Category Archives: Federal Reserve

Trump Is (Sort Of) Right About Yellen

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Donald Trump this week said that Federal Reserve Board Chairman Janet Yellen won't raise rates because President Obama told her not to. Why he's (sort of) right. [Credit: CNBC]

Don­ald Trump this week said that Fed­er­al Reserve Board Chair­man Janet Yellen won’t raise rates because Pres­i­dent Oba­ma told her not to. Why he’s (sort of) right. [Cred­it: CNBC]

The media just can’t keep up with The Donald.

Cor­po­rate news-gath­er­ing out­lets do their best to repeat and ampli­fy his every off­beat utter­ance.  His accu­sa­tion that Mar­co Rubio is a “dis­as­ter with his cred­it cards” has rip­pled through the press and forced Rubio to respond.  Dit­to for Trump’s mock­ery of Jeb’s ener­gy, Carson’s reli­gion, Carly’s face, Kasich’s poll num­bers, Hillary’s mar­i­tal rela­tions  (“If Hillary Clin­ton can’t sat­is­fy her hus­band what makes her think she can sat­is­fy Amer­i­ca?”), Bernie’s men­tal health and the men­stru­al cycles of debate moderators.

But as they were buzzing about his sched­uled appear­ance on Sat­ur­day Night Live, the media large­ly over­looked what was per­haps Trump’s most hereti­cal accu­sa­tion of all. Con­tin­ue read­ing →

On Wind And Eagles

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Citing potential damage to protected species, a federal judge recently put a crimp in the Administration's forced march toward wind energy. [Credit: Daily Mail]

Cit­ing poten­tial dam­age to pro­tect­ed species, a fed­er­al judge recent­ly put a crimp in the Admin­is­tra­tion’s forced march toward wind ener­gy. [Cred­it: Dai­ly Mail]

Two strains of envi­ron­men­tal­ism col­lid­ed in a fed­er­al court­room this month, pit­ting pro­tec­tors of bald and gold­en eagles against advo­cates of the Oba­ma Administration’s forced march toward wind power.

The eagles won.

Con­tin­ue read­ing →

If Obama Were President

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The mammone -- a jobless man in his 20s, 30s or 40s who lives with mamma -- is an Italian tradition. But under President Obama, labor force participation rates of young men have plunged to Italian levels. [Credit: studenti.it]

The mam­mone — a job­less man in his 20s, 30s or 40s who lives with mam­ma — is an Ital­ian tra­di­tion. Under Pres­i­dent Oba­ma, labor force par­tic­i­pa­tion rates of young Amer­i­can men have plunged to Ital­ian lev­els. [Cred­it: studenti.it]

In Italy, they call him a mam­mone: an unem­ployed man in his 20s, 30s or 40s who still lives with mamma.

The preva­lence of the mam­mone has long been thought to be a pre­dom­i­nant­ly Ital­ian phe­nom­e­non, with deep cul­tur­al roots.  It has grown more pro­nounced with the country’s recent eco­nom­ic dis­tress.  Since 2008, a grow­ing per­cent­age of Ital­ian men aged 25–54 have aban­doned the labor force, no longer both­er­ing even to look for work.

Italy’s work­force par­tic­i­pa­tion rate among men of prime work­ing age is by far Europe’s low­est.  But it is not the low­est in the devel­oped world.  Italy now shares that dubi­ous dis­tinc­tion with the U.S.

That wouldn’t hap­pen if Oba­ma were Pres­i­dent. Con­tin­ue read­ing →

Good News Coming On The Deficit. Well, Sort Of.

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Syriza party leader Alexis Tsipras hopes to prevail in today's Greek elections, which could mark a turning point in his nation's struggle against a crushing load of debt. Meanwhile, U.S. government deficits are improving. Sort of.

Syriza par­ty leader Alex­is Tsipras hopes to pre­vail in today’s Greek elec­tions, which could pro­voke a show­down between Euro­pean lead­ers and Greece, which strug­gles under a crush­ing load of debt. Mean­while, U.S. gov­ern­ment deficits are improv­ing. Sort of. [Cred­it: BBC]

On Tues­day morn­ing, the Con­gres­sion­al Bud­get Office will announce that the fed­er­al deficit con­tin­ued to decline last year.

