Monetary System

I am a sceptic of thinking about low unemployment as a bad thing – which is what people who think about policy in terms of the Phillips curve do. Now a study by the Philly Fed is saying that the Phillips Curve is a poor forecasting tool.…

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…

The Fed should not use rate policy to deal with financial stability concerns. The Fed should concentrate rate policy on its dual mandate and that’s it. Instead the Fed should use non-rate mechanisms to exert regulatory control. The worst…

Quick hit here. I have been banging on about lowflation, repeatedly suggesting it is here to stay. The Fed, on the other hand begs to differ and is pre-emptively normalizing rates, as a result. No matter how you look at this, there’s a…

Baumol was a giant in promoting entrepreneurship. And most importantly here, his theory on rising costs in labor intensive industries is something that the Nobel committee considered in 2003 and should have given him an award for.

I think I have the answer to at least one question: why was the Fed talking to big money investors in the first place. My thoughts follow below.

Increased delinquencies in the auto sector will spell trouble given the high LTVs of loans and lower credit scores of borrowers. And I am troubled by the OCC’s depiction of the commercial real estate sector; we could see heavy loan losses…

While most analysts have been focused on credit growth which has re-emerged after the sovereign debt crisis, cross border inter-bank lending has decreased, fragmenting the euro zone along national lines. In a crisis scenario, one should…

The last few days have made clear that monetary policy is having less and less impact as time goes along.In particular, the latest salvos from the Bank of Japan smack of desperation, as if BOJ Governor Kuroda has decided to throw everything…

As the Brexit worries began two weeks ago, I flagged Italian banks - more than the UK economy - as one of my principle concerns, because of the potential to cause systemic damage to the euro system. And now the contagion is spreading, with…