Econintersect Analysis Blog
Tag Archives: interest rates
Written by Steven Hansen The Federal Reserve FOMC meets next week to review the economy and argue monetary policy. For those who see economic policy as black or white, I have a bridge to sell you. Low interest rates are … Continue reading
by Macrotides Monetary policy is a bit like watering a garden. Its nourishment is intended to foster growth and jobs, and when in full bloom, a rising standard of living for the majority of people in society. A functioning spigot … Continue reading
by Macrotides An improvement in U.S. economic data in the fourth quarter has convinced many investment strategists that the U.S. will continue to grow 2% to 3% in 2012, absent a Lehman Brothers type of crisis in Europe. After all, … Continue reading
by Michael Pettis Last week’s Senate bill on Chinese currency intervention predictably enough brought out all the same old arguments about international trade, and just as predictably has hardened the opposing positions in the debate. Unfortunately the difference between a … Continue reading
by Dirk Ehnst
Paul Krugman has embraced nominal GDP targeting. And we are back at the old QE discussion. It is Richard Koo in the red corner, vs Paul Krugman in the blue corner. One is left with the impression that the whole case for a nominal GDP target is based on dubious assumptions and mixed evidence at best. The case for fiscal policy is much more clear-cut. Targeting nominal GDP is OK with me, as Paul Krugman says, why exclude the fiscal side? As it stands, it is a lender’s strike. Investors want to see aggregate demand rise, and not expect that it rises. Only then you get back to talking about credibility and confidence and all those things. Since we are in a situation which resembles the Great Depression, I am not aware that any country escaped from that event by changing expectations. Two things did it: exiting the gold standard (which gave you control over the interest rate and money supply), and ramping up fiscal policy. I wish there were another way. Continue reading
Over the past 10 years Chinese consumption has declined, investment increased and real interest rates have declined. And interest rate increases have pushed inflation inflation higher. Continue reading
by Guest Author: James D. Hamilton
The Federal Reserve announced on Wednesday (, ) that it will sell some of its shorter-term assets in order to buy more longer-term assets. Here I assess some of the possible consequences of this move.
The modest effects that one could reasonably anticipate for a measure like operation twist are easily swamped by other developments, and even a sizable effect on 30-year Treasury yields would not in my mind provide a major stimulus. I think the correct interpretation is that the Fed would like to bring some more stimulus, this was something they could do in that direction, so they did it.
But if you were about to drown, I wouldn’t want to count on operation twist as your lifeline to safety. Continue reading
The tightening of monetary policy over the last year by China, India, and Brazil will cause their domestic economies to slow. Coupled with the slowdown in developed countries, global growth is set to slow for the rest of 2011 and early 2012. The European debt crisis is going to get worse, and it also will have a negative effect on global growth. Continue reading
The Reserve Bank should consider holding back further rate increases for at least next three months and closely study price behavior lest it has to backpedal later (as it had to do quite embarrassingly in late 2008). Continue reading
China continues with interest rate hikes to fight inflation but they will be reversed quickly when growth slows. FDI ($105 billion in 2010) is likely partly disguised domestic hot money flows. Continue reading