The following is in blog form the substance of a talk I gave Sept 7 at a Mercatus conference, “Monetary Policy Rules for a Post-Crisis World.“ “Rules versus discretion” is a hardy perennial of monetary policy debate, dating from earliest debates between Bullionists and anti-Bullionists, to the 19th century Currency School versus Banking School, up to the 20th century monetarists
Read more“I wouldn’t start from here,” the BIS never says explicitly in its recent Annual Report, but nevertheless it goes on to paint a rather comprehensive and compelling picture of a possible future toward which they think we should be trying to head, and of the present dysfunctional economic policies that are daily making it harder to achieve that possible future.
Read morePeter Conti-Brown, The Power and Independence of the Federal Reserve (Princeton 2016) A powerful meme has taken possession of popular, and even professional, understanding of the role of the Fed. To wit, political forces (specifically the US President) are supposedly always pushing for excessive expansion, and the role of the Fed (specifically the Fed Chair) is to resist that pressure.
Read moreIn the immediate aftermath of the global financial crisis, most people thought that shadow banking was all in the past, and good riddance! Today, however, it is becoming clear that shadow banking is also in our future, even centrally so. The crisis was just one step toward that future, revealing weakness in order to force necessary restructuring. Of course the
Read moreThe Office of Financial Research is out with a new “Reference Guide to U.S. Repo and Securities Lending Markets” which collects together in one place most of what is known, and draws some attention to how much is not known, about this key bit of monetary infrastructure. Kudos to the authors for treating repo and securities lending in the same
Read moreGoldman Sachs takes “A Look at Liquidity”, and tells us what they see. Suffice it to say that different people see different things, depending on their vantage point, like the proverbial blind men touching the elephant. Let’s see if we can construct a picture of the animal as a whole from the snapshots provided. What seems clear is that the
Read moreThe recently released PwC “Global Financial Markets Liquidity Study”, sounds a warning. Financial regulation, while perhaps well-intentioned, has gone too far. Banks may be safer but markets are more fragile. At the moment, this fragility is masked by the massive liquidity operations of world central banks. But it will soon be revealed as, led by the Fed, central banks attempt to exit.
Read moreIn the last few weeks, the ECB has been drawing on its liquidity swap line with the Fed, first $308 million for a week, then $658 million for a week, and last week back down to $358 million. What’s that about? It’s not such a large amount. Bank of Japan borrowed more in the past, $810 million in March and
Read moreThe official report on events of October 15, 2014, is now public and it makes fascinating reading. Most news accounts of the report have taken its bland no-smoking-gun conclusion at face value, but if you actually read the report a rather clear picture emerges, along with some rather obvious unanswered questions. Bloomberg has the best account, but there is more
Read moreNow comes a symposium of five articles, published in the AEA outreach Journal of Economics Perspectives, several of which read clearly as a kind of apologia pro vita sua for the actions of the authors themselves. The idea seems to be that, if only readers could be made to understand the conditions under which the authors were operating, they would
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