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October 07, 2008

Balance sheet of the Federal Reserve

I was astonished when I heard that the Fed is contemplating increasing the Term Auction Facility to $900 billion. I wanted to take another look at the ever-changing balance sheet of the Fed to see how logistically Bernanke might be able to perform such a feat.

Continue reading "Balance sheet of the Federal Reserve"

Posted by James Hamilton at 08:51 PM permalink | Comments (36)

September 28, 2008

Understanding the TED spread

One measure that is being used to summarize the strain in financial markets is the TED spread. This is calculated as the gap between 3-month LIBOR (an average of interest rates offered in the London interbank market for 3-month dollar-denominated loans) and the 3-month Treasury bill rate. The size of this gap presumably reflects some sort of risk or liquidity premium. I was interested to break the TED spread down into identifiable components to try to get a better understanding of what may be responsible for its recent behavior.

Continue reading "Understanding the TED spread"

Posted by James Hamilton at 09:09 PM permalink | Comments (28)

Gross domestic income and recessions

The "final" values for 2008:Q2 GDP released by the Bureau of Economic Analysis on Friday were more disappointing than the earlier estimates. Still, the 2.8% annual growth rate for real GDP that we're now told characterized the second quarter doesn't sound like a recession. Or does it?

Continue reading "Gross domestic income and recessions"

Posted by James Hamilton at 02:06 AM permalink | Comments (7)

September 22, 2008

Brad DeLong on Bernanke and Paulson

Brad DeLong had some insightful and amusing observations on the priorities of Federal Reserve Chair Ben Bernanke and Treasury Secretary Henry Paulson. I can't resist reproducing Brad's comments with some annotations of my own.

Continue reading "Brad DeLong on Bernanke and Paulson"

Posted by James Hamilton at 11:51 AM permalink | Comments (24)

September 21, 2008

Paulson bailout

Let me begin with the point on which I am in complete agreement with Treasury Secretary Henry Paulson and Federal Reserve Chair Ben Bernanke-- it is hard to overstate just how scary this week's developments in financial markets could be.

Continue reading "Paulson bailout"

Posted by James Hamilton at 02:17 PM permalink | Comments (68)

September 09, 2008

Taylor Rules, Synchronized Recession and the Potential for Competitive Depreciation

In yesterday's FT, "All in this together" assessed the possibility of a roughly synchronized downturn in the world's major economies, with the United States, ironically enough, suffering the smallest hit. This brings up all sorts of interesting questions regarding exchange rates, if one believes that Taylor rules define monetary policy making to some degree, and that interest differentials affect exchange rates.

Continue reading "Taylor Rules, Synchronized Recession and the Potential for Competitive Depreciation"

Posted by Menzie Chinn at 10:12 PM permalink | Comments (36)

August 19, 2008

Economic consequences of falling oil prices

I've maintained that rising oil prices put a significant burden on the U.S. economy in recent months. How much will falling oil prices help to alleviate those concerns?

Continue reading "Economic consequences of falling oil prices"

Posted by James Hamilton at 07:58 AM permalink | Comments (12)

August 12, 2008

Macroblog returns

It's back!

Continue reading "Macroblog returns"

Posted by James Hamilton at 01:45 PM permalink | Comments (2)

July 28, 2008

Taylor rules, exchange rates, and the speculation about the dollar/euro rate

As Europe teeters on the edge of recession [0], and the United States remains mired in slow growth, expectations of what interest rates, and hence exchange rates, are shifting. Here's a familiar depiction of where policy rates in the US and the euro area have been, and where they are predicted to go.

Continue reading "Taylor rules, exchange rates, and the speculation about the dollar/euro rate"

Posted by Menzie Chinn at 06:17 AM permalink | Comments (11)

July 15, 2008

Did Fannie and Freddie cause the mortgage crisis?

Some thoughts about the role played by the GSEs in the run-up in mortgage debt and house prices.

Continue reading "Did Fannie and Freddie cause the mortgage crisis?"

Posted by James Hamilton at 08:04 PM permalink | Comments (26)

July 13, 2008

The Fannie and Freddie assistance plan

I see much to like about this.

Continue reading "The Fannie and Freddie assistance plan"

Posted by James Hamilton at 07:53 PM permalink | Comments (17)

July 12, 2008

Fannie Mae and Freddie Mac

How did we get into this mess, and how do we get out of it?

Continue reading "Fannie Mae and Freddie Mac"

Posted by James Hamilton at 07:08 PM permalink | Comments (28)

July 07, 2008

Janet Yellen on risks and prospects for the U.S. economy

This morning we were pleased to welcome Janet Yellen, President of the Federal Reserve Bank of San Francisco, to our UCSD Economics Roundtable. She focused on three main challenges: the housing slump, financial market turmoil, and commodity prices, which she likened to the three witches from Macbeth. Her complete speech is available from the FRB SFO Here are some excerpts.

Continue reading "Janet Yellen on risks and prospects for the U.S. economy"

Posted by James Hamilton at 10:19 AM permalink | Comments (12)

June 08, 2008

Oil spike

Why did oil breach $138?

Continue reading "Oil spike"

Posted by James Hamilton at 07:33 AM permalink | Comments (27)

June 06, 2008

Oil Prices in Other Currencies

Some of the explanations for the dollar jump rely upon the perceived weakness in the dollar's value (and hence, by extension, Fed policy). Does this make sense?

Continue reading "Oil Prices in Other Currencies"

Posted by Menzie Chinn at 08:38 PM permalink | Comments (9)

May 30, 2008

Commodity futures speculation

More on the possible contribution of index fund investment to recent commodity price moves.

Continue reading "Commodity futures speculation"

Posted by James Hamilton at 05:59 AM permalink | Comments (6)

May 25, 2008

How Effective Will Monetary Easing Be? The Bank Lending Channel and the Implications of Increasingly Internationalized Banks

As I noted in a previous post, monetary policy works through various channels, one of which is the "bank lending channel". Lower policy rates, as witnessed in the past few months and shown below, should induce greater lending.

Continue reading "How Effective Will Monetary Easing Be? The Bank Lending Channel and the Implications of Increasingly Internationalized Banks"

Posted by Menzie Chinn at 10:00 AM permalink | Comments (5)

May 13, 2008

Credit crunch: how we got here and how to get out

Fed Chair Ben Bernanke on Tuesday offered his perspective on the appropriate response of the Fed to the ongoing turmoil in financial markets. I still think he's overlooking a key element of what's been happening.

Continue reading "Credit crunch: how we got here and how to get out"

Posted by James Hamilton at 08:16 PM permalink | Comments (19)

May 09, 2008

What if we'd been on the gold standard?

If the U.S. had decided to go back on the gold standard in 2006, where would we be today? That's a question my friend Randy Parker recently asked me. Here's how we both would answer.

Continue reading "What if we'd been on the gold standard?"

