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The Fed Becomes a Demoralizing Embarrassment

The U.S. Federal Reserve is tightening its noose on the U.S. economy, despite being below its 2% PCE inflation target, and despite the sluggish wages that define the American job scene: real hourly wages are down in Q1 (the latest reading) and are up 3.1% in the last 10 years. However, the picture may be
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A veritable “festschrift” on a (new & higher) inflation target

After building-up for several years, the view that the Fed should increase its inflation target has “boomed”. The progression: 2010,  2014, 2016, 2017A, 2017B, 2017C The July 1996 FOMC Meeting witnessed an extended discussion of inflation targeting. Interestingly it was Janet Yellen and Laurence Meyer´s first FOMC Meeting. Interesting because they are the two strong
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Low unemployment: Root of all evil?

Yes, according to this piece: “Other Times Unemployment Has Been This Low, It Didn’t End Well” There have been only three fleeting periods in the past half-century when the U.S. unemployment rate was as low as it is today. This would be cause for celebration but for one disturbing fact: in hindsight, each period was
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Unpleasant rumblings in EUR land

As some debate raged in the corridors of the ECB about both Draghi’s successor and over when and how to end the QE for the EUR, the common currency remained strong, helping keep the USD weak. Draghi has been such a relative force for good at the ECB, boldly implementing QE and other measures to
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Yes, interest rates should be banned from monetary policy discussions

At the Mercatus Center, Thomas Raffinot has an important working paper: According to the conventional view, low interest rates are associated with “loose” monetary policy, leading to higher inflation, whereas high interest rates are associated with “tight” monetary policy, leading to lower inflation. Interest rates, however, are unreliable indicators of monetary policy: low interest rates
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Japan has put together a string of five straight quarters of real growth, along with declining unemployment and minute amounts of inflation. Some have recently termed Abenomics “a big success.” If so, then worth noting is that Abenomics’ “three-legged stool” of fiscal reform, less regulation and expansive monetary policy has so far been carried out
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The uselessness of the concept of potential output

The concept of potential output is one of the Fed´s “guiding lights”. Unfortunately, it doesn´t “illuminate” anything but dependence on it can cause grave policy mistakes. It seems, as illustrated in the charts below, that “potential” output is always “chasing” actual output. In the 90s and first half of the 00s, actual output was always
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Eric Rosengren is the Boston Fed President, and a man who has publicly fretted at the construction cranes populating his home city. True, property values have been soaring in the Boston market—witness nearby Newton, Mass., where an average home sells near a cool million. Boston is a city and region infamous for stipulations on property
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