Relevant and even prescient commentary on news, politics and the economy.

ECB policy is tightening – has been for some time

Update: Nouriel Roubini front pages this post on Euromonitor here. The ECB dove in and hiked its policy rate by 25 basis points to 1.25%. I had the pleasure of listening to Wolfgang Munchau on Thursday, and he reiterated what I reluctantly understood: the ECB’s strict inflation target is ridiculously simple for such a complex […]

Why There’s Little Inflation, In One Easy Graphic

Ex-food and energy, inflation is at 0.9% for the past twelvemonth. Even if you include those in the longer measure, annual inflation has been 1.7%. (Recall that we paid an average of more than $3.00/gallon for most of the Spring of 2010, for instance.) There is a simple reason “everyone” expected higher numbers: they were […]

Following the Taylor Rule would have led to President Kerry

The Reserve Bank of New Zealand released a paper by Nicolas Groshenny last month—I’m behind on planning for Chanukkah; that I got to a paper from New Zealand about U.S. monetary policy this soon is, er, probably one of the reasons why—in which he evaluates the counterfactual of following the “Taylor Rule” from 2002 to […]

Transmission Channels for the Fed’s QE2

What are the channels for QE2? In a recent post, David Beckworth outlines his frustration: “It has been frustrating to watch Fed officials explain QE2. The standard Fed story centers around the QE2 driving down long-term interest rates and stimulating more borrowing.“ On the tip of my tongue, I can think of three direct channels: […]

Comparing the Fed, the ECB, and the BoE before policies diverge

The coming week is G4 central bank week. The Federal Reserve Bank (Fed) announces its policy decision on November 3; the European Central Bank (ECB) and the Bank of England (BoE) will make policy announcements on November 4; and the Bank of Japan pushed forward its November 15-16 meeting to be held now on November […]

Dropping $100 Bills on the Sidewalk, or Even More on Excess Reserves

The sarcasm of the title of my recent post notwithstanding, there are some things economists understand to be true that are. Among those: People respond to incentives As with the Supreme Court, economists extend this principle to organizations, on the (generally correct) idea that organizations are made up of people who act in their own […]

When S != I

As Brad DeLong has noted, Tim Geithner believes it is time for “the economy has now recovered sufficiently for government to begin to make way for private business investment.”  In short, he expects “the private sector” to do the heavy lifting in these joyous times of economic recovery. Cynics among us—why, yes, that might well […]

Yield curves in Japan and the US: similar but not the same

Andy Harless presents the case for a double dip (second recession) – I would re-order #1 and #2 on that list – and that for a sustained recovery. #6 of Andy’s case for a sustained recovery (he calls it Case Against a Second Dip) caught my attention, pointing me to an earlier Paul Krugman article […]