Posted by James Hamilton at 05:59 AM permalink | Comments (71)

May 03, 2008

Macroeconomics and ARCH

That's the topic of my most recent research paper. Reader warning: this is a bit more technical than the standard Econbrowser post, so if you're not a user of regression analysis, this may not be up your alley.

Continue reading "Macroeconomics and ARCH"

Posted by James Hamilton at 05:37 AM permalink | Comments (11)

April 24, 2008

The case for 2-1/4

The Federal Open Market Committee's next meeting is scheduled for April 29/30, which the May fed funds futures contract currently anticipates will result in another 25-basis-point reduction in the target fed funds rate down to 2.0%. Here's why I hope the Fed doesn't do that.

Continue reading "The case for 2-1/4"

Posted by James Hamilton at 06:59 PM permalink | Comments (34)

April 22, 2008

Commodities and the Fed: answering the skeptics

Judging from some of the reactions across the blogosphere (not to mention any number of our own dear readers), maybe I should take another stab at clarifying why I see the hand of the Federal Reserve in the most recent movements in oil and commodity prices.

Continue reading "Commodities and the Fed: answering the skeptics"

Posted by James Hamilton at 08:03 PM permalink | Comments (29)

April 17, 2008

Why new oil price highs?

West Texas Intermediate closed today above $115/barrel. Does that reflect changes in the fundamentals of world supply and demand? My answer is no.

Continue reading "Why new oil price highs?"

Posted by James Hamilton at 08:45 PM permalink | Comments (74)

April 14, 2008

The G-7 Communique and the Dollar

Was this the new (reverse) "Plaza Accord"? From Bloomberg:

Continue reading "The G-7 Communique and the Dollar"

Posted by Menzie Chinn at 09:30 PM permalink | Comments (20)

April 13, 2008

Central bank independence

Former Secretary of Labor Robert Reich (hat tip: Economist's View) offered some thoughts Friday about democracy and the Federal Reserve. Both his insights and his errors are instructive.

Continue reading "Central bank independence"

Posted by James Hamilton at 01:32 PM permalink | Comments (38)

April 09, 2008

Oil and the Great Moderation

Another interesting paper presented at the Society for Nonlinear Dynamics and Econometrics Symposium that I attended last week was by Anton Nakov of the Bank of Spain and Andrea Pescatori of the Federal Reserve Bank of Cleveland on the role that changes in energy markets may have played in the reduction in GDP and inflation volatility observed since 1984.

Continue reading "Oil and the Great Moderation"

Posted by James Hamilton at 06:04 AM permalink | Comments (11)

March 26, 2008

Would you like anything else with that coffee, Ben?

Last week we received some new data linking commodity prices to the decisions of the U.S. Federal Reserve.

Continue reading "Would you like anything else with that coffee, Ben?"

Posted by James Hamilton at 08:13 AM permalink | Comments (33)

March 23, 2008

Quick links

Here are a couple of nice summaries of the credit crunch and the Fed's response.

Continue reading "Quick links"

Posted by James Hamilton at 06:01 PM permalink | Comments (3)

March 19, 2008

Another 75

How much ammo is left in that fed funds gun?

Continue reading "Another 75"

Posted by James Hamilton at 05:00 AM permalink | Comments (21)

March 18, 2008

Not a bailout

How shall we describe what happened this weekend with Bear Stearns? The first big casualty of the credit crisis, yes. Bailout, no.

Continue reading "Not a bailout"

Posted by James Hamilton at 12:26 PM permalink | Comments (38)

March 15, 2008

TSLF

Last week the Fed announced yet another new measure to deal with the ongoing problems in credit markets in the form of a just-created Term Securities Lending Facility, which we're apparently invited to refer to affectionately as a TSLF.

Continue reading "TSLF"

Posted by James Hamilton at 08:21 PM permalink | Comments (26)

March 11, 2008

Asking too much of monetary policy

I remember a Federal Reserve economist once recounting a conversation with his young daughter, who asked him, "What do you do at work, Daddy?" He answered, "I help make important decisions." "What kind of decisions, Daddy?" "Oh, things like how much money the government needs to print."

Continue reading "Asking too much of monetary policy"

Posted by James Hamilton at 07:47 PM permalink | Comments (40)

March 07, 2008

Commodity prices and the Fed

If the Fed thinks that recent commodity price moves have nothing to do with their own actions, perhaps they should think again.

Continue reading "Commodity prices and the Fed"

Posted by James Hamilton at 07:10 AM permalink | Comments (22)

March 02, 2008

Just how badly is the U.S. economy doing?

That's the topic of a piece I wrote for today's San Diego Union-Tribune.

Posted by James Hamilton at 06:45 AM permalink | Comments (16)

February 28, 2008

Bernanke's tightrope act

Some analysts are saying that Fed Chair Ben Bernanke is walking a tightrope-- if he does not drop interest rates quickly enough, the U.S. will be in recession, but if he goes too far, we'll see a resurgence of inflation. I am increasingly persuaded that's not an accurate description of the situation.

Continue reading "Bernanke's tightrope act"

Posted by James Hamilton at 06:27 PM permalink | Comments (42)

January 31, 2008

Thinking about Monetary Policy Efficacy: Back to the Textbooks

As the Fed drops interest rates, I've been trying to sort out all the channels that monetary policy will affect output, and which ones are likely to be short circuited this time around.

Continue reading "Thinking about Monetary Policy Efficacy: Back to the Textbooks"

Posted by Menzie Chinn at 11:18 AM permalink | Comments (15)

January 30, 2008

Fed rate cut

Today the Federal Reserve announced a further 50-basis-point cut in its target for the fed funds interest rate, bringing it down to 3.0% for a total reduction in January of 125 basis points. How long should it take before this has an effect on the economy?

Continue reading "Fed rate cut"

Posted by James Hamilton at 03:25 PM permalink | Comments (11)

January 22, 2008

Another day, another dollar

It was a fun day to be a macroeconomist, don't you think?

Continue reading "Another day, another dollar"

Posted by James Hamilton at 02:52 PM permalink | Comments (13)

The Fed makes its move

The Federal Reserve announced today it was lowering its target for the fed funds rate 75 basis points, from its previous value of 4.25% to a new value of 3.5%.

Continue reading "The Fed makes its move"

Posted by James Hamilton at 07:57 AM permalink | Comments (42)

January 17, 2008

The case against fiscal stimulus

Everybody else seemed to hear Bernanke say he was in favor of fiscal stimulus as one approach to our economic problems. But I instead heard him articulate very intelligently the potential pitfalls of the strategy.

Continue reading "The case against fiscal stimulus"

Posted by James Hamilton at 05:06 PM permalink | Comments (28)

January 16, 2008

Will inflation fears restrain the Fed?

I think not, and here's why.

Continue reading "Will inflation fears restrain the Fed?"