The announce­ment will trig­ger an orgy of self-con­grat­u­la­tion in Wash­ing­ton.  The Admin­is­tra­tion will claim that its poli­cies have been vin­di­cat­ed.  Repub­li­cans also will take a bow, tout­ing spend­ing con­straints they’ve imposed since win­ning the House majority.

But you’ll hear noth­ing from the Wash­ing­to­ni­ans who most deserve cred­it for reduced deficits: the Fed­er­al Reserve Board of Gov­er­nors.  By hold­ing inter­est rates near zero and lend­ing tril­lions in free mon­ey to the Trea­sury, the Fed has allowed the gov­ern­ment to reduce deficits even as it gorged on debt. Con­tin­ue read­ing →

Debt And The New American Exceptionalism

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Federal Reserve Chairman Janet Yellen plans to increase interest rates. Can government and households survive the shock? [Credit: Huffington Post]

Fed­er­al Reserve Chair­man Janet Yellen plans to increase inter­est rates. Can gov­ern­ment and house­holds sur­vive the shock? [Cred­it: Huff­in­g­ton Post]

The Amer­i­can econ­o­my is back.  After years of tepid growth and a first quar­ter con­trac­tion, GDP grew by a robust 4.6 per­cent in the third quar­ter of last year.  The unem­ploy­ment rate remained at 5.8 per­cent in Novem­ber, and ana­lysts expect the Labor Depart­ment to announce tomor­row that the econ­o­my added sub­stan­tial­ly more than 200,000 jobs in Decem­ber.  Infla­tion is low, the dol­lar is strong, oil prices have tum­bled, and fed­er­al deficits are low­er.  Near­ly six years after the reces­sion end­ed, the long-await­ed recov­ery appears at last to have arrived.

That recov­ery has in part been dri­ven by a force that could be its undo­ing: debt.  Near­ly $46 tril­lion of it, or more than 2–1/2 times our annu­al eco­nom­ic out­put. Con­tin­ue read­ing →

Inequality: Has The Income Gap Narrowed?

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Two icons of the Left -- economist Thomas Piketty and Senator Elizabeth Warren (D-MA) -- talking about rising inequality last June. But by some measures, inequality is shrinking. [Credit: National Review]

Two icons of the Left — econ­o­mist Thomas Piket­ty and Sen­a­tor Eliz­a­beth War­ren (D‑MA) — dis­cussing ris­ing inequal­i­ty dur­ing an event last June. But by some mea­sures, inequal­i­ty is shrink­ing, not ris­ing. [Cred­it: Nation­al Review]

“The game right now in Amer­i­ca is rigged. It is rigged so that those at the top keep doing bet­ter and bet­ter, and every­one else is under increas­ing pres­sure, is under increas­ing eco­nom­ic strain…And that is the pro­found dan­ger that we see from great inequal­i­ty.” Eliz­a­beth War­ren (D‑MA)

Democ­rats are still sting­ing from last month’s epic defeat at the polls.  Some of them attribute that unhap­py out­come to ide­o­log­i­cal tem­per­ance.  The par­ty would do bet­ter, some argue, if their can­di­dates took a more stri­dent tone, denounc­ing the rich, preach­ing that Wash­ing­ton gov­erns in the ser­vice of Wall Street, and call­ing for more aggres­sive redis­tri­b­u­tion of income and wealth to damp­en ris­ing inequality.

But a new study pub­lished in the South­ern Eco­nom­ic Jour­nal pulls at a crit­i­cal thread of that nar­ra­tive.  It found that, at least accord­ing to one mea­sure of income, the gap between rich and poor actu­al­ly nar­rowed between 1989 and 2007. Con­tin­ue read­ing →

The Fed On The Road To Nowhere

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Economic policymakers may have us, as the Talking Heads put it in their 1985 hit, on the road to nowhere. [Credit: qednet.biz]

Eco­nom­ic pol­i­cy­mak­ers may have us, as the Talk­ing Heads put it in their 1985 hit, on the road to nowhere. [Cred­it: qednet.biz]

For­mer Fed­er­al Reserve Chair­man Ben Bernanke has been called the man who saved the world.  His extra­or­di­nary inter­ven­tions in the fall of 2008 have almost uni­ver­sal­ly been rec­og­nized as hav­ing pre­vent­ed a sec­ond Great Depression.

