Articles by The Economist’s U.S. Economics Editor
The original article is linked here.
GREG IP
An academic background stood the chairman of the Federal Reserve in good stead during his first term. Political skills may be more important in his second
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AS THE financial crisis gathered force in August 2007, Jim Cramer, a hyperbolic market commentator on cable television, hurled the worst epithet he could muster at the chairman of the Federal Reserve: “Bernanke is being an academic. It is no time to be an academic!” By August 25th this year, when Barack Obama nominated Ben Bernanke to a second, four-year term, what had once been an epithet had become a source of strength. Read the rest of this entry »
The original article is linked here.
By Greg Ip
Politics stops the Fed from expanding an asset-purchase scheme
BACK IN 2002, before he became chairman of the Federal Reserve, Ben Bernanke claimed that if short-term interest rates fell to zero, a central bank still had the ultimate weapon: printing money by purchasing government bonds. Having now actually tried quantitative easing himself, Mr Bernanke is discovering its limits. Read the rest of this entry »
The original article is linked here.
Jul 21st 2009 | WASHINGTON, DC
From Economist.com
The Fed’s chairman talks up the economy
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IT HAS been a long time since comments on the economy by an official of America’s Federal Reserve comments could be described as cheerful. Yet there was no denying the upbeat tone of Ben Bernanke’s testimony to Congress on Tuesday July 21st.
Markets have experienced “notable improvements,” the Fed’s chairman told Congress. The fear of investors has “eased somewhat,” and “many markets are functioning more normally.” As for the economy, consumer spending has been stable, the drop in the housing market has moderated and many “of our trading partners are also seeing signs of stabilisation.” His fingers may be crossed but it is clear that Mr Bernanke thinks the recession, if not over now, soon will be.
That is a far cry, though, from seeing a threat from inflation and Mr Bernanke made it clear that the federal funds target rate, now near zero, will remain there for a long time. Read the rest of this entry »
The original story is linked here.
Congress threatens the central bank’s independence
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WHEN Ron Paul ran for president in 2007, he was gratified to hear students at one of his rallies start chanting “End the Fed”, while setting dollar bills alight. Though the Texas congressman’s pursuit of the White House ended in failure, his campaign against the central bank is gaining some adherents.
Mr Paul has introduced a bill that would give the Government Accountability Office (GAO), the non-partisan investigative arm of Congress, the right to inspect the Federal Reserve, including its conduct of monetary policy, its lending and its relations with foreign central banks, all of which are now off-limits. Sixty percent of the members of the House of Representatives have signed on as co-sponsors. Read the rest of this entry »
The original story is linked here.
The simple rules by which central banks lived have crumbled. A messier, more political future awaits
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IN THE world that existed before the financial crisis, central bankers were triumphant. They had defeated inflation and tamed the business cycle. And they had developed a powerful intellectual consensus on how to do their job, summarised recently by David Blanchflower, a member of the Bank of England’s monetary policy committee, as “one tool, one target”. The tool was the short-term interest rate, the target was price stability.
This minimalist formula fitted the laissez-faire temper of the times. A growing array of financial markets could price risk and allocate credit efficiently. Central bankers had merely to calibrate their interest-rate tools and all other markets would automatically adjust. Central banks still cared about financial stability and full employment, but could argue these were best served by stabilising prices—without, if you please, interference from politicians.
The financial crisis has upended all that. Read the rest of this entry »
The original article is linked here.
The hyperactive Fed finds its cherished independence is on the line
THE Federal Reserve has ventured ever further into the political realm, propping up failing companies, lending to industries other than banks and financing the federal budget through purchases of Treasury bonds. Now the politicians are threatening to respond in kind. Read the rest of this entry »
The original story is linked here.
Mar 19th 2009
From The Economist print edition
Today’s fattened central-bank balance-sheets evoke fears of inflation. Deflation is the bigger worry
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BACK in 2002 Ben Bernanke, then still a Federal Reserve governor, declared that “under a paper-money system, a determined government can always generate higher spending and hence positive inflation.” That does not mean it is easy.
On March 18th America’s inflation rate was reported at 0.2%, year on year, in February. The same day the Fed said “inflation could persist for a time” at uncomfortably low levels. Yet some economists and investors insist high inflation, even hyperinflation, is lurking in the wings. They have two sources of concern. The first is motive: the world is deleveraging, ie, trying to reduce the ratio of its debts to income. Policymakers might secretly prefer to do that through higher inflation, which lifts nominal incomes, than through the painful processes of cutting spending and retiring debt, or default. The second is captured by the Fed’s announcement that it plans to purchase $300 billion in Treasury bonds and an additional $850 billion of mortgage-related debt, bringing such purchases to $1.75 trillion in total, all paid for by printing money. It is not alone: around the world, central-bank balance-sheets have ballooned (see chart).
This is scary stuff to those who swear by Milton Friedman’s dictum that “inflation is always and everywhere a monetary phenomenon.” But the role of the money supply in creating inflation is less obvious than monetarism suggests.
The quantity theory of money holds that the money supply, multiplied by the rate at which it circulates (called velocity), equals nominal income. Nominal income in turn is the product of real output and prices. But does money supply directly boost nominal income, or does nominal income affect velocity and the demand for money? The mechanism is murky. Read the rest of this entry »
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The Fed finds innovative ways to pump hundreds of billions of additional dollars into the economy
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A FEW days ago Ben Bernanke, chairman of the Federal Reserve, was asked to identify the biggest obstacle to economic recovery. That “we don’t have the political will,” he replied.
Mr Bernanke showed his own will on Wednesday March 18th, when the Fed’s policy panel said it would purchase $300 billion in Treasury debt, mostly maturing in two to ten years, starting next week. Read the rest of this entry »
By GREG IP
The original article is linked here.
WASHINGTON — The Federal Reserve is likely to cut its short-term interest rate by a quarter of a percentage point next week — but then may be ready for a breather.
The Fed, meeting Tuesday and Wednesday, is likely to make what would be its seventh cut in eight months. The reason: Some officials see a case for more insurance against a deeper recession.
By Greg Ip
1030 words
3 March 2008
The Wall Street Journal
A2
English
(Copyright (c) 2008, Dow Jones & Company, Inc.)
Two fears hang over the U.S. economy: wrenching recession and spiraling inflation.
Yet history suggests the two almost never happen at the same time. And that explains why the U.S. Federal Reserve, for now, has chosen to focus on the first threat rather than the second.
Fed officials believe that those who say it is courting a return of 1970s-style “stagflation” — stagnant growth and inflation — misinterpret the lessons of that decade. Read the rest of this entry »