Posted by James Hamilton at 02:31 PM permalink | Comments (24)

January 14, 2008

The Implications of a Textbook Analysis of Macro Stabilization via Discretionary Fiscal Policy

From Reuters:

If Bush and Congress are to act at all, they will have to move quickly to have any impact, says Alan Auerbach, an economics professor at the University of California, Berkeley, who has done research on the effects of fiscal stimulus.

"Timing is extremely important," he says. "Recessions typically last less than a year, so unless you can be pretty quick, it's not worth doing."

Continue reading "The Implications of a Textbook Analysis of Macro Stabilization via Discretionary Fiscal Policy"

Posted by Menzie Chinn at 09:35 PM permalink | Comments (7)

January 13, 2008

How low will Ben go?

Was 25, now we have 50. Do I hear 75?

Continue reading "How low will Ben go?"

Posted by James Hamilton at 11:13 AM permalink | Comments (33)

January 09, 2008

What Are the Prospects for a Two Recession Bush Presidency?

With recession calls becoming more frequent ([1], [2], [3], [4], [5]) it might pay to revisit the indicators that the NBER looks at in determining the turning points in recessions (The fact that NBER put up some new recession-dating-FAQs just a couple days ago might be a leading indicator of sorts).

Continue reading "What Are the Prospects for a Two Recession Bush Presidency?"

Posted by Menzie Chinn at 10:24 PM permalink | Comments (28)

January 04, 2008

Economic indicators take a turn for the worse

No cheer for the New Year from the numbers released this week.

Continue reading "Economic indicators take a turn for the worse"

Posted by James Hamilton at 05:51 PM permalink | Comments (15)

December 16, 2007

Monetary policy using the asset side of the Fed's balance sheet

An interesting trend has developed in the Federal Reserve's asset holdings, a trend that the newly created term auction facility is designed to accelerate.

Continue reading "Monetary policy using the asset side of the Fed's balance sheet"

Posted by James Hamilton at 12:08 PM permalink | Comments (15)

December 12, 2007

Term auction facility

Will a new, improved discount window solve our problems?

Continue reading "Term auction facility"

Posted by James Hamilton at 06:05 PM permalink | Comments (18)

A curious market reaction

I'm trying to make sense of the strong reactions to yesterday's action from the Federal Reserve.

Continue reading "A curious market reaction"

Posted by James Hamilton at 08:33 AM permalink | Comments (19)

December 01, 2007

Risk premia creeping higher

Since Halloween, financial markets seem to be getting spooked again.

Continue reading "Risk premia creeping higher"

Posted by James Hamilton at 11:11 AM permalink | Comments (11)

November 21, 2007

Freddie Mac and Fannie Mae back in the news

So how worried should you be?

Continue reading "Freddie Mac and Fannie Mae back in the news"

Posted by James Hamilton at 03:55 PM permalink | Comments (20)

November 20, 2007

So now you know

As part of its ongoing efforts at helping the public understand exactly what its intentions might be, the Federal Reserve today released more detailed minutes of its October 30-31 meeting that included the Fed's expectations for what comes next.

Continue reading "So now you know"

Posted by James Hamilton at 06:50 PM permalink | Comments (14)

November 13, 2007

New research on the causes of the housing boom and bust

What are the respective contributions of national and local factors to recent changes in house prices?

Continue reading "New research on the causes of the housing boom and bust"

Posted by James Hamilton at 05:00 PM permalink | Comments (31)

November 11, 2007

Oil, gold, the dollar, and inflation

Do the ongoing surge in gold and oil prices and slide in the dollar signal a resurgence of inflation?

Continue reading "Oil, gold, the dollar, and inflation"

Posted by James Hamilton at 08:29 AM permalink | Comments (46)

October 31, 2007

Does Dollar Weakness 'Cause' High Oil Prices?

There's an idea floating around that asserts that the high price of oil is -- at least in part -- due to the weak dollar. Does this make sense?

Continue reading "Does Dollar Weakness 'Cause' High Oil Prices?"

Posted by Menzie Chinn at 09:50 AM permalink | Comments (17)

October 19, 2007

Rules versus discretion in monetary policy

I had the privilege of attending a conference in St. Louis this week on Monetary Policy under Uncertainty at which I presented a paper on the response of interest rates to changes in the fed funds target. One of the interesting themes that came up in some of the other papers concerned whether the public's interests are best served when monetary policy follows mechanical rules as opposed to responding to events in a discretionary way. Here I report on some of the discussion of this issue from the conference.

Continue reading "Rules versus discretion in monetary policy"

Posted by James Hamilton at 03:07 PM permalink | Comments (8)

October 17, 2007

Deteriorating lending standards

What is the significance of the fact that the most recently issued subprime mortgages are the ones that are running into the biggest problems?

Continue reading "Deteriorating lending standards"

Posted by James Hamilton at 05:39 AM permalink | Comments (25)

October 11, 2007

Inferring market expectations from changes in fed funds futures prices

I recently completed a new research paper studying how interest rates of different maturities change with market expectations of what the Fed is going to do next.

Continue reading "Inferring market expectations from changes in fed funds futures prices"

Posted by James Hamilton at 06:13 PM permalink | Comments (6)

October 08, 2007

What's a "Strong Dollar"?

I used to wonder about the use of this term a lot, at least in the context of government pronouncements. Here's my answer. First, the use of the term in context. From Bloomberg:

Weak Dollar Boosts Growth Without Fueling Inflation (Update1)

By Matthew Benjamin and Vivien Lou Chen

Oct. 8 (Bloomberg) -- Treasury Secretary Henry Paulson, whose signature appears on every new dollar bill, may find the weak currency with his name on it helps the U.S. economy more than the strong one he publicly endorses.

Continue reading "What's a "Strong Dollar"?"

Posted by Menzie Chinn at 07:03 PM permalink | Comments (15)

October 03, 2007

Not all the news is bad

We've been dwelling here quite a bit on the bleak incoming housing data. But I have to admit that I'm not seeing that spilling over so far into some of the other key economic indicators.

Continue reading "Not all the news is bad"

Posted by James Hamilton at 06:32 AM permalink | Comments (21)

October 01, 2007

Pick a finger

Princeton Professor Alan Blinder offers his thoughts in the New York Times on who's to blame for the mortgage mess, getting the attention of Mark Thoma, Dave Iverson, Brad DeLong, and Greg Mankiw. Here are my two cents.

Continue reading "Pick a finger"

Posted by James Hamilton at 12:00 PM permalink | Comments (25)

September 25, 2007

More troubles for housing

New data released today portend continued weakness for housing.

Continue reading "More troubles for housing"

Posted by James Hamilton at 01:23 PM permalink | Comments (12)

September 24, 2007

What would be the implications of stagflation for the dollar?

