Category : Federal Reserve

(WSJ) As Food Prices Rise, The Federal Reserve Keeps a Watchful Eye

U.S. food prices are on the rise, raising a sensitive question: When the cost of a hamburger patty soars, does it count as inflation?

It does to everyone who eats and especially poorer Americans, whose food costs absorb a larger portion of their income. But central bankers take a more nuanced view. They sometimes look past food-price increases that appear temporary or isolated while trying to control broad and long-term inflation trends, not blips that might soon reverse.

The Federal Reserve faces an especially important challenge now as it mulls the long-standing dilemma of what to make of the price of a pork chop.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, Dieting/Food/Nutrition, Economy, Federal Reserve, Globalization, Personal Finance, The U.S. Government

(WSJ) Federal Reserve Interest Rate Decision will Focus on Joblessness

Four years ago, 6.8 million Americans were out of work for six months or longer. Half as many are now. That might sound like good news, but it isn’t.

Nearly four-fifths of those who became long-term unemployed during the worst period of the downturn have since migrated to the fringes of the job market, a recent study shows, rarely seeking work, taking part-time posts or bouncing between unsteady jobs. Only one in five, according to the study, has returned to lasting full-time work since 2008.

The plight of these millions is now at the center of a contentious debate among top U.S. officials over how to spur jobs without stirring inflation.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, Anthropology, Economy, Ethics / Moral Theology, Federal Reserve, Globalization, Labor/Labor Unions/Labor Market, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government, Theology

Lawrence Summers reviews the new book on the Financial Crisis "House of Debt"

[Book authors Mian and Sufi] argue that, rather than failing banks, the key culprits in the financial crisis were overly indebted households. Resurrecting arguments that go back at least to Irving Fisher and that were emphasised by Richard Koo in considering Japan’s stagnation, Mian and Sufi highlight how harsh leverage and debt can be ”“ for example, when the price of a house purchased with a 10 per cent downpayment goes down by 10 per cent, all of the owner’s equity is lost. They demonstrate powerfully that spending fell much more in parts of the country where house prices fell fastest and where the most mortgage debt was attached to homes. So their story of the crisis blames excessive mortgage lending, which first inflated bubbles in the housing market and then left households with unmanageable debt burdens. These burdens in turn led to spending reductions and created an adverse economic and financial spiral that ultimately led financial institutions to the brink.

This interpretation resolves the anomalies that Mian and Sufi highlight. Households do not spend while they are still overly indebted, which precipitates slow growth even after banking is restored to health. Spending slowdowns are caused by household over-indebtedness, so of course they precede problems in the banking system. And, when consumers do not spend, businesses have less need to borrow to finance investment, inventories or receivables.

Their analysis, presented with far more depth and subtlety than I have been able to reflect here, is a major contribution that furthers our understanding of the crisis. It certainly affects what I will examine in trying to predict and forestall future crises. And it should influence policies aimed at crisis prevention by demonstrating the insufficiency of keeping financial institutions healthy and by making a case for macroprudential measures directed at preventing runaway growth in household debt.

Read it all (my emphasis).

Posted in * Culture-Watch, * Economics, Politics, Books, Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Federal Reserve, History, Personal Finance, The Banking System/Sector, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government, Theology, Treasury Secretary Timothy Geithner

(Time) Americans Are Taking on Debt at Scary High Rates

Americans are known risk-takers when it comes to their personal finances. While consumer spending has traditionally been one of the great engines of the U.S. economy, it also helped get the country into the Great Recession. So after five years of economic turmoil we’ve presumably become a little better at keeping track of our debts, right?

Not really. Data released Tuesday by the Federal Reserve Bank of New York show that at $11.52 trillion, overall consumer debt is higher than it has been since 2011. And more unsettling, debt is rising at rapid levels. Americans’ debt””that includes mortgages, auto loans, student loans and credit card debt””increased by 2.1%, or $241 billion in the last three months of 2013, the greatest margin of increase since the third quarter of 2007, shortly before the U.S. spiraled into recession.

