Comments welcome -- but ...
any unmoderated comment stream that I run gets overrun with insults and obscenities; so comments on this blog have to be moderated. ... So right now we have a backlog of more than 2000 comments. We'll try to get through them, but it may take a little while.
So right now we have a backlog of more than 2000 comments. We'll try to get through them, but it may take a little while.
That's just funny, but this is pure gold.
he humbling of the Fed (wonkish)
Not a day has gone by since this crisis began that I haven't been thankful that Ben Bernanke is the chairman of the Fed; had events gone a bit differently (thank you Harriet Meiers!) the post might well have gone to some unqualified Bush loyalist. That said, the Fed's experience in this crisis has been humbling; getting traction has proved harder than BB himself suggested in his pre-crisis writings. Here are my thoughts on why. ... But in March, and again this week, interest rates on T-bills fell close to zero -- liquidity trap territory. What does that do to the Fed's role? You still see people saying, in effect, "never mind the zero interest rate, why not just print more money?" Actually, the Bank of Japan tried that, under the name "quantitative easing;" basically, the money just piled up in bank vaults. To see why, think of it this way: once T-bills have a near-zero interest rate, cash becomes a competitive store of value, even if it doesn't have any other advantages. ... ... So Ben Bernanke came into his current position believing that central banks have the power, all on their own, to fight Japan-type problems. It seems that he was wrong.
That said, the Fed's experience in this crisis has been humbling; getting traction has proved harder than BB himself suggested in his pre-crisis writings. Here are my thoughts on why.
...
But in March, and again this week, interest rates on T-bills fell close to zero -- liquidity trap territory. What does that do to the Fed's role?
You still see people saying, in effect, "never mind the zero interest rate, why not just print more money?" Actually, the Bank of Japan tried that, under the name "quantitative easing;" basically, the money just piled up in bank vaults. To see why, think of it this way: once T-bills have a near-zero interest rate, cash becomes a competitive store of value, even if it doesn't have any other advantages. ...
So Ben Bernanke came into his current position believing that central banks have the power, all on their own, to fight Japan-type problems. It seems that he was wrong.