The dollar is declining, with no apparent support. That's because the recessionary factors seem to be dominating. But a reporter's question about what factors might support the dollar prompted me to think about other influences that might work in a direction opposite the forces alluded to in the conventional wisdom.

Continue reading "What would be the implications of stagflation for the dollar?"

Posted by Menzie Chinn at 09:41 PM permalink | Comments (29)

September 23, 2007

Money creation and the Federal Reserve

There seem to be some misconceptions about the monetary consequences of actions that the Federal Reserve has taken to address liquidity needs.

Continue reading "Money creation and the Federal Reserve"

Posted by James Hamilton at 07:25 AM permalink | Comments (58)

September 20, 2007

Forward rates and inflation expectations

Forward rates on Treasury bonds tell an interesting story about the market's reaction to the Fed's interest rate cut on Tuesday.

Continue reading "Forward rates and inflation expectations"

Posted by James Hamilton at 04:21 PM permalink | Comments (17)

September 19, 2007

Divining the Dollar

The dollar declines in response to the drop in the target Fed Funds rate. What next?

Continue reading "Divining the Dollar"

Posted by Menzie Chinn at 09:30 PM permalink | Comments (20)

September 18, 2007

50 it is

For the first time in 5 years, markets were actually unsure what the Fed was going to do, with yesterday's fed funds options calling it an even chance that the Fed would settle for a 25-basis-point cut or go all the way to 50. Capital Chronicle had prepared amusing posters as to just how to interpret a 25-basis-point as opposed to a 50-basis-point cut. Fifty it was, disappointing perhaps knzn who wanted a 175-basis-point cut, but delighting economic researchers like Refet Gurkaynak and Eric Swanson who both emailed me their high spirits at finally getting another data point for what happens when the Fed surprises the markets.

Continue reading "50 it is"

Posted by James Hamilton at 05:36 PM permalink | Comments (35)

Four Observations on Import and Export Prices and the Dollar

Some delayed reflections on exchange rates, trade prices, and the messages from the August data.

Continue reading "Four Observations on Import and Export Prices and the Dollar"

Posted by Menzie Chinn at 12:13 AM permalink | Comments (8)

September 15, 2007

Catch the wave

I keep trying to warn my friends in the Federal Reserve about the tsunami that's coming their way.

Continue reading "Catch the wave"

Posted by James Hamilton at 07:27 AM permalink | Comments (37)

September 13, 2007

Saving Glut Redux

Bernanke recaps his interpretation of the explanation for global imbalances. Is it any more convincing than the first time?

Continue reading "Saving Glut Redux"

Posted by Menzie Chinn at 08:10 AM permalink | Comments (20)

September 10, 2007

By how much will the Fed cut rates?

Once again we're seeing a big divergence between what the markets expect the Fed to do and what the Fed expects the Fed to do.

Continue reading "By how much will the Fed cut rates?"

Posted by James Hamilton at 08:23 AM permalink | Comments (25)

September 02, 2007

The Taylor Rule and the housing boom

Stanford Professor John Taylor presented another very interesting paper at the Jackson Fed conference.

Continue reading "The Taylor Rule and the housing boom"

Posted by James Hamilton at 07:09 PM permalink | Comments (18)

September 01, 2007

Comments on Housing and the Monetary Transmission Mechanism

Here are the comments that I delivered this morning at the Fed Jackson Hole conference.

Continue reading "Comments on Housing and the Monetary Transmission Mechanism"

Posted by James Hamilton at 12:30 PM permalink | Comments (39)

Bernanke and Gramlich on the subprime issue

Also featured yesterday at the Federal Reserve conference in Jackson Hole were speeches by Fed Chair Ben Bernanke and former Fed Governor Edward Gramlich.

Continue reading "Bernanke and Gramlich on the subprime issue"

Posted by James Hamilton at 05:44 AM permalink | Comments (12)

August 31, 2007

Report from Jackson Hole

Here are some brief impressions about this morning's papers at the Federal Reserve conference.

Continue reading "Report from Jackson Hole"

Posted by James Hamilton at 10:54 AM permalink | Comments (12)

August 29, 2007

Update on the fed funds market

As noted by Calculated Risk and William Polley, the last few days we've seen the return of slightly more normal behavior in the overnight market for fed funds.

Continue reading "Update on the fed funds market"

Posted by James Hamilton at 01:19 PM permalink | Comments (25)

August 28, 2007

Solutions to the mortgage problem

Quick links to a few of the suggestions out there on what to do about pending mortgage defaults.

Continue reading "Solutions to the mortgage problem"

Posted by James Hamilton at 07:08 AM permalink | Comments (48)

August 24, 2007

Latest economic indicators

New home sales picked up in July, and new orders for durable and capital goods grew strongly. But that was then and this is now.

Continue reading "Latest economic indicators"

Posted by James Hamilton at 10:14 AM permalink | Comments (13)

August 22, 2007

Whee!

Who knew holding short-term Treasuries could be so exciting?

Continue reading "Whee!"

Posted by James Hamilton at 04:22 PM permalink | Comments (9)

August 20, 2007

What does the cut in the Fed's discount rate signal?

Some analysts, and perhaps the market, seemed to view Friday's cut in the Federal Reserve discount rate as a first step in lowering interest rates generally. That view may prove to be correct, though I'm inclined to look first for an explanation in terms of the narrow tactical challenges of managing current liquidity needs.

Continue reading "What does the cut in the Fed's discount rate signal?"

Posted by James Hamilton at 04:15 PM permalink | Comments (18)

August 19, 2007

Saving Glut Reversed? A Historical Analogy and Conjecture about US Adjustment

One interpretation of recent global capital flows is that the collapse in investment in East Asia post-crisis, combined with stable saving rates in ex-China developing Asia, led to an excess of saving in that region (so really the term of "investment drought" is better). Note that there was no excess saving until the collapse of unsustainable lending associated with bubbles, or crony capitalism, or -- in other models -- behavior of investors implicitly "insured" against losses. While this is a voluminous literature, it's interesting to me that few analysts have observed that a similar occurence can not be ruled out in the current unfolding drama in the ever expanding but always containable subprime mortgage crisis.

Continue reading "Saving Glut Reversed? A Historical Analogy and Conjecture about US Adjustment"

Posted by Menzie Chinn at 05:30 PM permalink | Comments (10)

August 11, 2007

Another roller coaster week

Glad I wasn't trying to provide a play-by-play explanation of fed funds futures last week. But whatever was going on, we seemed to end up with the same conclusion with which the week began.

Continue reading "Another roller coaster week"

Posted by James Hamilton at 10:00 PM permalink | Comments (6)

August 10, 2007

What is a liquidity event?

It was an exciting week in financial markets, including some dramatic central bank interventions in short-term money markets.

Continue reading "What is a liquidity event?"

Posted by James Hamilton at 11:14 PM permalink | Comments (22)

August 04, 2007

Interpreting fed funds futures

Despite what you may have read elsewhere, the probability of a fed funds rate cut has increased significantly over the last few weeks.