And on an individual level, many Americans are in a precarious financial position.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, America/U.S.A., Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Federal Reserve, Media, Personal Finance, Psychology, The Banking System/Sector, The U.S. Government, Theology

(NY Times) Treasury Secretary Sends Warning on Debt Limit

Treasury Secretary Jacob J. Lew warned Congress on Wednesday that the government would most likely exhaust its ability to borrow in late February, setting up yet another fiscal showdown with Republicans, and this time earlier than congressional leaders had anticipated.

In a letter to Speaker John A. Boehner and the other top three congressional leaders, Mr. Lew said a surge of February spending, mainly tax refunds for 2013, would leave the Treasury with little room to maneuver after the official debt limit is reached on Feb. 7.

The letter amounts to an early alarm bell, coming just weeks after Congress passed its first bipartisan budget and comprehensive spending bill in years. Those bills were supposed to serve as a cease-fire in the budget wars that have rattled the country and the economy since Republicans took control of the House in 2011.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, America/U.S.A., Budget, Economy, Ethics / Moral Theology, Federal Reserve, Globalization, History, House of Representatives, Medicaid, Medicare, Office of the President, Politics in General, President Barack Obama, Senate, Social Security, Taxes, The National Deficit, The U.S. Government, The United States Currency (Dollar etc), Theology

(NYT) Eduardo Porter–The Great Recession’s True Cost Is Still Being Tallied

More than five years later, there is still no answer to perhaps the most critical question raised by the man-made disaster: How much did it all cost?

In July, three economists at the Federal Reserve Bank of Dallas, Tyler Atkinson, David Luttrell and Harvey Rosenblum, gave it a shot, at least as far as the United States economy goes.

…their examination offers a panoramic view of the variety of ways in which the financial crisis diminished the nation’s standard of living. At a bare minimum the crisis cost nearly $20,000 for each American. Adding in broader impacts on workers’ well-being ”” an admittedly speculative exercise ”” could raise the price tag to as much as $120,000 for every man, woman and child in the United States. With this kind of money we could pay back the federal debt or pay for a top-notch college education for everyone.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, Anthropology, Children, Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Federal Reserve, History, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Marriage & Family, Personal Finance, Politics in General, Poverty, Psychology, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The National Deficit, The U.S. Government, Theology

(FT) Minneapolis Fed Pres. Kocherlakota pleads for Federal Reserve to do more to stimulate Economy

The US Federal Reserve was being complacent by planning for years of below-target inflation, warned Minneapolis Fed President in a clarion call for more economic stimulus.
“We’re running the risk of being content with inflation running consistently below our target. That’s inappropriate,” said Narayana Kocherlakota, who votes on Fed monetary policy this year, in an interview with the Financial Times. “Right now we’re sitting with an outlook for inflation that even by 2016”‰.”‰.”‰.”‰is not getting back to 2 per cent.”

Mr Kocherlakota’s remarks illustrate the growing anxiety about low global inflation that led Christine Lagarde, head of the International Monetary Fund, to warn this week that “rising risks of deflation” could be disastrous for the world’s economic recovery ”“ calling it the “ogre that must be fought decisively”.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, America/U.S.A., Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Federal Reserve, History, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Personal Finance, Politics in General, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government, Theology

(WSJ) Federal Reserve Dials Back Bond Buying, Keeps a Wary Eye on Growth

Although the Fed expects to keep reducing the program “in measured steps” next year, the timing and the course isn’t preset. “Continued progress [in the economy] is by no means certain,” Mr. [Ben] Bernanke said. “The steps that we take will be data-dependent.”

If the Fed proceeds at the pace he set out, it would complete the bond-buying program toward the end of 2014 with holdings of nearly $4.5 trillion in bonds, loans and other assets, nearly six times as large as the Fed’s total holdings when the financial crisis started in 2008.

