Author Archives: rx789

Stranger than Fiction: Neutral Rate, Natural Rate Nonsense Nomenclature

The Federal Reserve must start to lower the nominal interest rate since inflation is now at 3% and the real market rate of interest is sufficiently positive after two decades of negative real interest rates through “persistent liquidity” injections by the Fed that have led to over $4 trillion in reserves sitting at the Fed,Continue reading “Stranger than Fiction: Neutral Rate, Natural Rate Nonsense Nomenclature”

The Fed’s Last Unnecessary Increase in Interest Rates: Raising the Real Rate towards 3%

The Federal Reserve increase in interest rates to the 5.25-5.5% level in July 2023 was unnecessary and unwise. Inflation is now falling and will continue to fall. Having come in at 3% in June, the real rate of interest is now more than 2% and rising. This is after having been negative for many years.Continue reading “The Fed’s Last Unnecessary Increase in Interest Rates: Raising the Real Rate towards 3%”

Legal Inflation Rate Target of the Fed?

The Wall Street Journal today reports: “Employers added 209,000 jobs last month. The unemployment rate fell to 3.6%.” By this criterion alone, a 3.6% employment rate, it is possible to state with certainty what the legal inflation rate target of the Federal Reserve System. By the 1978 Full Employment and Balanced Growth Act, if theContinue reading “Legal Inflation Rate Target of the Fed?”

Independence Day: But not for Central Banks

To say the old dictum that central banks in developed economies are independent ignores history and modern politics. The central bank, and with a focus on the Federal Reserve, has always printed money at a rate dependent upon the fiscal exigencies put upon the US government during crises or during stable periods. First note thatContinue reading “Independence Day: But not for Central Banks”

Unintended Consequences of US Monetary Policy

There are many economic distortions when the US Federal Reserve System sets interest rates below the inflation rate at an “unnatural” level. It is not an equilibrium level since the market interest rates normally, naturally in line with the business cycle supply and demand for capital, fall below the inflation rate only rarely during pre-2008Continue reading “Unintended Consequences of US Monetary Policy”

Reforming the US Banking Insurance System and its Conflation with Monetary Policy

Reforming the US Banking Insurance System and its Conflation with Monetary Policy. The main problem with Federal Reserve monetary and “macroprudential” policies (the latter means government bank sector insurance policy) is that after 2008 the two became conflated so as to distort both sets of policies. Before 2008, it was believed that the non-FDIC financialContinue reading “Reforming the US Banking Insurance System and its Conflation with Monetary Policy”

Reforming Monetary and Banking Insurance Policy: Excerpt from Last Chapter, The Spectre of Price Inflation

The FDIC could offer a specifically determined risk-based premium, according to the FDIC’s own assessment of risk, for different types of deposits across the financial intermediation spectrum, including pensions, insurance companies, investment banks and the host of new innovative financial institutions that are arising. This would simply allow any financial institution to apply for FDICContinue reading “Reforming Monetary and Banking Insurance Policy: Excerpt from Last Chapter, The Spectre of Price Inflation”

The Spectre of Price Inflation

Bank runs even with over $3 trillion in reserves held by private banks at the Fed. What are those reserves doing other than leading to less investment? Certainly they are not preventing bank runs as we see today. Inflation was said to be a temporary blip during Covid. In this new book by Agenda Publishing,Continue reading “The Spectre of Price Inflation”

The Trojan Horse in the Gates of US Monetary Policy

The Federal Reserve is embarked upon increasing the interest rate that they set on reserves held at the Fed. This is the interest rate that the Fed determines by diktat, coming after interest was allowed to be paid on reserves for the first time in 2008. This is being done to combat inflation. Consider howContinue reading “The Trojan Horse in the Gates of US Monetary Policy”