...“seven years of the most accommodative monetary policy in U.S. history”
- Thread starter Altavest_Erik
- Start date
Can any one read the axes of the Chart at the beginning of this article. I tried to blow it up on my computer but it is too blurry for my old eyes to read.
It should be noted that if the Fed Funds rate went to zero, it did so for only a short time and not for most of eight years as is claimed by the article. The Fed started paying a very small interest rate on reserves, something they normally don't do, and this kept the rate above zero by putting a floor under it.
As far too often is the case, Wall Street financial instrument hucksters are trying to pass themselves off as experts on Central Banking and Economics. It's a common affliction. Some of course really do have the knowledge to constructively criticize the Fed and the Treasury, but most do not. Soros -- who is not really a Wall Street Huckster anyway -- would be one of the exceptions --, and their are a number of others of course. But many of these guys are simply farting hot air. I don't know anything about the current author. Maybe he is qualified maybe not. Several statements in his article, however, I know for a fact to be misleading. That caused a raised eye brow.
One curiosity I could not avoid noticing is the author's seemingly not taking much notice of our narrowly having avoided becoming the epicenter of a world wide depression. Could it be there was a reason for extraordinarily low interest rates other than purely screwball liberals messing with the system to make Obama look better? I wonder. If the Fed were going to step up their Treasury buying by 30 billion a month, or so, perhaps that would somewhat depress bond rates on the secondary market. Do you suppose? If the Treasury wanted to make it appear that bond sales were linked to deficits, something they don't absolutely have to do in a fiat money regime, they might have had to raise the rate on their offerings to attract sufficient buyers had the Fed not promised to say "here I am" to the secondary market.
The Fed allowed reserve accounts to climb far above the pre-crisis target. This was by design, and Bernanke bitched that the low rates wern't attracting as much business for the banks as he had hoped. Of course when reserve balances are allowed to rise, the Funds Rate is driven down. It was driven down rapidly toward zero as would be expected, whereupon the Fed stepped in and said we will pay a very small interest on reserves, thus establishing a floor to the rate.
All in all it was a remarkable response from the Treasury and Fed working hand in glove, as they do every day, and demonstrating the application of something of practical value learned from the Great Depression.
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Inverted it is easier.
22,000
20,000
18,000
16,000
seems to me
Months from 2014 in quarters on bottom.
Like the Greek debt crisis and all the rest.. what is the point.
I'd guess that the article is referring to the headline federal funds rate, and isn't taking into account what you noted in regards to the Fed paying institutions small amounts of vig to hold reserves. Yes, there are always unintended consequences associated with central banking and financial engineering, some perhaps negative and others perhaps not...depending on ones station I suppose. Here's a piece about the author http://joehoft.com/about-joe/ His historical references/data don't seem too debatable or controversial. However one might fairly argue that his conclusion(s) are debatable. Is the Fed politically biased to the left? It does appear so. Looking at the data he presented it seems that correlation is indeed causation over the last 16 years or so. The Fed was hiking under GOP Presidents and easing in the midst of the Dem administration. It's a small sample size though and clearly other variables are always part of the equation.
Thank. Your eyes are still a lot better than mine.
Clearly indeed! Sample size = 2. First sample during a recovery from an exceptionally deep recession; Second sample after full employment reached. Textbook Central Banking says rates to be lowered during recessions and raised once recovery occurs. We all know that lefties write the textbooks, and righties are illiterate. That would explain everything.
The Fed ran a zero rates policy for pretty much Obama's entire tenure. It allowed obama to run up more debt than all other presidents combined. Without the Fed's accommodation, rates would have gone up and forced Obama to curtail his largesse.
Whether the Fed is politicized or not, its policies have serious political consequences. And if the FBI can be politicized, what makes the Fed so special? It seems crazy not to let the Executive Branch run monetary policy. They have a far bigger stake in it than the Fed.
Whether the Fed is politicized or not, its policies have serious political consequences. And if the FBI can be politicized, what makes the Fed so special? It seems crazy not to let the Executive Branch run monetary policy. They have a far bigger stake in it than the Fed.