This post was published at Scott Horton
In September, we proposed a theory of the Fed and suggested that the FOMC will soon worry mostly about financial imbalances without much concern for recession risks. We reached that conclusion by simply weighing the reputational pitfalls faced by the economists on the committee, but now we’ll add more meat to our argument, using financial flows data released last week. We’ve created two charts, beginning with a look at cumulative, inflation-adjusted asset gains during the last seven business cycles:
According to the way that the Fed defines its policy approach, our first chart stamps a giant ‘Mission Accomplished’ on the unconventional policies of recent years. Recall that policy makers explained their actions with reference to the portfolio balance channel, meaning they were deliberately enticing investors to buy riskier assets than they would otherwise hold. Policy makers hoped to push asset prices higher, and they seem to have succeeded, notwithstanding the usual debates about how much of the price gains should be attributed to central bankers. (See one of our contributions here and a couple of other papers here and here.) But whatever the impetus for assets to rise, it’s obvious that they responded. In fact, judging by the data shown in the chart, policy makers could have checked the higher-asset-prices box long ago, and with a King Size Sharpie.
This post was published at FinancialSense on 12/13/2017.
It looks like Trump’s pick to chair the Federal Reserve plans to walk in the footsteps of his predecessors.
In other words, we can expect the legacy of Ben Bernanke and Janet Yellen to continue unbroken. That means a continuation of interventionist monetary policy, artificially low interest rates into the foreseeable future, and plenty of quantitative easing when the time comes.
Yes. The new boss looks a lot like the old boss.
Jerome Powell testified before the Senate Banking Committee on Tuesday. The New York Times described it as a ‘relatively placid affair.’
Maintaining the status quo doesn’t set off too many fireworks.
Democrats seem OK with the pick. Interestingly, the people who were against Powell when he was an Obama appointee are OK with him now that he’s a Trump appointee.
Some Democrats have indicated they might oppose the nomination. But, importantly, Mr. Powell drew little opposition from conservative Republicans who opposed both his nomination as a Fed governor in 2012 and his reappointment in 2014. Senator Dean Heller, a Nevada Republican who voted against Mr. Powell both times, said he was trying to get to yes.’
This post was published at Schiffgold on NOVEMBER 29, 2017.
Update (11:45 am ET): As Powell’s testimony draws to a close, analysts at Stone & McCarthy noted that – as expected – the future Fed chair’s comments were “generally dovish”.
The hearing was largely free of surprises. As it neared its close, Powell offered his thoughts about the blockchain and digital currencies (one day they could impact the Fed’s policies, but right now they’re too small to matter), and the mysterious roots of low inflation (the Fed is still struggling to determine if it’s due to transitory factors, or some kind of fundamental shift.
Here’s Stone & McCarthy:
In his confirmation hearing before the Senate Banking Committee, Powell fielded questions mainly on the topics of raising interest rates, shrinking the balance sheet, and his views on “tailoring” regulation. Powell maintained the view that it is appropriate to gradually increase short-term rates against a backdrop of healthy, consistent growth with a strong labor market. He did not address inflation issues. He said GDP growth should be about 2.5% in 2017, and looking forward to “something pretty close to that” next year. Powell declined to specifically say if he would vote for another rate hike at the December 12-13 FOMC meeting. He did say “conditions are supportive” for another rate hike and “the case for raising rates at the next meeting is coming together”.
This post was published at Zero Hedge on Nov 28, 2017.