But a new study by the Swiss-based Bank for Inter­na­tion­al Set­tle­ments (BIS) sug­gests that Bernanke saved the world from a cri­sis that was at least part­ly of his own mak­ing.  Worse, it argues that the course he set and that his suc­ces­sor Janet Yellen and oth­er cen­tral banks are fol­low­ing will pro­duce anoth­er and per­haps graver crisis.

Gov­ern­ment mon­e­tary and fis­cal pol­i­cy­mak­ers have lost their way, the BIS argues.  So bad­ly that they don’t just need a new direc­tion.  They need a new compass.

Con­tin­ue read­ing →

Paul Krugman and the Inequality Deniers

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Recent criticism of Thomas Piketty's Capital in the 21st Centruy has drawn the ire of the splenetic Paul Krugman. [Credit: National Review]

Recent crit­i­cism of Thomas Piket­ty’s Cap­i­tal in the 21st Cen­tu­ry has drawn the ire of the sple­net­ic Paul Krug­man. [Cred­it: Nation­al Review]

There is grow­ing con­cern among peo­ple on the Right and Left about income inequal­i­ty. But you wouldn’t know that from read­ing Paul Krugman’s lat­est screed.

What stirred Krugman’s bile this week was crit­i­cism of econ­o­mist Thomas Piketty’s book, Cap­i­tal in the 21st Cen­tu­ry, a work that has attained canon­i­cal sta­tus among the Left on both sides of the Atlantic. Con­tin­ue read­ing →

Vince Young And Economic Mobility

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Vince Young in happier times. His rapid rise and sudden fall constitute a cautionary tale. But behind it all there is good news about economic opportunity and upward mobility. [Credit: Dallas Morning News]

Vince Young in hap­pi­er times. His rapid rise and sud­den fall tell a cau­tion­ary tale. But a new study pro­vides wel­come news about eco­nom­ic oppor­tu­ni­ty and upward mobil­i­ty. [Cred­it: Dal­las Morn­ing News]

Vince Young is bank­rupt.  The sto­ry of a star col­lege quar­ter­back who rose from hum­ble cir­cum­stances to impos­si­ble wealth only to plunge into insol­ven­cy in the course of eight years is one marked by extrav­a­gant spend­ing, fool­ish invest­ments and, he has argued in court doc­u­ments, exploita­tion by agents, busi­ness asso­ciates, fam­i­ly and friends.  His is an extreme exam­ple of eco­nom­ic mobility.

Reports of Young’s bank­rupt­cy fil­ing coin­cid­ed with the release this week of a new study by a group of Har­vard and Berke­ley econ­o­mists that reached an unex­pect­ed con­clu­sion: upward eco­nom­ic mobil­i­ty is not the exclu­sive province of entre­pre­neurs, enter­tain­ers and star ath­letes like Young. The Nation­al Bureau of Eco­nom­ic Research [NBER] report con­clud­ed that “chil­dren enter­ing the labor mar­ket today have the same chances of mov­ing up in the income dis­tri­b­u­tion (rel­a­tive to their par­ents) as chil­dren born in the 1970s.” Con­tin­ue read­ing →

The Fed and the Consequences of Bad Predictions

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South Africa's government in recent years voted to jail people who make unauthorized and inaccurate forecasts. Good thing for the Federal Reserve that their bad predictions don't carry consequences. [Credit: University of MN]

South Africa’s gov­ern­ment in recent years vot­ed to jail peo­ple for mak­ing unau­tho­rized and inac­cu­rate weath­er fore­casts. Good thing for the Fed­er­al Reserve that their bad pre­dic­tions don’t car­ry con­se­quences. [Cred­it: Uni­ver­si­ty of MN]

The South African gov­ern­ment in recent years con­sid­ered a bill to jail peo­ple who pub­lished inac­cu­rate and unau­tho­rized fore­casts of severe weather.

Hold­ing peo­ple account­able for their pre­dic­tions seems a bit harsh in this sea­son of pre­dic­tions. But the South Africans do have a point: pre­dic­tions have con­se­quences. That’s as true of pre­dic­tions about the econ­o­my as about the weath­er, some­thing that the Fed­er­al Reserve might do well to pon­der. Con­tin­ue read­ing →