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links for 2008-10-26
Economist's View — Irrationally exuberant cartoons - Los Angeles Times Spending Stalls and Businesses Slash U.S. Jobs - NYTimes.com Take the Handcuffs Off the Economic Recovery - Eric E. Sterling Help for Homeowners, at Last? - NYTimes.com The Federal Reserve's balance sheet - Econbrowser New Bretton Woods idea is not new - Rybinski No economy is an island unto itself - Michael Spence

Debt-ology
Gregor.us — ... me the only method to ensure this new supply is taken up would be that other central banks would eventually have to monetize the USA, in the same way the USA is monetizing its own banking system. So future Treasury issuance may depend either on our own central bank to monetize it, or for foreign central banks to do the same. When either happens, I’m of the opinion it’s Game Over. -Gregor Further Reading: James Hamilton’s Econbrowser: The Federal Reserve’s Balance Sheet. Brad Setser’s Follow the Money: Do not ...

Federal Reserve Balance Sheet
Across the Curve — ... Professor Hamilton at Econbrowser has written an article about the expansion of the Federal Reserve balance sheet which has no equal. If you have any question about what they are doing and how they are doing it, he tackles the topic in clear and understandable prose and makes very clear there methodology. It is a very interesting and informative exposition of the radical transformation of monetary policy since August 2007 ...

Links 10/27/08
naked capitalism — ... Extends Declines Bloomberg. That is almost always a losing game unless the central bank has huge firepower. The flip side is the currency has fallen so far that it might actually works at these levels. Lawsuit claims Barclays is guilty of fraud Independent Restoring Functioning Markets in a Broken World Roger Ehrenberg Ben Stein Watch: October 26, 2008 Felix Salmon NY Times Lending Conspiracy Madness Michael Shedlock The Federal Reserve's balance sheet Jim Hamilton, Econbrowser Antidote du jour: ...

quantitative easing
Decline and Fall of Western Civilization — from the financial times, citing deutsche bank. note that japan's nikkei index hit a 26-year low this morning. also, jim hamilton examines the fed balance sheet.

Fifteen More Notes and Comments on the Current Crisis
The Aleph Blog — ... Though I have written on the changing balance sheet of the Fed [link] and its implications, Jim Hamilton of Econbrowser has a very good post on it as well. The only place where I think we differ is that I think this will eventually be inflationary to goods prices when the Fed is forced to stop sterilizing. ...

Fed Watch: More Easing Expected
Economist's View — ... of us under an illusion that the price of money is the dominant policy challenge? How many believe that the final 100bp will have a measurable impact on economic activity? This is especially true with regard to the near term; if the last 100bp has much effectiveness left, the impact will not be felt until late next year. That is not meant to say that we should reverse course and start raising rates. Only that future policy easing will be more about the extension of tools that increase the Fed’s balance sheet rather than on the level of rates in the overnight markets. ...

Hamilton Scoffs at Deflation and the Liquidity Trap
EconLog: Library of Economics and Liberty — ... , in which the central bank supposedly has no power even to cause inflation. Their theory is that interest rates fall so low that when the Fed buys more T-bills, it has no effect on interest rates, and the cash the Fed creates with those T-bill purchases just sits idle in banks. To which I say, pshaw! If the U.S. were ever to arrive at such a situation, here's what I'd recommend. First, have the Federal Reserve buy up the entire outstanding debt of the U.S. Treasury, which it can do easily enough by just creating new dollars to pay for the Treasury securities. No need to ...

Federal Reserve for Beginners
The Baseline Scenario — ... (I got this last explanation from James Hamilton at Econbrowser, who is a good source for people who want to further plumb the mysteries of this topic.) ...

Hamilton: The Fed Needs a New Plan
Economist's View — ... Nor should there be any enthusiasm for yet another lending facility. What started as a few billion dollars is now in the trillions, and credit spreads continue to widen. If we keep doing the same thing we've been doing for the last year and a half, why should we expect any different result? ...

Escape from Punchbowlism
The Baseline Scenario — ... ” on Brad DeLong’s blog, and it is a very scary prospect indeed. Remember when the Fed kept rates tight in August and early September 2008 (arguably to fight the commodity bubble/dollar run)? And when, in the post-September 2008 crisis, the Fed continued its deflationary policies, even though it was abundantly clear to the entire world that aggregate demand was (to paraphrase Warren Buffett) falling off a cliff? The Fed didn’t bring out the heavy weapons until March of 2009, until things looked pretty bleak indeed. This is what we can look ...