Still, officials””worried that investors would quake at the thought of less Fed support””went to lengths to demonstrate that they would keep interest rates low for years to come, even after the bond-buying program ends.
Read it all.

Posted in * Culture-Watch, * Economics, Politics, Budget, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Federal Reserve, History, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Personal Finance, Politics in General, Stock Market, The Banking System/Sector, The National Deficit, The U.S. Government, Theology

(FT) Gillian Tett–Danger: US mortgage market whiplash risk

..before realtors get too confident about the future, it is worth looking at some sobering research from the International Monetary Fund, buried deep inside this autumn’s Global Financial Stability Report. This analysis, which looks at mortgage real estate investment trusts (M-Reits) ”“ which invest in packages of mortgage bonds ”“ did not make headlines when the IMF met last month, because M-Reits are a fairly specialist sector. That is a pity, given that the IMF says the rapidly expanding world of M-Reits has the potential to deliver nasty surprises if, or when, US interest rates rise.

Most notably, even a modest increase in rates could spark fire sales of mortgage-backed bonds, which would raise mortgage interest rates sharply for consumers. And that could not just hurt housing markets but produce knock-on waves of instability in other areas of finance.

“Rapid M-Reit deleveraging has important spillover implications,” the IMF report warns.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Economy, Ethics / Moral Theology, Federal Reserve, Globalization, History, Housing/Real Estate Market, Stock Market, The Banking System/Sector, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government, Theology

(Wash. Post) Senate leaders’ talks on shutdown, debt limit stall as sides await Mkt reaction

What started as a mad dash to strike a deal to lift the federal debt limit slowed to a crawl over the weekend as stalemated Senate leaders waited nervously to see whether financial markets would plunge Monday morning and drive the other side toward compromise.

Republicans seemed to think they had more to lose. After talks broke down between President Obama and House leaders, GOP senators quickly cobbled together a plan to end the government shutdown ”” now entering its third week ”” and raise the $16.7 trillion debt limit. Senate Minority Leader Mitch McConnell (R-Ky.) then asked Majority Leader Harry M. Reid (D-Nev.) to elevate negotiations to the highest level.

On Sunday ”” with the Treasury Department due to exhaust its borrowing power in just four days ”” Reid was wielding that leverage to maximum advantage. Rather than making concessions that would undermine Obama’s signature health-care initiative, as Republicans first demanded, Democrats are now on the offensive and seeking to undo what has become a cherished prize for the GOP: deep agency spending cuts known as the sequester.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, Budget, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Federal Reserve, Globalization, House of Representatives, Office of the President, Politics in General, President Barack Obama, Senate, Stock Market, The Banking System/Sector, The National Deficit, The U.S. Government

(CNBC) Stanley Druckenmiller: The Federal Reserve lost a chance for a 'freebie' in not tapering

The Federal Reserve lost its chance for a “freebie” by deciding not to begin scaling back its $85-billion-a-month bond-buying program because the markets had already factored in the taper, hedge fund pro Stanley Druckenmiller told CNBC on Thursday….

Druckenmiller argued that the Fed’s lack of action will make it much harder for the next central bank chairman to start tapering.

Read it all (the full video of the interview is highly recommended if you have the time).

Posted in * Economics, Politics, Consumer/consumer spending, Corporations/Corporate Life, Economy, Federal Reserve, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government

(WSJ) The Federal Reserve Stays the Course on Easy Money

Seeing a more uneven economic climate than they expected and the potential for fiscal discord in Washington, Federal Reserve officials got cold feet Wednesday and decided to keep their signature easy-money program in place for the time being.

The move, coming after Fed officials spent months alerting the public that they might begin to pare their $85 billion-a-month bond-buying program at the September policy meeting, marks the latest in a string of striking turnabouts from Washington policy makers that have whipsawed markets in recent days.

