October 11, 2018

The Fed´s monetary policy has become dysfunctional

Tim Duy is a well known “Fed Watcher”. As such what he writes does not necessarily reflect his views but what he sees as the Fed´s view. In “Fed intent on raising rates even if the economy sours”, we read: A combination of weak labor force growth, solid employment growth, a lower unemployment rate, and firmer wage gains will tend to support the Fed’s view that the labor market needs to cool substantially to prevent inflationary pressures from building. Regardless of the estimate of the neutral interest rate, central bankers probably won’t think policy is restrictive until they see a… Read More

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This week George Mason University icon Tyler Cowen interviewed Nobel Prize winner Paul Krugman, and the economic figure of Hyman Minsky came up. Krugman pondered if there was a “Minsky financial cycle” in the near future—often dubbed “a Minsky moment”—referring to a scenario in which elevated asset prices suddenly decline, triggered by a sudden market reappraisal of prospects.  To be sure, it can be argued asset values are high presently, especially in global institutional real estate, and especially in Asia. Also, the PE’s on the US stock market are well above long-term averages. Presently, the specter of higher interest rates… Read More

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