Tag Archives: central banking

The Fed's half-hearted attempt a monetary tightening

Source: Ludwig von Mises Institute
by Thorsten Polleit

"The slowness with which the Fed is bringing rates back up suggests that they are certainly not in a hurry to put an end to ongoing debasement of US-dollar money balances and US-dollar denominated debt. There is, however, a reason why the Fed might actually be quite keen to keep real interest rates into negative territory: If the interest rate borrowers have to pay on their debt is lower than the economy’s growth rate, the economy’s overall debt-to-GDP level comes down over time; or the debt-to-GDP ratio increases at a slower pace even if borrowers keep running into even higher debt." (03/21/17)


Federal Reserve raises benchmark interest rate by 0.25%

Source: CBS News

"The Federal Reserve raised its benchmark interest rate by a quarter percentage point Wednesday, part of a planned series of upcoming interest rate increases. The central bank's program of gradually increasing short-term interest rates, if it continues, will increase what Americans pay on everything from home mortgages to credit cards. 'The simple message is that the economy is doing well,' Fed Chair Janet Yellen said in remarks after the announcement, underlining why the central bank sees it as a good time to increase rates. 'We have confidence in the robustness of the economy and its resilience to shocks.' The Fed's benchmark, called the federal funds target rate, now climbs to a range of 0.75 to 1 percent." (03/15/17)


How the Fed operates — and why it's a problem

Source: Ludwig von Mises Institute
by Frank Shostak

"We are often asked about the mechanisms by which the US Federal Reserve Board (the Fed) influences the level of US interest rates and whether these mechanisms also influence the level of the US money supply. It has long been regarded that the Fed no longer inflates and contracts the money supply but rather simply acts to target interest rates. The purpose of this brief paper is to clarify how the Fed works and the impact that its operations have on the money supply." (03/15/17)


The fateful date

Source: Cobden Centre
by Alasdair MacLeod

"Caesar: What sayest thou to me now? Speak once again. Soothsayer: Beware the ides of March. Caesar: He is a dreamer; let us leave him: pass. This famous advice, according to Shakespeare, was ignored with fatal consequences for Julius Caesar. Markets may be being similarly complacent ahead of this anniversary date next week. The Fed has signalled that it will raise interest rates at the FOMC's March meeting, timed for the same day. It so happens that this fateful date coincides with the end of the suspension of the US debt ceiling. Dare Janet Yellen raise rates at such a sensitive juncture?" (03/14/17)


Can Yellen keep the boom going?

Source: Ludwig von Mises Institute
by Brendan Brown

"Yellen, like notorious previous Fed chiefs including Strong, Martin, and Greenspan, can now claim success in having prolonged and strengthened an asset price inflation which otherwise may well have been about to enter its severe end phase. If history is any guide, the result of that success is to be feared." (03/06/17)


Fed may raise US rates "fairly soon"

Source: BBC News [UK state media]

"Federal Reserve officials have said they may need to raise interest rates 'fairly soon' if the economy stays strong, minutes of their meeting show. The first meeting of the Fed since Donald Trump took office as president discussed the possibility of a rate rise as early as March. Most economists have been forecasting a rise in June. However, Fed officials appear divided on the timing of a rise amid uncertainty over Mr Trump's policies." (02/22/17)


Five reasons for central banks: Are they any good?

Source: Ludwig von Mises Institute
by Karl-Friedrich Israel

"So what are the justifications for central banks? [Vera C. Smith (later Lutz)] identified five main arguments for central banks from an economic point of view. Although Smith has written with a gold standard as the underlying monetary system in mind, it is interesting to look at these arguments with the benefit of hindsight more than 80 years later. Has any one of the arguments actually made a strong or even conclusive case for central banking?" (02/22/17)


Gini and monetary policy

Source: Cobden Centre
by Alasdair MacLeod

"Central banks must be increasingly aware that critics of monetary policy are getting some traction in their arguments, that not only have monetary policies failed in their objectives, but they are creating counterproductive economic distortions as well. Chief among these is the transfer of wealth that comes with monetary debasement. Central bankers have always glossed over this issue, which if made to stick would undermine monetary policy to the extent that central banks would then have no role in the management of our affairs. Instead, they would be reduced to policing money to make sure it is always sound. At the least, they would have to become Schachts, instead of Havensteins." (02/14/17)


What will Trump do about the central bank cartel?

Source: Ludwig von Mises Institute
by Thorsten Polleit

"If the Trump administration really wishes to live up to its campaign promise 'Make America great again,' there is no way of getting around addressing Fed policy. A first step in that direction is the idea to subject the US central bank to public scrutiny ('Audit the Fed'), bringing to public attention the scope of the Fed's interventions into the world's banking system." (02/13/17)


Could Bitcoin affect emerging market monetary policy?

Source: Bitcoin.com
by Justin Connell

"Federal Reserve Bank of St. Louis Vice President, Dr. David Andolfatto, is optimistic about Bitcoin, as an alternative currency could impose limitations on the ability of governments to raise revenue through money creation. … 'What people do in high inflationary and hyperinflationary circumstances is seek alternative or competing currencies,' Dr. Andolfatto tells Bitcoin.com. 'This could be the U.S. dollar, gold and things like that. Governments and central banks often then impose currency restrictions, maybe by implementing laws keeping people from opening USD denominated bank accounts.' It's not so easy, however, for a money printing central bank to stymie capital inflows into digital currency." (02/13/17)