor Danny Blanchflower is talking about slack in the US labour market because he believes the Fed is premature in assessing its full employment mandate as fulfilled. I have a few thoughts on this issue I want to flesh out below and the crux of my narrative revolves around the over-dependence on monetary policy as a policy lever.

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An anecdote on the German housing bubble

An anecdote on the German housing bubble

I don’t know if there is a German housing bubble or even whether there will be one. I do know that we hear a lot about it in the press – the result of zero, even negative, interest rates. So let me give you a little anecdote from my trip to Germany last week.

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How monetary policy entrenches secular stagnation

Recent statements by monetary authorities in Canada, the United States and the United Kingdom tells us rate hikes are possible in all three this year. This trio of English-speaking G7 nations is at a different phase of the monetary policy cycle than Europe or Japan. The implications are unclear though.

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How Brexit makes Britain poorer, forcing Carney to stay his hand

How Brexit makes Britain poorer, forcing Carney to stay his hand

The risk in the UK is an inflationary recession. For now, Mark Carney is resisting a rate hike. But how long will the Bank of England hold out? And how long can British consumers keep spending if real wages are falling? Two things would ease this pressure. One is some sort of fiscal support for real wages. The second is the fall in oil prices. As in the US, I see oil prices as key.

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Is the new rout in oil getting worrying?

Is the new rout in oil getting worrying?

Earlier this morning, the New York Mercantile Exchange was quoting delivery for light sweet crude in July at $43.30. That’s a far cry from the $55 average that analysts had expected for 2017 as recently as last month. And all indications are that this price deflation is not transitory, but lasting. The selloff in oil brings year-to-date losses to some […]

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The Fed’s financial stability concerns before its June hike

The Fed’s financial stability concerns before its June hike

Hiking rates now after a monster commercial real estate cycle has already developed is akin to closing the stable doors after the horse has already bolted. But this may be a concern of the Fed. Let’s see what the Spring 2017 OCC Risk Assessment says when it comes out.

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Secular stagnation is a policy choice

Secular stagnation is a policy choice

In my most recent posts, I have been saying that bond markets are pricing in secular stagnation scenarios based on how shallow the yield curve is. But secular stagnation is a policy choice. And that is something I thought I should highlight in view of UK Prime Minister Theresa May’s change of heart in pursuing austerity. Some comments below

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What are credit markets signalling about the US economy?

What are credit markets signalling about the US economy?

The US economy has been very resilient during this post-crisis business cycle, as we are now into our ninth year of economic expansion. Soon we could hit a record for the length of an expansion. Yet, with that backdrop, 10-year Treasury yields were at 2.13% this morning – even as the Fed signals more hikes to come in 2017 as well as reverse QE. I think the bond market is signalling continued low growth and low inflation. Some thoughts below

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On the Fed’s pause due to dual-barrelled monetary tightening

On the Fed’s pause due to dual-barrelled monetary tightening

Fed Governor Jerome Powell recommended a June hike and 2017 balance sheet reductions, in one of the last public speeches by a Fed official before the June FOMC meeting. When the Fed follows Powell’s game plan, we will be in the unchartered waters of dual-barrelled tightening, with the attendant risks that entails. Some comments below

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UK interest rate dissenter signals policy divergence may be coming to an end

As expected, the Bank of England left rates unchanged at a record low 0.25% in today’s Monetary Policy Committee decision. There was a dissent, however, with soon to be departing MPC member Kristin Forbes wanting a quarter-point rise.

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