Continue reading "Interpreting fed funds futures"

Posted by James Hamilton at 10:58 PM permalink | Comments (31)

August 01, 2007

July auto sales

This is not just another bad sales month.

Continue reading "July auto sales"

Posted by James Hamilton at 11:19 PM permalink | Comments (21)

July 26, 2007

Ouch

No, this was not a good housing report.

Continue reading "Ouch"

Posted by James Hamilton at 05:17 PM permalink | Comments (15)

July 19, 2007

Bernanke on the economic outlook

In testimony before the U.S. Congress yesterday, Fed Chair Ben Bernanke continued his policy of greater openness and transparency for Federal Reserve policy, trying to lay out clearly what the Fed is most worried about.

Continue reading "Bernanke on the economic outlook"

Posted by James Hamilton at 07:19 AM permalink | Comments (11)

July 12, 2007

A Tipping Point for the Dollar?

In a post over a year ago, I observed that the relative stability of the dollar would come to an end as a confluence of events occurred. Those would be the end to rises in the US interest rates, and the continued increases in policy rates abroad, especially in the euro area and the UK, against a backdrop of a massive current account deficit that requires large and continuous infusions of saving from the rest of the world (and indeed consumes most of the world's excess saving).

Continue reading "A Tipping Point for the Dollar?"

Posted by Menzie Chinn at 07:10 PM permalink | Comments (20)

Are your inflation expectations well-anchored?

Fed Chair Ben Bernanke's comments Tuesday about anchors for expected inflation left some analysts unsettled and others mystified. Bernanke was speaking to a group of academic researchers, and I believe his message was intended to provide some insights from practical policy-making to help improve the quality of academic research. So let me offer my interpretation of his message.

Continue reading "Are your inflation expectations well-anchored?"

Posted by James Hamilton at 08:40 AM permalink | Comments (13)

June 25, 2007

Inflation: Local or Global?

What does the empirical literature say about the sources of inflation movements in an era of globalization?

Continue reading "Inflation: Local or Global?"

Posted by Menzie Chinn at 08:05 PM permalink | Comments (5)

June 24, 2007

Following yields up and down

A quick follow-up on a point I made last week ([1], [2]) about the factors behind recent interest rate moves.

Continue reading "Following yields up and down"

Posted by James Hamilton at 11:46 AM permalink | Comments (16)

June 22, 2007

Econoblog on interest rates

I was pleased to participate in the latest Wall Street Journal Econoblog with Mark Zandi, Chief Economist and co-founder of Moody's Economy.com. Here's a brief preview of what you can find over at the WSJ.

Continue reading "Econoblog on interest rates"

Posted by James Hamilton at 06:31 AM permalink | Comments (4)

June 20, 2007

Thinking about import prices, the dollar, and inflation

Some delayed reflections on the May import/export price release, and how to interpret the data in light of the empirics of exchange rate pass through.

Continue reading "Thinking about import prices, the dollar, and inflation"

Posted by Menzie Chinn at 09:08 PM permalink | Comments (2)

June 17, 2007

More on those rising interest rates

Rising rates look scary, but I still read it as good news.

Continue reading "More on those rising interest rates"

Posted by James Hamilton at 07:08 AM permalink | Comments (16)

June 14, 2007

Lessons from the yield curve

The dramatic upward move of long-term interest rates gives me an opportunity to look back on some of the predictions made on the basis of the inversion of the yield curve, and what might be in store next.

Continue reading "Lessons from the yield curve"

Posted by James Hamilton at 08:14 PM permalink | Comments (11)

May 19, 2007

Bernanke on subprime mortgages

If Bernanke isn't worried about subprime mortgages, should you be?

Continue reading "Bernanke on subprime mortgages"

Posted by James Hamilton at 09:35 AM permalink | Comments (29)

March 28, 2007

About that downside

As always, first-rate economic analysis from Fed Chair Ben Bernanke today, and first-rate coverage from Mark Thoma and Kash Mansori, among others.

Continue reading "About that downside"

Posted by James Hamilton at 05:05 PM permalink | Comments (42)

March 17, 2007

Disappointing numbers on inflation and retail sales

Macroblog and Calculated Risk had some discouraging graphs yesterday.

Continue reading "Disappointing numbers on inflation and retail sales"

Posted by James Hamilton at 07:22 AM permalink | Comments (18)

March 11, 2007

Fannie, Freddie, and Ben

Fed Chair Ben Bernanke had some excellent suggestions last week for congressional action on Fannie Mae and Freddie Mac.

Continue reading "Fannie, Freddie, and Ben"

Posted by James Hamilton at 12:41 PM permalink | Comments (26)

March 08, 2007

WMDs in Iraq, "Last throes..." and... "deficits don't matter"

According to former Secretary of Treasury Paul O'Neill, Dick Cheney is reputed to have said: "...deficits don't matter." (see Suskind's The Price of Loyalty, and online here). What's the (updated) evidence?

Continue reading "WMDs in Iraq, "Last throes..." and... "deficits don't matter""

Posted by Menzie Chinn at 07:12 AM permalink | Comments (17)

WMDs in Iraq, "Last throes..." and... "deficits don't matter"

According to former Secretary of Treasury Paul O'Neill, Dick Cheney is reputed to have said: "...deficits don't matter." (see Suskind's The Price of Loyalty, and online here). What's the (updated) evidence?

Continue reading "WMDs in Iraq, "Last throes..." and... "deficits don't matter""

Posted by Menzie Chinn at 07:12 AM permalink | Comments (17)

March 06, 2007

Financial crises

Financial or banking panics were a recurrent theme in 19th-century U.S. economic history.

Continue reading "Financial crises"

Posted by James Hamilton at 03:11 PM permalink | Comments (15)

March 05, 2007

Globalization and Inflation: Thinking about Identification

Recent news articles ([1], [2]) and blog posts (Economists View, Big Picture) have discussed Bernanke's March 2 speech on globalization and inflation.

Continue reading "Globalization and Inflation: Thinking about Identification"

Posted by Menzie Chinn at 09:25 AM permalink | Comments (6)

February 28, 2007

Recession watch

Recent data leave me significantly more bearish than I was a month ago.

Continue reading "Recession watch"

Posted by James Hamilton at 11:31 AM permalink | Comments (20)

February 15, 2007

The market reads Bernanke's lips

The Fed Chair speaks, and the market jumps. But why?

Continue reading "The market reads Bernanke's lips"

Posted by James Hamilton at 09:01 AM permalink | Comments (17)

February 11, 2007

How Paul Volcker became a practical monetarist

A bit of history I only recently learned.

Continue reading "How Paul Volcker became a practical monetarist"

Posted by James Hamilton at 09:04 AM permalink | Comments (10)

January 27, 2007

The housing market and the Federal Reserve

More evidence that the housing market has stabilized, consistent with the recent policy stance of the Federal Reserve.

