Steve Matthews and Michael McKee at Bloomberg seem to think so. But a simple idea occurs to me: if the Fed is really worried that banks will cause inflation by drawing down reserves, can’t the Fed just raise the required reserve ratio (that’s the percentage of a bank’s deposits [your checking account, for example] that it is required to keep in it’s reserve account at the Fed)? This seems too simple. Am I missing something or are Bloomberg’s reporters?
[cross posted]
What gives with this morning’s NPR “Morning Edition” story about banks that are choosing to steer clear of TARP bailout money? Reporter Jim Zarroli mostly profiles the Johnson Financial Group, a bank that at first applied for $100 million, then decided not to take it after all once it learned the details of the the strings that come attached, saying that this bank is just one example of many that represent a “mini rebellion” against the TARP [...] read more >
Today’s NYTimes article on Federal Reserve Chairman Ben Bernanke’s testimony to Congress yesterday, and the simultaneous drop in the stock market, includes a few noteworthy passages:
The stock market plunged again on Thursday on bad economic news, taking little comfort from reassuring words by the chairman of the Federal Reserve or an emerging consensus about a stimulus plan that many worry could be too late.
On a day when stocks were pushed down another 3 percent on reports of more weakness [...] read more >
As was more-or-less expected, if not exactly at that precise moment, the Federal Reserve has cut both the “discount (interest) rate” and its target for the “federal funds (interest) rate.” Most stock markets around the world have reacted with big increases. Does this mean a rising tide for the foreseeable future and beyond? A couple of responses from outside the cheerleader squad.
Dean Baker: ‘…According to much of the coverage, the markets soared yesterday because they are now [...] read more >
Ex-chair of the Fed, Alan Greenspan, was frequently criticized for throwing his weight around in favor of those whose economic position is based on owning financial capital, at the expense of the vast majority of the public. Congress loved everything about Greenspan and would have made him chair-for-life if they could, so it shouldn’t be terribly surprising that his replacement, Ben Bernanke, tends towards the same bias. Dean Baker paints a “hypothetical” scenario that would lead to just [...] read more >
by Jonathan Teller-Elsberg, CPE Staff Economist
After eighteen years holding the reigns of power, Alan Greenspan has finally ended his career as chair of the Board of Governors of the U.S. Federal Reserve, as a result of legal limitations on the length of his term. As the person in charge of monetary policy in the U.S., Greenspan was, by some accounts, the single most powerful person in the world economy. His term as chair coincided with the early 1990s recession that [...] read more >
By Jim Crotty, CPE Staff Economist
The Keynesian economics that Paul Samuelson popularized in the United States after World War II was a sanitized version of the radical critique of capitalism offered by Keynes himself. John Maynard Keynes’s deep-seated attack on free-market economics led him to call for direct government control of the lion’s share of investment spending, industrial policy, a confiscatory wealth tax, strict control over cross-border financial flows and managed trade. But US “Keynesians” defanged his attack, arguing that [...] read more >
By Michael Ash, CPE Staff Economist
A recent finding from two researchers at the Federal Reserve Board implies that rich people did all of the extra consuming during the 1990s “boom.”
They reached their conclusion by looking at savings, the flip side of consuming. While the historic pattern has been that the rich save and the poor eat hand-to-mouth, the pattern of savings stratified by income class reversed over the past decade. The savings rate of high-income households declined very sharply, and [...] read more >
