RSS FeedMy recent interviews on CNBC cover the FOMC’s decision and discussion of the dollar. To access my CNBC profile click here. The videos below were filmed November 4th, November 3rd, and October 30th, respectively.
Archive for the 'federal reserve' Category
Comments (0)10 26th, 2009 4:01:15 PM
I’ve been reading Amity Shlaes’ wonderful book, The Forgotten Man, A New History of the Great Depression, with an eye out for parallels and lessons for our current crisis. You will find some of those and much, much more.
Amity showed great restraint in writing her book. A scholar with her expertise could have driven the ideological lessons home and saved those of us on a practical mission some time. Instead, she patiently let the characters and the circumstances speak for themselves letting the nuance show through for us to savor.
While I wasn’t totally clueless about the depression, not having lived through it, you see, I must admit that my knowledge of many of the details was limited.
09 27th, 2009 9:00:48 AM
Financial TV is full of talk about Governor Warsh’s opinion piece in Friday’s Wall Street Journal. One theory is that it was a shot across Chairman Bernanke’s bow. I doubt it, but even if it was in some limited sense, my experience on the FOMC for almost 14 years suggests to me that the following probably happened. Governor Warsh wrote the piece, then showed it to Chairman Bernanke and asked if he was okay with submitting it to the WSJ. Whatever the Chairman really thought down deep, he probably said “That’s okay with me. Go ahead.” This, of course, is only a guess, but an educated guess.
The timing was odd, however, and awkward, for the Governor since it was so soon after an FOMC meeting in which he didn’t dissent. It looks like he’s trying to have it both ways. Of course, it’s always possible that he and the Chairman together are trying to have it both ways.
09 18th, 2009 10:51:41 AM
(Old Bones for the Week-end)
When I was president of the Dallas Fed (1991-2004), I frequently spoke to the graduates of our rank-and-file training programs. I just ran across the following summary outline someone made of my remarks on such an occasion in February 2002. Maybe you can use my suggestions on your kiddos. Commenters may want to add their own favorites to the list.
1. Plan your life on paper. Where would you like to be in your career in 5 years? 10 years?
2. Do a time line.
3. Write out your goals, objectives and ambitions. Be very specific and detailed.
4. Translate your goals into activities and schedule those activities on your calendar. Write your to-do lists with your goals in mind.
09 6th, 2009 11:00:40 AM
(A More Realistic Look)
This is the year that the whole world apparently discovered the importance of the Fed's Balance Sheet. Unfortunately, their discovery was made when it suddenly doubled in the context of a severe financial panic. This is awful! Right? We've got to get it back down to size! Right?
The suddenness of these revelations prevented useful perspective on why the balance sheet is important and why the composition of the balance sheet is just as important as the size. Money and banking text books for decades have discussed the Fed's balance sheet in the context of bank reserves and the Fed has for decades provided a statistical release on "Factors Affecting Reserves."
08 27th, 2009 3:55:31 PM
A: No, Not directly, but Yes Indirectly.
Channeling the FOMC
I remember once when the head of the trading desk at the New York Fed was giving his report on international operations, the FOMC broke into applause when he announced that there had been no dollar intervention during the past year. While fixed exchange rates was once the orthodoxy, central bankers came to appreciate their ability to concentrate on domestic economic needs under flexible exchange rates. Do what's right for the domestic economy and let the exchange rate adjust to that. The alternative is to target the exchange rate and let the domestic economy do the adjusting. Fortunately, sound domestic policy promoting low inflation is more likely than not to produce a strong dollar.
So, when talking heads say the Fed's job is to support the dollar, Fed policy-makers agree, but they view supporting the dollar as protecting its domestic purchasing power. That's not usually what the critic had in mind; but they rarely acknowledge the downside of targeting the dollar.
08 25th, 2009 8:50:10 AM
I was about to "go to press" with the title and article that follows when I heard of the reappointment. Topics are too precious to waste; so I'm going with it anyway. Congratulations to President Obama for his good judgment. Congratulations to Ben, who must be thinking that no good deed goes unpunished.
Should Bernanke be Reappointed?
I'm asked that a lot these days. My answer is "Yes, of course, and he should be given a medal for saving our financial system." Then comes, "But he, or the Fed, didn't see the crisis coming," or, "The Fed caused the crisis by creating the real estate bubble." There are more "ors," but let's start with these two.
08 12th, 2009 1:29:45 PM
This morning on financial TV before the Federal Open Market Committee's (FOMC's) scheduled announcement today at 2:15 eastern, someone (Larry Kudlow) asked "Should the Fed begin its exit strategy?"
Let me offer the view that it already has. The Fed's balance sheet ballooned last fall and peaked in December. Since then there has been no net new growth in total assets, but the composition of those assets have changed with circumstances. First, borrowing through special loan facilities grew rapidly, but the FOMC pretty much offset that by reduction in Treasury bills. The liquidity went where it was needed most without bloating liquidity throughout the system.