Continue reading "The housing market and the Federal Reserve"

Posted by James Hamilton at 11:35 AM permalink | Comments (20)

January 23, 2007

What would Milton do?

What with next Monday apparently having been declared Milton Friedman Day, I thought I might try to contribute to the festivities with some thoughts on how recent U.S. monetary policy might be evaluated from a Friedmanesque perspective.

Continue reading "What would Milton do?"

Posted by James Hamilton at 08:40 PM permalink | Comments (28)

January 19, 2007

Bernanke on the deficit

In testimony before the Senate Budget Committee yesterday, Fed Chair Ben Bernanke once again tells it like it is.

Continue reading "Bernanke on the deficit"

Posted by James Hamilton at 05:25 AM permalink | Comments (20)

January 01, 2007

What will the Fed do next?

Probably nothing.

Continue reading "What will the Fed do next?"

Posted by James Hamilton at 10:44 AM permalink | Comments (3)

December 29, 2006

WIN buttons and Arthur Burns

I normally find myself agreeing with Dave Altig's high-quality analysis over at Macroblog. But I'm afraid I have to leave Dave all alone in his latest quixotic mission to defend Arthur Burns (Chair of the Federal Reserve during the great inflationary episode from 1970 to 1978) and Gerald Ford's old WIN buttons.

Continue reading "WIN buttons and Arthur Burns"

Posted by James Hamilton at 06:58 AM permalink | Comments (8)

December 15, 2006

Bernanke in China

Distortion versus effective subsidy.

Continue reading "Bernanke in China"

Posted by Menzie Chinn at 12:24 PM permalink | Comments (17)

December 11, 2006

2006 and the Econbrowser crystal ball

This seems like a good time to review some of the occasions over the last year when I've been brave (or foolish) enough to make a specific quantitative prediction.

Continue reading "2006 and the Econbrowser crystal ball"

Posted by James Hamilton at 05:12 PM permalink | Comments (11)

November 26, 2006

Housing: speculative bubble or fundamentals?

Caclulated Risk had some interesting observations this week about why forecasts for housing differ so widely across analysts.

Continue reading "Housing: speculative bubble or fundamentals?"

Posted by James Hamilton at 11:26 AM permalink | Comments (22)

November 13, 2006

The yield curve and the term premium

Some new studies suggest that the yield curve inversion might not be quite as ominous as some of us have been assuming.

Continue reading "The yield curve and the term premium"

Posted by James Hamilton at 02:22 PM permalink | Comments (17)

November 02, 2006

Federal Reserve policy and mortgage rates

I've recently completed writing a research paper titled Daily Monetary Policy Shocks and the Delayed Response of New Home Sales. The paper develops some new measures of the delay between changes in Fed policy and the impact on the economy. In this, the second of three posts on the paper, I describe the paper's findings about how the Federal Reserve affects mortgage lending rates.

Continue reading "Federal Reserve policy and mortgage rates"

Posted by James Hamilton at 06:53 PM permalink | Comments (3)

October 31, 2006

Accuracy of futures prices as predictors of the fed funds rate

I'm just finishing writing a new research paper whose goal is to come up with a better measure and understanding of the lagged effect of monetary policy on the economy. One of my claims is that the public's expectations of what the Fed is going to do next play a key role in that process. In this, the first of several posts based on that paper, I describe some of the properties I've found for fed funds futures prices as predictors of subsequent Fed policy changes.

Continue reading "Accuracy of futures prices as predictors of the fed funds rate"

Posted by James Hamilton at 07:10 PM permalink | Comments (13)

October 19, 2006

One way or the other

Mixed signals this week leave Bernanke still needing to earn his pay.

Continue reading "One way or the other"

Posted by James Hamilton at 03:10 PM permalink | Comments (12)

October 13, 2006

Friday the thirteenth not so scary

The latest data on retail sales, tax receipts, and consumer sentiment all look consistent with the soft landing scenario.

Continue reading "Friday the thirteenth not so scary"

Posted by James Hamilton at 09:49 AM permalink | Comments (21)

October 03, 2006

And they all lived happily ever after

Can high-flying stocks be reconciled with an inverted yield curve? David Rosenberg of Merrill Lynch, via Felix Salmon and Business Week thinks "it is highly doubtful that both asset classes can be getting the story right." But here's one scenario under which both markets in fact might be telling the same story.

Continue reading "And they all lived happily ever after"

Posted by James Hamilton at 08:28 PM permalink | Comments (30)

September 20, 2006

Watching housing slide

The Census Bureau yesterday released August data for housing permits and new housing starts, both of which confirm that we are in the midst of a significant housing downturn.

Continue reading "Watching housing slide"

Posted by James Hamilton at 05:06 AM permalink | Comments (29)

August 30, 2006

Inflation expectations

So where's the surge in inflation expectations, now that the Fed has stopped tightening?

Continue reading "Inflation expectations"

Posted by James Hamilton at 09:11 AM permalink | Comments (22)

August 11, 2006

Good and not-so-good reasons to disagree with Bernanke

Some of the reasons people have given for why the Fed should keep raising interest rates make sense to me, and some don't.

Continue reading "Good and not-so-good reasons to disagree with Bernanke"

Posted by James Hamilton at 02:04 PM permalink | Comments (13)

August 09, 2006

Could it be that we're already in a recession? Lessons from the last episode

There's a lot of talk about recession these days, despite the fairly rapid average growth of GDP in the past few quarters. Krugman (via DeLong) observes a slowdown is coming that might feel a lot like a recession. DeLong considers whether Fed policy has already raised rates to such a degree a recession is inevitable. Roubini bravely cites probabilities. My colleague James Hamilton provides a contrasting opinion, based upon his academic work with Chauvet [pdf].

Continue reading "Could it be that we're already in a recession? Lessons from the last episode"

Posted by Menzie Chinn at 07:42 AM permalink | Comments (16)

August 08, 2006

Econbrowser (and hopefully Bernanke) gets it right

As we predicted here last Friday the Federal Reserve announced today its decision to hold the fed funds rate constant at 5.25%.

Continue reading "Econbrowser (and hopefully Bernanke) gets it right"

Posted by James Hamilton at 01:36 PM permalink | Comments (11)

August 04, 2006

A pause it shall be

The last month has been something of a cliffhanger for Fed watchers. But today the market seemed to make up its mind.

Continue reading "A pause it shall be"

Posted by James Hamilton at 11:41 AM permalink | Comments (15)

July 31, 2006

About that pause

A few weeks ago I noted that the fed funds futures contracts seemed to reflect an expectation that we'd see one more rate hike this fall, and that would be it. But a lot can change in two weeks. Now the message looks more like, "that's it!"

