Category Archives: Uncategorized

What led to Interest on Reserves being paid (called IOER, then IORB)?

IOER, then IORB when reserve requirements were dropped, was introduced in the Emergency Economic Stabilization Act of 2008. “The Emergency Economic Stabilization Act of 2008 (EESA) accelerated the authority for the Federal Reserve to pay interest on depository institutions’ reserve balances. It moved the effective date forward from October 1, 2011, as originally scheduled inContinue reading “What led to Interest on Reserves being paid (called IOER, then IORB)?”

Warsh could implement one major policy reform of what was enacted in 2008

Warsh could implement one major policy reform of what was enacted in 2008: Stop paying interest on reserves. This has caused the Fed to lose billions, has paid the large banks the seigniorage that should have been given back to Treasury at the end of each year, and has set interest rates in markets. ByContinue reading “Warsh could implement one major policy reform of what was enacted in 2008”

Real Oil Prices and Inflation

People like to blame oil prices for causing inflation even though it is the other way around, with money supply growth causing inflation. This graph shows the relation between nominal oil prices, real oil prices and the normalized US CPI inflation rate. Very close correlation between oil prices and inflation. Two main exceptions: the increasedContinue reading “Real Oil Prices and Inflation”

Granger predictability of real oil prices by US money and inflation in Markov-switching regimes” has been published online in Eurasian Economic Review, Open Acces

rdcu.be/d7wKW Present value theory linking oil prices to money growth and inflation rates: The model presented here is a theoretical asset pricing model for oil prices from Gillman and Nakov (2009). It shows that the capital in the oil sector demands that the USD oil price follow changes in the discount factor which is theContinue reading “Granger predictability of real oil prices by US money and inflation in Markov-switching regimes” has been published online in Eurasian Economic Review, Open Acces”

Williams is Wrong Again

According to the WSJ today (Nick Timiraos, July 17, 2024), John Williams as President of the New York Fed and Vice Chair of the Federal Open Market Committee (FOMC) that decides US monetary policy, stated that the labor market’s current conditions (a slow, steady rise in the unemployment rate) and recent inflation rates are “gettingContinue reading “Williams is Wrong Again”

The Real Estate Run Has Begun, as the Fed sits in Nowhere land making Nowhere plans for Nobody.

As the Federal Reserve System sits on an Interest rate on Reserve Balances (IORB) of 5.4% that they set by dictate each time they meet for “monetary policy” decisions, the 3-month Treasury bill rate continues to follow it nearly identically. This is true even though the IORB is the rate the Fed began paying inContinue reading “The Real Estate Run Has Begun, as the Fed sits in Nowhere land making Nowhere plans for Nobody.”

FED: Lower Your Dictated Interest Rate Now; Real Rates have been above 2% for 7 months.

Last time I wrote how the last 6 months of CPI inflation at rates in the 3% range made shot the real interest rate up to over 2% for the entire period. Why? Because after almost a quarter of a century of the Fed pushing the real interest rate below zero (with 2006-2007, and aContinue reading “FED: Lower Your Dictated Interest Rate Now; Real Rates have been above 2% for 7 months.”

A Plea to the Fed: Inflation, Interest Rates & Fed’s Combined Monetary & Macroprudential Policy

For six months, half a year, the US CPI inflation rate has remained in the 3% range, averaging 3.4% in that time. That is low inflation. The inflation rate almost never exactly equals the 2% Fed target. Rather the inflation rate has bounced around 2%, and a 3% number for 6 months leaves little doubtContinue reading “A Plea to the Fed: Inflation, Interest Rates & Fed’s Combined Monetary & Macroprudential Policy”