08 11th, 2009 3:17:13 PM
(The FOMC Should Start Making that Distinction)
Monetary policy is not interest-rate policy. Neither is it Fed balance-sheet policy. Monetary policy is money-supply policy.
Sometimes these distinctions aren't important, but they are important now, and the Federal Open Market Committee (FOMC) should begin educating the public on them because soon it may need to allow interest rates to rise a bit to reduce market distortions without easing money (the money supply) in an inflationary way.
Similar distinctions between monetary policy and the Fed's balance sheet, the monetary base, and excess reserves should be understood. A large balance sheet, monetary base, and excess reserves are not inflationary unless they lead to too rapid an expansion of the money supply given the state of money velocity.
07 30th, 2009 11:16:01 AM
If I hadn't worked at the Fed for 36 years, I wouldn't know its history either. Several misconceptions muddy the current debate about the future role of the Fed as systemic risk regulator. The following statements, frequently heard in some forms, are very misleading.
1. The Fed was created to conduct monetary policy; so let it stick to it's knitting.
2. The Fed doesn't need to take on a new role on top of those it already has.
3. The Fed had a large role in creating the current mess, so it shouldn't be rewarded with new assignments.
The Fed was not created to conduct monetary policy. Monetary policy as we know it today hadn't been invented yet. The Fed was created to stabilize the financial system and prevent or ameliorate financial panics.
07 28th, 2009 8:30:39 AM
I sat in on a presentation this week where a picture of the Fed's balance sheet growth was shown as prima facie evidence that inflation looms down the road. The presenter wasn't sure when inflation would arrive, but it would arrive and be caused by the balance sheet expansion. No chain of causality was laid out. Just balance sheet expansion then, later, inflation.
He may be right, but I don't think so. It may happen, but it isn't an inevitable result of the balance sheet growth. Here is my reasoning:
1. The first point I would make is that all the balance sheet expansion took place last fall. There has been no further expansion since December-7 months ago.
07 15th, 2009 9:00:39 AM
(Or a big part of it anyway)
I sat next to Ben Bernanke for almost three years at the FOMC table when he served as a Fed Governor. This was before he became Chairman of the President's Council of Economic Advisors and later returned as Chairman of the Board of Governors of the Federal Reserve System, appointed by President Bush. The cliché, "a gentleman and a scholar," was surely coined to describe Ben Bernanke. He seemed to be the quintessential Ivy League, high I.Q. nerd. I saw no bully in him. No attitude. Just a gentleman and a scholar.
He shocked me when he told me he was from South Carolina and had worked at South of the Border. I grew up in neighboring North Georgia and was familiar with South of the Border. As I recall, snakes were one of the tourist attractions. We had more in common than I ever dreamed, except, of course, for the high I.Q. and SAT scores. Not that he ever mentioned either. I inferred his high I.Q. from his career progression- which obviously required high-powered math skills- and learned of his almost-perfect SAT scores from a network TV special.
06 26th, 2009 10:00:30 AM
Just to catch you up on what's been going on, I recently had two good discussions on CNBC about the Fed and the markets. On June 23rd I commented on why implementing a Fed exit strategy may be premature, and on the 24th I responded to questions about Chairman Bernanke's likely role in the BOA/Merrill Lynch affair.
06 25th, 2009 10:00:48 AM
The FOMC met Tuesday and Wednesday. I enjoyed two-day meetings when I was there, but we normally had only two two-day meetings per year, in February and July. The problems have grown lately and so have the number of two-day meetings.
The July meeting was usually close to July 4th-closer than this one-and the British ambassador invited us to his residence for dinner on the evening between meetings. In my first few years, Alan Greenspan sat across from the ambassador of the time, and they discussed big-picture issues very eloquently. It was educational for me as well as entertaining.
06 24th, 2009 10:00:17 AM
Once upon a time, people took rising interest rates as evidence of tighter money. Then, circumstances and growing sophistication led to recognition that rising inflation and/or rising inflationary expectations would show up in higher interest rates, especially longer-term rates. Then, apparently, everyone decided that rising long rates could ONLY be explained by easy money and inflationary expectations. They forgot about the tight money possibility. Sophistication crowded out the obvious.
06 23rd, 2009 9:35:45 AM
Today's (06-23-09) Wall Street Journal editorial page, of which I'm a fan, contains a fascinating look back at the monetary policy debate in December 2003. During the FOMC meeting on December 9, 2003, then Governor Bernanke referred to a WSJ editorial of that same day (Speed Demons at the Fed) that wondered if the FOMC was paying adequate attention to "yellow-flashing" price signals such as the $406 price of gold, higher commodity prices, and a weak dollar.
In referring to the WSJ editorial and similar arguments, Mr. Bernanke said he believed such critics are "not particularly well informed" and that "as a Committee, we should continue to remain patient and not choke off growth unnecessarily."