by Joseph Joyce Monetary Policy in an Open Economy The recent research related to the trilemma (see here) confirms that policymakers who are willing to sacrifice control of the exchange rate or capital flows can implement monetary policy. For most central banks, this means using a short-term interest rate, such as the Federal Funds rate […]

I woke up today to see oil below $27 a barrel, the US 10-year at 1.6% and the Dow down to 15,600. How quickly the economy is faltering. It is a crazy moment. Oil below $29 a barrel creates Geo-political tensions that can create attacks of aggression. Other countries have already tried to negotiate with […]

Kevin Drum wrote “Here’s Why Bernie Sanders Doesn’t Say Much About Welfare Reform” He presents a graph of total social welfare spending in the USA divided by the number of people in households under 150% of the poverty line. He concludes “There are two obvious takeaways from this. First, overall spending on social welfare programs […]

Socialism has always appealed to the young, the cure for which isn’t age but responsibility. This usually comes in the form of taxes and children, both of which involve working and sacrificing for the benefit of others, the extent of which forms the axis upon which all politics turns. That Sanders never outgrew his own […]

Looking at the past six months, Sears was outperforming Wal-Mart until mid-December. (Graphic via CNN)

Last week 31 countries signed a new Organization for Economic Cooperation and Development (OECD) agreement providing for country-by-country corporate information reporting and the automatic exchange of tax info between countries under the Multilateral Competent Authority Agreement (MCAA). Country-by-country reporting, the brainchild of noted tax reformer Richard Murphy,* is a principle that makes it possible to […]

Here is the graph from FRED for FOMC Summary of Economic Projections for the Fed Funds Rate, Central Tendency, Midpoint. (link) 1.15% for 2016. 2.45% for 2017. 3.20% for 2018. LOL… lots of luck. “The projections for the federal funds rate are the value of the midpoint of the projected appropriate target range for the […]

This post will build upon my previous post with the Cobra equation. In that post, I gave a model showing that the Fed is completely behind the curve of the business cycle. The Fed should not be raising rates at this point in the business cycle. When to Normalize in Theory In the model, aggregate […]

Tim Duy, who is a cool economist, points out a difference between the labor market and output GDP… Labor market improving while GDP is slowing. He describes this difference for the Fed. “Now they have slow GDP growth and fast employment growth. That will make brains explode on Constitution Ave.” Yet, Brains need not explode. […]

I have been saying for more than two years that the Fed should have raised the Fed rate earlier. Now it is too late because the economy is over the top of the business cycle… or as I would say, against the effective demand limit. They should have raised the Fed rate when effective demand […]