Tag Archives: central banking

Fed sets process to wind down $4.5 trillion balance sheet

Source: CNBC

"Federal Reserve officials appear to be in sync on how they plan to unravel the mammoth stimulus implemented during the financial crisis. The Fed is holding a $4.5 trillion portfolio, known as its 'balance sheet,' of mostly government debt it accumulated in the years after the crisis. Until now, the central bank has been taking the proceeds it receives from maturing debt and reinvesting them in more bonds. In recent days, officials have been indicating that the balance sheet will be unwound, likely starting later in the year, raising questions from investors about how the process will work and what impact it will have." (05/24/17)


Fed keeps rates on hold

Source: Bloomberg

"Federal Reserve officials remained on track to gradually tighten monetary policy after leaving interest rates unchanged and signaling they were not alarmed by recent U.S. economic weakness. 'The committee views the slowing in growth during the first quarter as likely to be transitory' the Federal Open Market Committee said in a statement Wednesday following a two-day meeting in Washington. 'Near-term risks to the economic outlook appear roughly balanced.' U.S. central bankers were unusually explicit in their statement, indicating that a disappointing first quarter, in which the economy grew at an annualized rate of 0.7 percent, would not knock the committee off its plan to raise rates two more times this year after a hike in March." (05/03/17)


Central banks' obsession with price stability leads to economic instability

Source: Ludwig von Mises Institute
by Frank Shostak

"For most economists the key factor that sets the foundation for healthy economic fundamentals is a stable price level as depicted by the consumer price index. According to this way of thinking, a stable price level doesn’t obscure the visibility of the relative changes in the prices of goods and services, and enables businesses to see clearly market signals that are conveyed by the relative changes in the prices of goods and services. Consequently, it is held, this leads to the efficient use of the economy’s scarce resources and hence results in better economic fundamentals." (04/28/17)


Why all central banks' e-currencies will fail horribly

Source: Bitcoin.com
by Datavetaren

"From time to time I hear 'central banks could issue e-currencies on blockchains!' Before dwelling on the details on why that isn’t possible, let’s consider an 'Einsteinian thought experiment.' Let’s begin by asking ourselves the question: How do we know that a computer system is secure and not being tampered with?" (04/27/17)


Accommodative monetary police is encroaching on fiscal policy

Source: Cobden Centre

"We believe that the ECB is presently using monetary policy in effect to conduct fiscal, as well as monetary policy. Elected politicians should be up in arms; that they are not would imply either that they do not understand this or that they simply accept it. This may provide an interesting pointer as to the future of the EU itself." (04/21/17)


The Fed's inflation fixation

Source: Independent Institute
by Randall Holcombe

"Despite arguments about the perils of deflation, the United States had a long-term decline in prices from 1865 until the Federal Reserve was established in 1913, at a time in which the industrializing economy was growing more rapidly than it ever had before. As to the argument that people will wait to purchase goods when they anticipate falling prices, computer prices have been falling for half a century, along with the prices of other high-tech goods, and those markets have seen rapid growth. Deflation is not bad for the economy, and deflation that represents increases in productivity produces prices that give a more accurate representation of real cost of goods and services. There is no good reason for the Fed to deliberately try to create inflation." (04/19/17)


Atlanta and NY Fed cut US first quarter GDP view after weak data

Source: Reuters

"The Atlanta and New York Federal Reserve banks downgraded their outlook for U.S. economic growth for the first quarter after disappointing data on retail sales and consumer prices in March. First-quarter gross domestic product was on track to grow 0.5 percent, which was lower than the 0.6 percent growth rate calculated on April 7, the Atlanta Fed said. The New York Fed said on Friday its first-quarter GDP forecast was 2.09 percent, down from 2.56 percent a week earlier." (04/17/17)

Fed gets small, realignment begins

Doug French

Source: Mises Canada
by Doug French

"In economics we learn, more supply with static demand equals lower prices. Not so with the U.S. Treasury market and hungry central banks. 'The supply of publicly-held Federal debt soared from $2.4 trillion to $14 trillion between 1988 and 2017, but prices did not fall; they marched steadily higher — causing yields to steadily decline toward the zero bound,' [David] Stockman writes (and emphasizes). Politicians, not strong in economics anyway, figured they could keep doing this forever. Not hardly. 'So the real meaning of B-Dud’s bomb is that the law of supply and demand will soon be back in operation in the government bond pits. The long central bank financed holiday is over,' says Stockman. So when B-Dud and Yellen start getting small, traders will be way ahead of them and the idea of a nice, smooth increase in rates managed by the PhD Fed army is fantasy." (04/05/17)


The next step in Europe's negative-interest-rate experiment

Source: Ludwig von Mises Institute
by Thorsten Polleit

"The European Central Bank (ECB) pushed its deposit rate to minus 0.4 percent in April 2016: Since then, euro area banks must pay 0.4 percent per annum on their excess reserves held at ECB accounts. This, in turn, has far-reaching consequences. To start with, banks seek to evade this 'penalty rate,' especially by buying government bonds. That inevitably pushes bond prices up and lowers bond yields. Moreover, the ECB keeps monetizing government debt as well. The result is a tremendous downward pressure on the yield environment." (04/06/17)


"Nowhere to go but up" survives because the Fed refuses to be honest about its assessment of the output gap

Source: Cobden Centre
by Jeffrey P Snider

"The Federal Reserve under Ben Bernanke committed several unforgivable mistakes during his tumultuous tenure, but cumulatively they could be easily summarized as “they really don’t know what they are doing.” Time and again whoever followed monetary policy and the conventions built upon it were led either off a cliff or somewhere just less dramatic. Federal Reserve actions are at best a reaction to what already occurs, and most often just plain irrelevant. Yet for all the mountains of evidence establishing just that sort of relationship, it remains 1999 for so many, especially those in the media." (04/05/17)