Continue reading "About that pause"

Posted by James Hamilton at 03:07 PM permalink | Comments (13)

July 24, 2006

Reading the yield curve

What are the implications of the current shape of the yield curve?

Continue reading "Reading the yield curve"

Posted by James Hamilton at 04:38 PM permalink | Comments (28)

July 19, 2006

Bernanke's latest testimony

A more optimistic assessment from the Fed chair than I had been expecting.

Continue reading "Bernanke's latest testimony"

Posted by James Hamilton at 09:45 AM permalink | Comments (13)

July 14, 2006

Are we there yet?

Almost, but not quite, sayeth the fed funds futures.

Continue reading "Are we there yet?"

Posted by James Hamilton at 07:09 AM permalink | Comments (0)

July 02, 2006

The Fed speaks and markets listen

Tim Iacono at The Mess That Greenspan Made had some interesting graphs this week.

Continue reading "The Fed speaks and markets listen"

Posted by James Hamilton at 01:18 PM permalink | Comments (21)

June 30, 2006

All eyes on housing

Mark Thoma notes that the most recent FOMC statement has changed from declaring growth is "likely to moderate" to "Recent indicators suggest that economic growth is moderating". The first stages of the long-anticipated cooling of the housing market certainly appear to be here now.

Continue reading "All eyes on housing"

Posted by James Hamilton at 04:56 PM permalink | Comments (9)

June 18, 2006

Inflation and the Fed

Certainly the recent inflation data have been-- Dave Altig says insert something negative here, so I'll just say "unwelcome". But when Fed Chair Ben Bernanke declared that's exactly the way he sees it, too, markets stood up and took notice. Let's review some of the dramatic market adjustments that have occurred since Bernanke's June 5 remarks.

Continue reading "Inflation and the Fed"

Posted by James Hamilton at 09:11 PM permalink | Comments (17)

June 10, 2006

Hawk or dove?

The pundits continue to be frustrated in their efforts to pigeonhole the Federal Reserve Chair.

Continue reading "Hawk or dove?"

Posted by James Hamilton at 06:58 PM permalink | Comments (18)

June 06, 2006

Bernanke tells it like it is

Once again I recommend the most recent statement of our Federal Reserve Chair as some of the finest economic analysis you will find anywhere.

Continue reading "Bernanke tells it like it is"

Posted by James Hamilton at 05:44 AM permalink | Comments (25)

May 30, 2006

M3 or not M3?

In response to a post earlier this week on M2 and inflation, one of our readers asks why I looked at M2 rather than M3. Here's the answer.

Continue reading "M3 or not M3?"

Posted by James Hamilton at 08:08 PM permalink | Comments (20)

May 28, 2006

M2 and inflation

High commodity prices and indications of rising inflation have renewed interest in the hypothesis that the U.S. has been increasing the money supply in recent years at an excessive rate.

Continue reading "M2 and inflation"

Posted by James Hamilton at 12:37 PM permalink | Comments (6)

May 17, 2006

Stagflation

We all understand that the Fed's next move depends on incoming data. But what if the incoming data raise concerns of both higher inflation and slower output growth?

Continue reading "Stagflation"

Posted by James Hamilton at 05:43 PM permalink | Comments (17)

May 02, 2006

Reading Bernanke's lips

I still say that many pundits are using the wrong paradigm for interpreting the public pronouncements of the new Federal Reserve Chair.

Continue reading "Reading Bernanke's lips"

Posted by James Hamilton at 08:08 PM permalink | Comments (9)

April 24, 2006

Who's afraid of $3 gasoline?

Does the expected strong 2006:Q1 GDP report mean that the economy will shrug off the recent resurgence of gas prices?

Continue reading "Who's afraid of $3 gasoline?"

Posted by James Hamilton at 12:33 PM permalink | Comments (19)

April 06, 2006

The yield curve and predicting recessions

Jonathan Wright, a brilliant research economist at the Federal Reserve Board, recently completed a very interesting paper titled The Yield Curve and Predicting Recessions. Wright's research seems to have been influential in Fed Chair Ben Bernanke's recent assessment that the current very flat yield curve does not signify a coming significant economic slowdown.

Continue reading "The yield curve and predicting recessions"

Posted by James Hamilton at 08:03 PM permalink | Comments (21)

April 04, 2006

What's moving long-term yields?

Long-term interest rates continue to creep up.

Continue reading "What's moving long-term yields?"

Posted by James Hamilton at 09:30 PM permalink | Comments (20)

March 29, 2006

Learning the new Fedspeak

Curious reaction from both markets and pundits to yesterday's statement from the FOMC accompanying the decision to boost the fed funds rate another 25 basis points.

Continue reading "Learning the new Fedspeak"

Posted by James Hamilton at 01:05 PM permalink | Comments (15)

March 19, 2006

Inflation concerns

The Bureau of Labor Statistics reported that inflation as measured by the seasonally adjusted consumer price index for all urban consumers rose only 0.1% in February (a 1.2% annual rate), down from 0.7% (an 8.4% annual rate) in January. Those who view the monthly CPI as the most important inflation indicator breathed a sigh of relief, perceiving the economy to have lurched from hyperinflation back to price stability within the space of 30 days.

Continue reading "Inflation concerns"

Posted by James Hamilton at 08:56 AM permalink | Comments (12)

March 08, 2006

Rising long-term yields

The yield on 10-year U.S. Treasuries is up almost 40 basis points so far this year, which means it's been gaining on the fed funds rate and reducing the prospect of full inversion of the yield curve. Why have rates been going up?

Continue reading "Rising long-term yields"

Posted by James Hamilton at 08:18 PM permalink | Comments (7)

March 03, 2006

Autos limp forward

Could be better, could be worse.

Continue reading "Autos limp forward"

Posted by James Hamilton at 05:15 AM permalink | Comments (4)

February 15, 2006

The Bernanke era begins

New Fed Chair Ben Bernanke provided his first testimony before Congress this morning.

Continue reading "The Bernanke era begins"

Posted by James Hamilton at 09:42 AM permalink | Comments (9)

February 06, 2006

Gold and inflation

What's behind the ongoing run-up in gold prices? One popular interpretation is that investors fear a resurgence of U.S. inflation. But that story just doesn't square with the facts.

Continue reading "Gold and inflation"

Posted by James Hamilton at 11:51 AM permalink | Comments (25)

February 01, 2006

Should the Fed worry about going too far?

I wanted to weigh in on the exchange between Kash Mansori at Angry Bear and Dave Altig at Macroblog.

Continue reading "Should the Fed worry about going too far?"

Posted by James Hamilton at 08:20 PM permalink | Comments (16)

January 25, 2006

Soaring commodity prices

Is U.S. monetary policy behind the surge in commodity prices?

Continue reading "Soaring commodity prices"

Posted by James Hamilton at 04:13 PM permalink | Comments (27)

January 09, 2006

What's the Fed waiting for?