Read it all

Posted in * Culture-Watch, * Economics, Politics, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Federal Reserve, Globalization, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Stock Market, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government

Barry Ritholtz–Translated into Truth: On Larry Summers Withdrawing from Fed Chair Consideration

Earlier today, I spoke with Larry Summers and accepted his decision to withdraw his name from consideration for Chairman of the Federal Reserve.

Larry was a critical contributor to the radical deregulation that was one of many causes of the worst economic crisis since the Great Depression. It was in no small part because of his lack of expertise, false wisdom, and inept leadership that the economy crashed and burned and even today is still failing to be to back to its full growth potential.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Federal Reserve, History, Office of the President, Politics in General, President Barack Obama, Stock Market, The Banking System/Sector, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government, Theology

(Bloomberg) Unemployment Falling for Wrong Reason Creates Predicament for the Federal Reserve

If the drop is mainly driven by demographics — aging baby boomers retiring — then the lower unemployment rate gives a true picture of the amount of slack left in the labor market. If the contraction instead is caused by discouraged job-seekers giving up their search, then the jobless rate doesn’t reflect the true state of the market….

Central bank economists are divided over how much of the fall in the workforce is structural and thus not likely to be reversed.

“There is disagreement within the system,” said Geoffrey Tootell, senior vice president and director of research at the Federal Reserve Bank of Boston.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, Economy, Federal Reserve, History, Labor/Labor Unions/Labor Market, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government

(BBC) Global markets fall as end to US stimulus beckons

Global markets have fallen sharply after the Federal Reserve signalled it may begin to scale back its stimulus of the US economy later this year.

On Wall Street, the Dow Jones dropped 354 points, or 2.3%, to close at 14,758, while the S&P 500 had its worst day since November 2011, shedding 2.5%.

European stock markets were down 3% or more by the close….

Read it all.

Posted in * Culture-Watch, * Economics, Politics, Economy, Federal Reserve, Globalization, Stock Market, The U.S. Government

The Federal Reserve Outlines Its Timeline for Winding Down Stimulus

The Federal Reserve chairman, Ben S. Bernanke, said on Wednesday that the central bank intended to reduce its monetary stimulus later this year ”” and end the bond purchases entirely by the middle of next year ”” if unemployment continued to decline at the pace that the Fed expected.

Mr. Bernanke said that the Fed planned to continue the asset purchases until the unemployment rate fell to about 7 percent, the first time that the Fed has specified an economic objective for the bond-buying. The rate stood at 7.6 percent in May.

The Federal Reserve also struck notes of greater optimism about the economic recovery, saying in a statement released after a two-day meeting of its policy-making committee that the economy was expanding “at a moderate pace,” the job market was improving and risks to the recovery had “diminished since last fall.”

Read it all.

Posted in * Economics, Politics, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Economy, Federal Reserve, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Stock Market, The Banking System/Sector, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government

(WSJ RTE Blog) San Francisco Federal Reserve paper–Government to Hold Back Growth for Years

Shifting government finances are likely to take an even bigger bite out of growth over the next few years than many now expect, economists at the San Francisco Fed warned Monday.

In a research note, Brian Lucking and Daniel Wilson write fiscal policy headwinds will subtract one percentage point from growth over the next three years beyond the normal fiscal drag that usually comes during times of recovery. If not for the current and likely future stance of fiscal policy, the economy would be growing at a faster rate, which would allow for more robust job growth and, presumably, a more normal stance of monetary policy for the Federal Reserve.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, Budget, Consumer/consumer spending, Corporations/Corporate Life, Economy, Federal Reserve, History, Politics in General, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government

(Wash. Post Wonkblog) The Economy is holding up surprisingly well in a year of austerity

A U.S. economy that was supposed to be barely hanging on is starting to look surprisingly robust.

