balance sheet recession

The real solution has nothing to do with the Fed because the constraints are demand side and not supply side. But people will continue to exhort the Fed to do more and so they will do more.

The Fed is out of bullets on interest rate policy and has turned to other nonconventional measures like quantitative easing. Excess reserves have piled up as a result. What does this mean for inflation and the economy?

Bill Gross is out with his monthly commentary. Because his points are central to the discussion of policy and markets right now, I am going to write this weekly newsletter commentary outside the paywall. The major question is about how to…

This is a silver level post asking to what degree the US recovery is fuelled by household sector releveraging.

This is a gold level post. According to the US Bureau of labor Statistics, nonfarm payroll employment rose by 227,000 in February, and the unemployment rate was unchanged at 8.3 percent. Here are my thoughts on what this signals about the…

If and when the demand for credit increases, so too will the money supply.

As I see it, Japan’s problem was that during the 1980s it was so addicted to investment-led growth and artificially cheap financing that it misallocated capital on a massive scale and failed to include the resulting implicit losses in its…

This extra $4.5 trillion of household mortgage debt is a terrible burden on the economy since consumers make up over 70% of our economy. This is why consumer spending has been so tepid over the past few years. U.S. consumers spent well…

If the Chairman has to do something, then the real question is what policy response is adequate to a) reviving asset prices and b) returning the US to trend real GDP growth (since the portfolio balance channel appears to be the only one…

For my part, I am with Richard Koo. Monetary policy reflation will not work in a balance sheet recession when fiscal policy is contractionary. But at some point, the Fed will be compelled to act anyway.