The Fed is likely to stop raising rates soon. What will be the final signal that enough is enough?

Continue reading "What's the Fed waiting for?"

Posted by James Hamilton at 06:17 PM permalink | Comments (9)

January 05, 2006

2005: the oil shock that didn't bite?

All but one of the recessions in the United States since World War II have been preceded by a dramatic increase in oil prices. Did we escape unscathed in 2005?

Continue reading "2005: the oil shock that didn't bite?"

Posted by James Hamilton at 02:40 PM permalink | Comments (34)

December 29, 2005

Who's afraid of the big bad yield curve?

Lots of talk this week of an inverted yield curve, such as Macroblog, Big Picture, Economist's View, Hypothetical Bias, and Mises Economics Blog. What's the big deal?

Continue reading "Who's afraid of the big bad yield curve?"

Posted by James Hamilton at 10:37 AM permalink | Comments (17)

December 17, 2005

The real yield curve

Economist's View reported last week on a letter from Alan Greenspan that addressed some questions about monetary policy posed for the Fed Chair by Representative Jim Saxton (R-NJ). I was particularly interested in Greenspan's explanation of why he is not concerned about the seemingly bearish connotations of the slope of the yield curve.

Continue reading "The real yield curve"

Posted by James Hamilton at 07:37 PM permalink | Comments (20)

December 12, 2005

The gold standard and the Great Depression

How the gold standard contributed to the Great Depression.

Continue reading "The gold standard and the Great Depression"

Posted by James Hamilton at 12:58 PM permalink | Comments (36)

November 30, 2005

Facing the latest economic data

Here are a few thoughts about some of the economic news that's been coming in over the last few weeks.

Continue reading "Facing the latest economic data"

Posted by James Hamilton at 05:54 AM permalink | Comments (15)

November 27, 2005

Inverted yield curve edges closer

If you haven't been worrying about the possibility of an inverted yield curve, now might be a good time to start.

Continue reading "Inverted yield curve edges closer"

Posted by James Hamilton at 02:17 PM permalink | Comments (17)

November 20, 2005

Hedge fund risk

Psst-- want to earn a 41% annual return over a decade? Then read on.

Continue reading "Hedge fund risk"

Posted by James Hamilton at 02:44 PM permalink | Comments (30)

November 13, 2005

Does it matter whether Bernanke is a Republican?

Mr. Dooley told us that the Supreme Court watches the election returns. So also must the Chair of the Federal Reserve.

Continue reading "Does it matter whether Bernanke is a Republican?"

Posted by James Hamilton at 11:36 AM permalink | Comments (7)

November 02, 2005

Autos continue to tank

The worst October for U.S. auto sales in the last 13 years, it was.

Continue reading "Autos continue to tank"

Posted by James Hamilton at 07:21 PM permalink | Comments (50)

October 24, 2005

Ben Bernanke: new Fed chair

Let me add my enthusiastic endorsement of the choice of Ben Bernanke to replace Alan Greenspan for chair of the Federal Reserve Board to the positive support earlier expressed at Marginal Revolution, the Big Picture, New Economist, Economist's View, and Angry Bear.

Continue reading "Ben Bernanke: new Fed chair"

Posted by James Hamilton at 12:20 PM permalink | Comments (11)

October 23, 2005

Ford joins the club

Having commented on a number of occasions about General Motors' woes, and striving to be an Equal Opportunity PunditTM, it's only fair to give credit where credit is due. Ford this week showed that it can compete with the best of them in terms of losing money, posting a loss on its North American operations of $1.2 billion for the third quarter and $2.4 billion over the last 15 months. I'm not sure what advice to give Ford. But here's what I think we might expect from U.S. policy makers.

Continue reading "Ford joins the club"

Posted by James Hamilton at 05:59 PM permalink | Comments (52)

October 14, 2005

Inflation's back?

Does today's CPI release indicate that inflation has returned?

Continue reading "Inflation's back?"

Posted by James Hamilton at 12:07 PM permalink | Comments (33)

October 11, 2005

Stagflation

Do recent energy shocks mean we might see a replay of the 1970's stagflation? I believe not, and here's why.

Continue reading "Stagflation"

Posted by James Hamilton at 10:10 AM permalink | Comments (43)

October 02, 2005

But you said that more saving was a good thing

After many of us have been arguing for some time that an increase in the U.S. personal saving rate was key for promoting long-run growth and reducing the trade deficit, the American consumer finally obliged with a 0.5% drop in consumption spending in August. But analysts such as Angry Bear and Macroblog see this as an ominous development. So which is right-- is more saving a good thing or a bad thing for the economy?

Continue reading "But you said that more saving was a good thing"

Posted by James Hamilton at 07:51 AM permalink | Comments (16)

September 25, 2005

Responding to supply shocks

It seems pretty clear to me that a monetary contraction isn't the appropriate policy response to a supply shock. Apparently there are those within the Federal Reserve who see things differently.

Continue reading "Responding to supply shocks"

Posted by James Hamilton at 02:28 PM permalink | Comments (16)

September 19, 2005

Consumer confidence plunges

Yet another key leading indicator turns gloomy. How much can the stock market and the Fed shrug off?

Continue reading "Consumer confidence plunges"

Posted by James Hamilton at 02:24 PM permalink | Comments (21)

September 16, 2005

Who cares about core inflation?

This is another one of those months when you could report pretty much any number you like to summarize the current inflation rate, and, as William Polley noted, newspapers did. At times like these, the concept of "core inflation" can be very helpful.

Continue reading "Who cares about core inflation?"

Posted by James Hamilton at 02:04 PM permalink | Comments (20)

September 12, 2005

Hurricane? What hurricane?

Amazingly, gasoline futures on the New York Mercantile Exchange today ended back where they were before Hurricane Katrina struck with all its fury. Retail prices will likely follow that lead. But what about the Fed?

Continue reading "Hurricane? What hurricane?"

Posted by James Hamilton at 07:57 PM permalink | Comments (7)

August 25, 2005

Recession in 2006-07?

If you just extrapolate the dynamics of past economic expansions, you'd say that a recession within the next few years is quite possible but by no means certain. The question is how much weight you want to attach to some of the other factors.

Continue reading "Recession in 2006-07?"

Posted by James Hamilton at 08:46 PM permalink | Comments (21)

August 17, 2005

Talk of recession

Nine out of the ten recessions in the United States since World War II were preceded by a spike in oil prices. Nevertheless, for the past year, I've been telling people that this time it's going to be different-- the economy could weather the rising price of oil without a downturn. Developments of the last couple of weeks make me a little more concerned.

Continue reading "Talk of recession"

Posted by James Hamilton at 07:15 PM permalink | Comments (81)

August 08, 2005

Is there a danger that the Fed will fall behind the inflation curve?

Both Macroblog and Capital Spectator raise t