Housing prices rose faster over the past year than they have in the past seven, according to data out Tuesday. Consumer confidence hit its highest level in five years. The stock market rallied another 0.6 percent as measured by the Standard & Poor’s 500, leaving it just short of an all-time high reached last week. And the national retail price of gasoline fell for six days straight through Monday and is down 16 cents a gallon since late February.

It adds up to this reality: In a year when tax increases and spending cuts by the federal government were expected to bleed life out of the economy, the strengthening housing and financial markets are proving to be more powerful than acts of Congress.

Read it all.

Posted in * Economics, Politics, Consumer/consumer spending, Corporations/Corporate Life, Economy, Federal Reserve, House of Representatives, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Office of the President, Personal Finance, Politics in General, Senate, Stock Market, The U.S. Government

(FT) US housing lift could crimp Federal Reserve buying

The largest rise in house prices for seven years and a surge in consumer confidence have added to a fast-improving US economic outlook, increasing the chances the Federal Reserve will slow its $85bn-a-month in asset purchases.

House prices jumped 10.9 per cent in March from last year’s levels, the biggest increase since the height of the housing boom in 2006, according to the S&P/Case-Shiller index. The rise in prices for homes and other assets helped push the Conference Board’s index of consumer confidence to its strongest level for five years.

Read it all (another link there.

Posted in * Economics, Politics, Economy, Federal Reserve, Housing/Real Estate Market, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government

(WSJ) Job Gains Calm Slump Worries

Employers kept hiring at a steady pace in April and the government revised up job tallies for February and March, easing fears that the economy is tumbling into a spring slump and propelling blue-chip stocks to record highs.

Nonfarm payrolls rose by 165,000 last month and the jobless rate ticked down to 7.5%, the lowest level since December 2008. The Labor Department also significantly raised hiring estimates for the two prior months, by a combined 114,000 jobs.

But the job gains in April, which were tilted toward the retail and business-services sectors, come alongside mixed signals for the economy almost four years into the recovery. While the housing and auto sectors are accelerating after years of industry turmoil, other major sectors are showing signs of trouble. In short: The Federal Reserve is looking for more broad-based and sustained job growth before easing up on its easy-money policies.

Read it all.

Posted in * Economics, Politics, Consumer/consumer spending, Corporations/Corporate Life, Economy, Federal Reserve, Labor/Labor Unions/Labor Market, Personal Finance, Stock Market, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government

(IBD) Federal Reserve Fed Could Boost Bond Buys As Economic Growth Sputters

The economy lurched this spring into an even lower gear, from manufacturing to services to construction, leaving the Federal Reserve poised to prolong or expand its bond-buying stimulus.

Central bankers Wednesday kept benchmark rates near zero and quantitative easing purchases at $85 billion a month. But changes in their statement highlighted shifting emphasis.

“The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes,” it said.

Read it all.

Posted in * Economics, Politics, * International News & Commentary, America/U.S.A., Consumer/consumer spending, Corporations/Corporate Life, Economy, Federal Reserve, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, The U.S. Government

Ambrose Evans-Pritchard–America's Federal Reserve and the Bank of Japan caused the gold crash

Commodity prices have been falling since September, culminating in a rout over the past two weeks. That is a classic warning for the global economy.

It is becoming ever clearer that the roaring boom in global equities since last summer has priced in an economic recovery that does not in fact exist. The International Monetary Fund has had to nurse down its global growth forecasts yet again. We are still stuck in an old-fashioned trade depression, with pervasive over-capacity in manufacturing plant and a record global savings rate of 25pc of GDP.

German car sales fell 17pc in March. That should puncture the last illusions that Germany is about to pull Europe out of a self-inflicted slump.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Asia, Consumer/consumer spending, Corporations/Corporate Life, Economy, Federal Reserve, Globalization, Housing/Real Estate Market, Japan, Labor/Labor Unions/Labor Market, Personal Finance, Stock Market, The U.S. Government

(CBS Marketwatch) David Stockman is worried about the Federal Reserve's Policy of QE longer term

MarketWatch: Since Nixon’s “abomination” as you call it, we have had some periods where government spending to GDP actually went down, like during the Clinton era. Doesn’t that show it’s just the choices made by Congress rather than the Fed to blame [for the problem of rising national debt as a % of GDP]?

