Federal Reserve System

Peking Over Our Shoulder
September 15, 2009

Our Chinese shareholders get nosy.

Better Regulate Than Never
September 15, 2009

The national ideological tilt has shifted fast, away from libertarianism and toward broad support for interventions like the new federal "pay czar," who will oversee banker compensation for bailout recipients. Such a sudden and dramatic reversal suggests that ideology has not been moored to steady principles. Instead, we have grasped too quickly at ephemeral data points and permitted our worldview to be shaped by panic. In this haze of hyperbole, we have an obligation to discern the more modulated truth.

Why Are Currency Traders Now Borrowing Dollars?
September 14, 2009

For years the term "carry trade" was synonymous with the Japanese yen. Because of the country's zero-interest rate policy, traders borrowed yen on the cheap and purchased higher yielding assets in other countries and markets, pocketing the difference. But in recent weeks, a key borrowing rate for the dollar -- the 3-month Dollar Libor -- has fallen below the 3-month Yen Libor. That means the dollar has added "carry trade currency" to its other titles: safe haven and world's reserve currency.

Worth Reading
September 11, 2009

The man behind AIG's implosion, Joseph Cassano, may face charges. Why have wages for college grads been falling?  The recession may have ended but official word may not arrive until 2010. Does the Fed have too much influence over the economics profession? The Economist: No smoking gun on oil speculation. Securitization is alive and kicking.

Did Tight Monetary Policy Cause the Crisis?
September 11, 2009

In his NYT mag piece, Paul Krugman blames macroeconomists for believing the world behaved as well as the math behind their models. His solution? To re-embrace Keynes. But in a provocative counterpoint on VoxEU, Scott Sumner says looking back to Keynes won't solve the problem.

Economic Recovery? Not So Fast!
September 10, 2009

The Federal Reserve’s latest Beige Book, released yesterday, painted a cautiously optimistic portrait of the state of the nation’s economy. The New York Times, reporting on the Beige Book, heralded a “slow and still fragile recovery” that is “taking hold across the country.” But even if the data bear out this anecdotal assessment, don’t think that a robust recovery is going to appear in your metro area anytime soon. Here’s why: In many parts of the country there are few signs of recovery. Of the 12 Federal Reserve districts, only Dallas (covering Texas and parts of Louisiana and New Mexico) re

The Next Financial Crisis
September 08, 2009

It's coming—and we just made it worse.

What Was Sheila Bair Getting At?
September 06, 2009

I'm coming a little late to Sheila Bair's intriguing Times op-ed from last week, but I think Tim Fernholz basically got it right over at The Prospect: Bair wasn't kvetching about the administration's regulatory proposals--the kind of thing that got her in Tim Geithner's crosshairs a few weeks back. She was taking aim at even more radical proposals for regulatory consolidation, like what Sen. Mark Warner lays out here.  Basically, the administration wants to fold the underwhelming Office of Thrift Supervision (OTS) into the Office of the Comptroller of the Currency--the two agencies that regula

Counter-counter CW: Job Losses Do Matter
September 03, 2009

Back in May, I wrote about recent research unearthing the fact that a substantial portion of the unemployment rate is driven not by job losses, but by slowdowns in hiring--a most counterintuitive result. The magnitude of this effect is the subject of some disagreement, but it would be fair to say that, on average, about 50-75% of the changes in the unemployment rate are caused by changes in the willingness of businesses to create new jobs. I, and others, have used this to suggest that during downturns the government should do more to get businesses hiring again.

Worth Reading
September 02, 2009

A very good explanation of why deficits aren't necessarily inflationary. Fed considered extending MBS purchases at last meeting. Willem Buiter is against, and Dean Baker is for, taxing trades. 10% of House and Senate have family members who also served in Congress. How credit derivatives are different from insurance.