For as long as I can remember people have referred to the Fed printing money-usually when they disapprove. The implication is that printing money is inflationary.
I've always assumed that those who use that terminology understood that "printing money" shouldn't be taken literally. Nowadays, I'm not so sure. Several financial talking heads I've heard recently sound like they mean it literally. Often the context has been whether the Fed might buy longer-term treasuries.
Comments (0)What to do when you find yourself pushing on a string?
Keep pushing!
I'm pretty sure that when I was a brand new economist at the Richmond Fed circa 1969 I was the first person to put a reference to the money supply in the draft of the President's FOMC remarks.
I really am sure of that; but others probably remember it differently, and I have no proof.
I was a young, newly-minted "monetarist," you see, having been raised on Milton Friedman's writings and been taught by Friedmanites once or twice removed. In addition to monetarism, I was also a believer in flexible exchange rates, the topic of my first Monthly Review article at the Richmond Fed. I wasn't the only believer on the staff, but we were still a minority toiling in the wilderness.
My quick reaction to the Fed's shock and awe policy actions on Tuesday may be found at Forbes.com.
Prior to the FOMC's announcement, when the entire focus of expectations was on the target Fed Funds rate, I anticipated a reduction of 50 basis points, but I didn't think it mattered much since the Fed Funds rate was already trading below its target rate of one percent. See CNBC's Squawk Box interview. Going all the way to a zero to quarter percent target range was a bold move in itself, but the more important part of the action was the purchase of mortgage-backed securities and agency debt and reiterating the coming help for consumer credit shortly. The FOMC clearly is willing to do whatever it can to pull us out of this dangerous financial crisis and minimize the damage of the recession.
Don't be afraid to bring in the best to help you. He or she won't outshine you because you are the president.
In my October 29 New York Times blog post, I discuss my first-hand experience with the Federal Open Market Committee (FOMC). See it here.
Come With Me to the F.O.M.C.: A Sneak Peak Into Fed Life
By Bob McTeer
Today is the second day of a two-day Federal Open Market Committee meeting. The rate decision along with the accompanying verbiage will be released at 2:15 p.m. If I were still there, I'd go in with a tentative idea of how I would vote, but would try to keep an open mind during the presentations and discussions. Today, I would be inclined toward a half percentage point cut, from 1.50 to 1.00 percent.
Forbes has posted another one of my articles, this time on the Fed's balance sheet. To see the full article go here.
The Fed's Balance Sheet
Bob McTeer 10-29-08
The sharp growth in the Fed's consolidated balance sheet has received much attention lately. Some have questioned the Fed's balance-sheet capacity to continue providing liquidity at home and abroad, and some have worried about the inflationary consequences of its balance-sheet growth down the road. This essay will address these issues–briefly.
Several policy mistakes were made during the 1930s that turned what could have been an ordinary recession into the Great Depression. Let's review just a few of them in the interest of not repeating them.
I don't intend this to be a big opus on the Fed and bubbles. I simply want to add my two-cents worth to what I keep hearing and, more importantly, not hearing about it on financial TV and radio.
My October 15 New York Times blog posting reviews the classic broken window fallacy-the seen versus the unseen-in the context of two issues of contemporary monetary policy. You may read it here.
The Seen and the Unseen - and Fed Policy
By Bob McTeer
Have you heard the one about the young hoodlum who threw a brick through a bakery's plate glass window? A crowd gathered on the sidewalk, shook their heads, and sympathized. It would probably cost the baker at least $1,000 to replace the window. What a shame!
I have a new commentary that has been published in the Washington Times. To view the article, click here.
Option for the Fed
Bob McTeer
COMMENTARY:
Among the actions the Federal Reserve is expected to announce imminently, it should include an immediate, but temporary, reduction in margin requirements for stock purchases.
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