Stockman: There is the issue that Congress ultimately is the fiscal authority. But my argument is, when the Fed becomes a massive buyer of bonds and debt and artificially suppresses interest rate below market-clearing levels, it’s a terrible signal to the Congress that debt is cheap, that running deficits is a viable strategy. So therefore they are induced to kick the can, to let it drift and avoid hard choices. Who wants to tell the public you are going to take your broccoli of higher taxes and lower benefits and spending if you can issue debt on a three-year basis for 40 basis points. That’s free. I was in Congress, they don’t do decimal math, OK? And they think the money is free, it’s a bad problem philosophically, we shouldn’t be doing this for the great long run, but it’s no harm today.

Then they have professors like Krugman who give them the disingenuous advice that the bond vigilantes don’t care. The market is saying, “fine with us, we don’t care, keep piling the debt on, we love it.” That is so much baloney. The reason the interest rate on the 10-year bond 10_YEAR -0.33% today is 1.8% or whatever it happened to settle today, is the market knows the Fed is buying half of the debt and is front running the Fed. And it is renting the bond on repo, 98 cents on the dollar, based on overnight money that’s free thanks to Bubbles Ben as well.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, America/U.S.A., Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Federal Reserve, History, The National Deficit, The U.S. Government, Theology

(Reuters) Special Report: How the Fed fueled an explosion in subprime auto loans

Thanks largely to the U.S. Federal Reserve, Jeffrey Nelson was able to put up a shotgun as down payment on a car.

Money was tight last year for the school-bus driver and neighborhood constable in Jasper, Alabama, a beaten-down town of 14,000 people. One car had already been repossessed. Medical bills were piling up.

And still, though Nelson’s credit history was an unhappy one, local car dealer Maloy Chrysler Dodge Jeep had no problem arranging a $10,294 loan from Wall Street-backed subprime lender Exeter Finance Corp so Nelson and his wife could buy a charcoal gray 2007 Suzuki Grand Vitara.

Read it all.

Posted in * Economics, Politics, Consumer/consumer spending, Economy, Federal Reserve, Personal Finance, The U.S. Government

(FT) Oops! Federal Reserve minutes from 2007 show slow crisis reaction

Top officials at the US Federal Reserve took months to realise that the 2007 financial crisis would rock the world’s largest economy, according to an embarrassing set of meeting transcripts released on Friday.

The transcripts reveal that some Fed policy makers viewed the market turmoil, which erupted in August 2007 on the back of problems in the market for subprime mortgage loans, as good news because markets were pricing in more risk.

The records of the Federal Open Market Committee’s 2007 meetings, which are released with a five-year delay, raise the question of whether the recession would have been less severe if the Fed had reacted faster instead of continuing to forecast steady growth.

Read it all (requires subscription).

Update: A Washington Post article is here.

Posted in * Culture-Watch, * Economics, Politics, Economy, Federal Reserve, History, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government

(FT) Gavyn Davies–Another year in thrall to the central bankers

Understanding the developing attitude of the central banks, and the effects of their actions, obviously remains central for investors in all financial assets. The “big picture” for global financial assets, involving very low government bond yields and a gradual shift of risk appetite into credit and equities, is unlikely to change until one of two events takes place.

The first would be a decision by the central bankers themselves that the era of unlimited quantitative easing must end, either because of the risk of inflation and asset price bubbles, or because of concerns about fiscal dominance over the monetary authorities. The second would be a realisation by the markets that further action by the central bankers is irrelevant because they have run out of effective ammunition. Either of these events would probably remove the central prop from the equity bull market which began in March, 2009, but neither seems very likely in 2013.

