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econbrowser.com - 11/24/2008

Time for a change at the Fed

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Plan A didn't work. Plan B didn't work. I suggest the Fed get going on Plan C.

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Heretical Thoughts
EconLog: Library of Economics and Liberty — James Hamilton writes The Fed has been trying to sop up the illiquid assets that nobody else wants. But I think what the Fed should be doing is instead acquiring assets of a type that would allow it to quickly reverse its position if a sudden shift in perceptions causes inflation to come in above the intended 3% target. What a radical idea! Instead of buying "toxic" assets, why not buy good stuff? We don't know what the toxic assets are worth. We don't know if the ...

How to Create Inflation
The Baseline Scenario — ... James Hamilton at Econbrowser has a plan for how to create some inflation (he suggests a target of 3%). And if that doesn’t work, he has ...

Hamilton: The Fed Needs a New Plan
Economist's View — Jim Hamilton says it's time for change: Time for a change at the Fed, by Jim Hamilton: Plan A didn't work. Plan B didn't work. I suggest the Fed get going on Plan C. The Bureau of Labor Statistics announced last week that the seasonally adjusted consumer price index fell by 1% during the month of October, implying an annual deflation rate around -12%. That's the biggest monthly drop in the CPI since publication of seasonally adjusted changes began in February 1947. The core CPI (excluding food and energy) saw its first decline in a ...

I think I see a pattern
self-evident — ... 2002, Ben Bernanke outlined a game plan to prevent deflation, and it is far more relevant now than it was then. We are already well down his proposed road. He called for open market operations to lower interest rates, and suggested the Federal Reserve could directly lend to corporates and other non-banks if needed. None of this, so far, has worked. His next suggestion was to finance new tax cuts and spending increases with money printed by the Federal Reserve. James Hamilton So here’s my suggested Plan C. The goal of monetary policy ...

Tuesday links: money spent wisely
Abnormal Returns — ... Should the Fed pursue an ‘inflation targeting‘ strategy post-haste?  (Econbrowser) ...

Observations and Sentiment for Tuesday
InvivoAnalytics.com — ... , the other from the venerable James Hamilton’s Econbrowser . The Mamis High/Low Barometer Let’s take a look at our market barometers to see ...

Pre-market 11/26/08
The Clueless Q Trader — ... And speaking of cash, Teresa Lo linked this article, James Hamilton’s Econbrowser., it's about deflation and how to get rid of it. Now, if DEFLATION is running at 12% a year, like he says, then cash is obviously King, which I personally think it is anyway, but it's like gasoline has fallen 50% so far since the summer peak, so I guess if you take all your money, and use it to buy gas, then you would make 50% on it, wooooo hooooo, I'm heading down to the station right now. ...

Some Post Thanksgiving Reading
Across the Curve — Swedish auto makers Saab and Volvo may seek aid from the Swedish government. The ECB will meet on Thursday and I found this interesting snapshot of the factors the ECB will consider as it gathers. Reports from Japan indicate that the BOJ will hold an emergency meeting to discuss methods of battling the credit crunch. This is a tad dated but it is an interesting article nonetheless from Professor Hamilton at Econbrowser. And from the blog  Accrued Interest (which was my first choice for a blog title when I began this 11 ...

The Fed Has Become a Prime Broker, Will Lend to Hedge Funds Under Consumer Loan Program
naked capitalism — ... In addition, when the Fed finally succeeds in creating inflation, it will need to quickly sell assets from its balance sheet to reduce money supply (when the Fed sells assets, buyer payments have the effect of taking money out of circulation). Jim Hamilton points out that the Fed is going to be hard-pressed to find an exit: ...