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In RealTime posts, PIIE senior staff and colleagues discuss the fast-moving economic news, financial developments, and public policy choices confronting the United States and the world.
Safe assets—often called information insensitive assets—are those debt securities that do not suffer from financial frictions characteristic of other financial assets. They play a major role in the strategies of institutional investors. But as we have learned recently, they can quickly lose their safety status at times of financial crises. In the past few months, [...]
In his recent speech at the Federal Reserve’s annual Jackson Hole conference, Professor Michael Woodford of Columbia University attempted to pour cold water on the idea that the Fed’s purchases of long-term bonds (also known as quantitative easing) could lower bond yields.1 His contention was that the portfolio balance effect of such purchases would be [...]
Let’s break out the booze and have a ball if that’s all there is. – From the song “Is That All There Is?” by Jerry Leiber and Mike Stoller At Jackson Hole last week, Federal Reserve Chairman Ben Bernanke provided more detail on the “costs and risks” he had cited in his June Federal Open [...]
On June 20, 2012, the Federal Reserve System’s Federal Open Market Committee extinguished the last shred of doubt as to whether it intends to achieve its mandated objectives. Despite a substantial markdown of an already inadequate forecast, the Fed did not take any actions that would make it possible to achieve either of its objectives [...]
Throughout modern economic history, every major financial crisis has been followed by premature abandonment—if not reversal—of the very stimulus policies necessary for sustained recovery. If the world is not to repeat that mistake, the Federal Reserve and the European Central Bank (ECB) must engage in further monetary stimulus, which today means purchasing additional government securities [...]
Despite the claim that last week’s jobs numbers were “better than expected,” they were in fact an abysmal indictment of US economic policy over the past two years. The unemployment rate has remained near or above 9 percent for 28 consecutive months, a policy failure not seen since the Great Depression of the 1930s. Unfortunately, [...]
On Wednesday afternoon, April 27, 2011, Federal Reserve Chairman Ben Bernanke gave the first scheduled press conference by a Federal Reserve chairman immediately following a meeting of the Federal Open Market Committee (FOMC). Chairman Bernanke was sure footed and appeared not to be surprised by any of the questions. He answered most of the questions [...]
The US Federal Reserve is preparing what could turn out to be one of its greatest follies since its defense of the gold standard during the Great Depression. Ben Bernanke, the Fed chairman, has signaled that next month the central bank could begin the process of printing hundreds of billions of dollars to buy US [...]
In his testimony [pdf] to the Congress this week, Fed Chairman Ben Bernanke left the door open to further monetary stimulus but made it clear that such action is not imminent. This reluctance to act may seem puzzling given the widespread view that the economic recovery is too weak. In response to a senator’s question, [...]
I am not able these days to make as much time as I would like to read whole books, but during a recent vacation I was able to finish Lords of Finance by Liaquat Ahamed. I recommend it to anyone interested in the interwar period of the 1920s and 1930s, both before and after, and [...]