Fed Watch: Forward Guidance Heading for a Change

The lackluster August employment report clearly defied expectations (including my own) for a strong number to round out the generally positive pattern of recent data.  That said, one number does not make a trend, and the monthly change in nonfarm payrolls is notoriously volatile.  The underlying pattern of improvement remains in tact, and thus the […]

Great Graphic: Central Bank Balance Sheets

This Great Graphic comes from Thomson Reuters. V.Flassen from Reuters Graphics appears to have composed it andPierre Briancon tweeted it. It shows the major central bank balance sheets since 2007 through the end of August.  It is going to change dramatically in the coming months.  The Federal Reserve’s balance sheet growth will slow dramatically, as QE ends, though some […]

Draghi Delivers!

After much fanfare, the ECB has surprised the market.  It delivered a 10 bp cut in key rates and committed itself to a ABS/covered bond purchase scheme to start next month.  The euro sold off, dragging down other European currencies, and sparked a dramatic bond and stock rally. The decision to cut rates today was […]

Comparing Labor Costs per Employee Across Countries

It almost seems surreal.  The major central banks seem to agree that wages need to rise.  Usually, to the extent central banks address the issue, they traditionally have cautioned against large pay increases.  And is so doing, reveal their underlying pro-business agenda.  Why should it matter to a central bank how the productivity gains are divided […]

What Did Quantitative Easing Accomplish?

Roger Farmer has taken a new look at an issue concerning the Federal Reserve’s program of large-scale asset purchases (referred to in the popular press as “quantitative easing”) that I’ve been discussing on Econbrowser and in my research with University of Chicago Professor Cynthia Wu for some time.   One theory of how LSAP might affect interest rates is that if […]

High Public Debt, Stagnation, Deflation and Unemployment: Policy Errors and a Way Forward

This note reviews monetary and fiscal policies adopted by Japan, the United States and Eurozone periphery countries during the global financial crisis and subsequently. These countries all experienced similar economic problems; high public debt burdens, the deflation tendency, credit traps, inadequate aggregate demand and high unemployment. It is argued below that policymakers anchored their strategic […]

Looking for the Signal? Expect No Fresh Help From Yellen and Draghi at Jackson Hole

There are four main issues that investors will be wrestling with in the week ahead.  First, as we saw before the weekend, geopolitical developments can still roil the markets.  Second, economic data from the US, Europe and Japan has been disappointing.  This has helped extend the rally in the bond and stock markets. Third, the euro […]

Fed Hawks Squawk

How much leeway does Fed Chair Janet Yellen have in her campaign to hold interest rates low for a considerable period after asset purchases end later this year?  If you listen to Fed hawks, you would believe that she is quickly running out of room.  Dallas Federal Reserve President Richard Fisher argued that the liftoff […]