Interest Rates Archive

QE follow up

It’s been about a week, and the initial reactions are already wearing off and markets settling in. The lasting effects are those of the income lost to the economy as the Fed earns the interest on the securities it buys instead of the economy. This reduces the federal deficit and is a ...Read More

Quick update

A few more modest ‘green shoots’ including US personal income up .5, a few more jobs, houses and cars looking reasonable firm, etc. and markets starting to ‘undiscount’ a US recession. Govt deficits remain plenty high to support income/sales/employment at current (depressed) levels and promote modest growth. Just as in the prior ...Read More

Interest income loss from rate cuts

Word’s getting around, from CS: The side-effect of the Fed’s near-zero interest medicine – the collapse in personal interest income over the last few years. The decline in interest income actually dwarfs estimates of debt service savings. Exhibit 2 compares the evolution of household debt service costs and personal interest income. Both ...Read More

John’s got it!

Congress, Not the Fed, Needs to ‘Get to Work’ By John Carney July 17 (CNBC) — The Senate Banking Committee’s grilling of Federal Reserve Chairman Ben Bernanke just got weird. Senator Charles Schumer, the New York Democrat, proposed a novel theory of political management of the economy shortly before 11 am Tuesday ...Read More

Banks Face $6 Billion of Libor Litigation, Morgan Stanley estimates

The libor scandal is particularly bad, even though not a lot of actual $ gains/losses involved, in that it happened after the financial crisis when there was at least some hope that the surviving major banks had, in general, cleaned up their act. And also at least some hope that the crisis ...Read More

Libor Criminal Investigations Will Happen: Diamond

Libor Criminal Investigations Will Happen: Diamond By Catherine Boyle July 4 (CNBC) — Bob Diamond, the recently-departed chief executive of Barclays, told U.K. politicians that there would be criminal investigations into the manipulation of the London interbank offered rate (Libor) scandal which led to his resignation. From my 2009 proposals here: 2. ...Read More

Brazil Cuts Rates to Record Low as Economy Stalls

Another central bank may have it backwards as lower rates turn out to be deflationary and slow things down via interest income channels? Brazil Cuts Rates to Record Low as Economy Stalls May 30 (Bloomberg) — Brazil’s central bank cut interest rates on Wednesday for the seventh straight time to a record ...Read More

Reuter’s Ed Rombach on US vs Japan

Ed researched this issue after discussing with Warren August 2011. Ed Rombach on US vs Japan ...Read More

People who reject free lunches are fools: Liquidity trap – part II

Fiscal and monetary policy in a liquidity trap – part II By Martin Wolf Output is produced by work. Work is a cost, not a benefit. It is in that sense that there is no free lunch. Might fiscal expansion be a free lunch? This is the question addressed in a thought-provoking ...Read More

Fiscal and monetary policy in a liquidity trap

Not bad, but let’s take it up to the next level. Comments below: Fiscal and monetary policy in a liquidity trap By Martin Wolf With floating fx, it’s always a ‘liquidity trap’ in that adding liquidity to a system necessarily not liquidity constrained is moot. Part 1 What is the correct approach ...Read More