There is certainly no sign that the central bankers themselves will call a halt to the extension of their balance sheets.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, --European Sovereign Debt Crisis of 2010, America/U.S.A., Asia, China, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Euro, Europe, European Central Bank, Federal Reserve, Globalization, Japan, Politics in General, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government, The United States Currency (Dollar etc)

(Bloomberg) Federal Reserve Chairman Bernanke Wields New Tools to Reduce Unemployment Rate

The actions on the eve of the Fed’s centenary year underscore Bernanke’s hallmark commitment to experimentation and forceful action, derived in part from his research showing too little monetary stimulus produced large economic costs for the U.S. in the 1930s and for Japan in the 1990s. He called the current state of the labor market, with unemployment at 7.7 percent, “an enormous waste of human and economic potential” and said the benefits of more bond buying outweigh the potential risks.

“Bernanke is pulling out all the stops to kick this economy back into a higher gear,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “They are buying everything in sight — Treasuries, mortgage-backed securities — and will keep rates low until everyone who wants a job has one.”

Read it all.

Update: Brian Milner has some interesting thoughts on this there.

Posted in * Economics, Politics, Consumer/consumer spending, Corporations/Corporate Life, Economy, Federal Reserve, Labor/Labor Unions/Labor Market, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government

(WSJ) The Federal Reserve Extends its Bond Buying Program Into 2013, announces targets as basis

The Federal Reserve refashioned its bond-buying programs on Wednesday, extending its far-reaching effort to revitalize the jobs market and boost the economic recovery into 2013.

In addition, the Fed shifted its communications strategy by specifying the levels of unemployment and inflation that might prompt it to begin raising short-term interest rates, which are now near zero.

The central bank’s policy committee, in its final meeting of the year, said Wednesday it would “initially” begin buying $45 billion of long-term Treasury bonds each month. The latest stimulus from the Fed will replace an expiring program known as “Operation Twist,” in which the Fed has been buying about $45 billion of long-term Treasury bonds each month and selling about the same amount of short-term Treasurys.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Federal Reserve, Globalization, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government

(FT) Henny Sender–Bernanke’s faith in QE on shaky ground

Indeed, the impact of this latest round of unconventional monetary policy is already fading. Analysts at Morgan Stanley this week decided that returns in the high-yield market were no longer attractive in the face of deteriorating fundamentals. The stock market is struggling to make further headway, while yields on mortgage-backed securities have started to turn up after an initial drop. A drop in third-quarter capital expenditure suggests the Fed policy hasn’t been a catalyst for corporate investment at all.

One major reason for the lack of effectiveness of this latest round of quantitative easing may well be a growing concern with the “fiscal cliff”, automatic US tax rises and spending cuts due to kick in on January 1. Uncertainty over “cliff risk” ”“ and the prospects of a deal in Congress on deficit reduction ”“ seems to be offsetting any positive impact of Fed policies.

Read it all.

Posted in * Economics, Politics, Budget, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Federal Reserve, House of Representatives, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Office of the President, Politics in General, Senate, Taxes, The Banking System/Sector, The National Deficit, The U.S. Government

(Reuters) FBI arrests man for attempting to bomb New York Federal Reserve

The FBI on Wednesday arrested a Bangladeshi man in a sting operation on charges he attempted to blow up the New York Federal Reserve Bank with what he believed was a 1,000-pound (450-kg) bomb, federal authorities said.

Quazi Mohammad Rezwanul Ahsan Nafis, 21, faces charges of attempting to use a weapon of mass destruction and attempting to provide material support to al Qaeda, the U.S. Department of Justice said in a statement. If convicted, he faces life in prison.

Read it all.

Posted in * Culture-Watch, * Economics, Politics, Defense, National Security, Military, Economy, Federal Reserve, Law & Legal Issues, Terrorism, The U.S. Government, Urban/City Life and Issues, Violence