Category Archives: Federal Reserve

Dan Kervick: The Fed is the Central Bank, and President Obama Should Treat It That Way

Too many of the ideas of what would make for a good Fed chairman are based on overly ambitious and wrongheaded goals for the central bank.

Robert Prasch: The Next Chair of the Federal Reserve Must be a Regulator

If we go by the rumors circulating in the financial press, the Obama Administration is on the verge of selecting a proven failure – Lawrence Summers – to be the next Chair of the Federal Reserve System. We can, and need to, do a lot better than that.

Why Larry Summers Should Not Be Permitted to Run Anything More Important than a Dog Pound

I’ve been gobsmacked to see that not only is Larry Summers on various short lists of candidates to become the next Fed chairman, but that Summers is also supposedly closing in on the favorite, Janet Yellen.

How Goldman Cost $5 Billion Manipulating Aluminum Inventories (and Copper is Up Next)

What sexual favors were exchanged so that the New York Times blunted the impact of an important, detailed investigative story on Goldman profiteering, this time in the aluminum market, by releasing it on a heat-addled summer Saturday?

Quantitative Easing: Can it Be Unwound?

Yves here. This post looks at the unwinding of quantitative easing in the UK and raises some concerns.

Bill Black: What if Bernanke Had the Character to be Candid?

Yves here. I suspect NC readers can go even further will Bill Black’s question!

The Fed (Sort of) Speaks, but is the Bond Market Really Listening?

Yves here. As has become typical of late, the markets reacted sharply to the release of the FOMC minutes on Wednesday and Bernanke’s remarks later. For a really good effort at parsing the minutes, see Fedwatcher Tim Duy. The one clear conclusion was how unclear the minutes were:

Nathan Tankus: The Fed’s Tapering Troubles and the Real Liquidity Trap

Since Bernanke started talking about “tapering off” Quantitative Easing, the bond markets have freaked out. This is a very logical reaction once you understand how liquidity traps operate.

Quelle Surprise! 38% of Prospective Home Buyers Halt Search Due to Rate Shock

We’ve been warning that the sudden rise in mortgage rates was going to create a great deal of buyer sticker shock. It’s already virtually halted refis. Further confirmation comes from the Urban Turf website:

Banks Outbidding Private Equity Funds at Foreclosures, Believing They Can Beat Them at the Pump and Dump Game

It’s conventional to deem local journalism to be dead, but Josh Salman at the Sarasota Herald-Tribune has written well-researched investigative story on bank bidding at foreclosures in his neck of the woods, Big lenders bidding to keep homes, that has national implications.

Michael Hudson: From the Bubble Economy to Debt Deflation and Privatization

Michael Hudson looks at the implications of ending QE in the context of the past 30 years of bubble blowing.

US Mortgage Rates Skyrocket

Yves here. So what is the Fed going to do, now that it has delivered a big blow to the nascent housing recovery? Risk its credibility by beating a serious retreat on taper talk, or keep whistling in the dark and wait and see what happens to July and August home sales (and remember, most housing market data is reported with a nearly two month lag…)?

Nathan Tankus: Krugman von Hayek

Mainstream economic discussions employ a false dichotomy. At one “extreme” you have Austrian economists who believe the current Federal Reserve policy is (or should be) causing inflation, malinvestment, and all sorts of other maladies. They think the nominal interest rate set by the Fed is too low and should be raised . At the other “extreme” you have Paul Krugman and “New Keynesian” company, who argue that the nominal interest rate set by the Fed is too high and should be lowered in some way. To the causal observer who is unfamiliar with the history of economic thought, these two positions seem diametrically opposed. They, in fact, are not.

Mortgage Rate Shock Likely to Dent the Housing Market

As regular readers know, your humble blogger, along with a lot of investors, was taken by surprise when the typically dovish Bernanke not only started using the taper word a month ago, but then made the demise of Fed heroics sound even more imminent by talking about higher unemployment “thresholds,” namely 7%, than had been voiced previously. And the reading of Fedwatchers like Tim Duy and (even before the FOMC statement) James Aitken is that the central bank wants out of the QE business sooner rather than later.

The impact on mortgage rates already looks very likely to throw a big bowl of cold water on the housing party.

Lee Adler: The Big Four Central Banks Muddy The Same Sea Of Liquidity, And Then There’s China

The world’s major central banks are now working at cross purposes, creating massive crosscurrents that are making life extremely difficult for investors. This isn’t likely to end soon. In fact, conditions should get worse.