Comments for Unsettled Account

Comment on John Taylor does not understand the word “unprecedented” by Debating History and Policy with Reich and Krugman | Economics One

Debating History and Policy with Reich and Krugman | Economics One — Fri, 26 Apr 2013 20:51:12 +0000

[...] in the Wall Street Journal. Here is the paragraph from my article he criticizes following the pull out quote from Richard S. Grossman which he links to. “With lessons learned from the century’s tougher [...]

Comment on The biggest threat to capitalism by Not far enough | Unsettled Account

Not far enough | Unsettled Account — Fri, 19 Apr 2013 19:03:05 +0000

[...] have written about Libor on a number of occasions (see here, here, and here, for example) and was interviewed by Law360 on the subject a few days ago. As currently [...]

Comment on Good news by Richard S. Grossman

Richard S. Grossman — Thu, 18 Apr 2013 00:30:07 +0000

Thanks, Bill!

Comment on Good news by Bill Craighead

Bill Craighead — Mon, 15 Apr 2013 04:09:52 +0000

That’s fantastic. Congratulations!

Comment on Will the Brits go negative? by flow5

flow5 — Sat, 23 Mar 2013 23:01:43 +0000

Regardless of the level of short-term interest rates, the remuneration rate is still higher than the U.S. Department of the Treasury’s: “Daily Treasury Yield Curve Rates” 2 years out (i.e., the short-end segment of the yield curve is still inverted after 4+ years).

This is the exactly same monetary policy blunder as the BOG & FDIC made during the 1966 S&L credit crisis. This borrow short, to lend long, funding matrix depletes the NBs of loan-funds (induces dis-intermediation [not deleveraging] – where the size of the NBs shrink, but the size of the CB system remains the same. I.e., the NBs are not now, nor have ever been, in competition with the CBs from the standpoint of the CB system.

By allowing the CBs to out bid the NBs for short-term funding (savings), the Fed lowers the net interest margins for both lenders & savers, induces maturity mis-matches, discourages lending in multifaceted ways, in short, reduces real-gDp, & forces the Fed to follow an easier or less restrictive monetary policy (i.e., causes stagflation).

How do you think stagflation (business stagnation accompanied by inflation), originated in the early 60′s? It was predictable & predicted.

It will continue to take increasing infusions of Reserve Bank & Commercial Bank credit to generate the same inflation-adjusted dollar amounts of gdp as long as interbank demand deposits are remunerated. Contrary to Milton Friedman, legal reserves are not a tax.

Comment on Time to go negative! by Will the Brits go negative? | Unsettled Account

Will the Brits go negative? | Unsettled Account — Thu, 28 Feb 2013 19:18:27 +0000

[...] little over a year ago, I argued that the Federal Reserve should consider charging banks for the privilege of holding their [...]

Comment on Libor needs to be scrapped—not reformed by Tom McNerney

Tom McNerney — Thu, 15 Nov 2012 07:52:04 +0000

It’s really not as simple as replacement with GCF, or Wheatley would have simply recommended that. There are many reasons, but LIBOR supports trillions in notional of securities and derivatives so any new index would have to slot into this existing population. LIBOR is supposed to represent prime bank unsecured credit: GCF is secured/government credit. This is not an academic distinction, as it makes GCF behave very differently both in terms of level and ability to hedge non-government credit. Whilst I hope GCF does take on an increasing role, it’s apples and oranges to LIBOR and not the solution.

The real LIBOR problem is lack of volume in the underlying loan markets. GCF has volume to back it, but is the wrong type of rate. An index like the Bloomberg proposal get you nowhere because the CDS and corporate bonds referenced have no more volume than the loan markets: this is nothing more than a complex Chimera.

Wheatley is right in its conclusions: what is proposed isn’t great, but it is the least bad solution to a not very tractable problem.

Comment on The biggest threat to capitalism by mercadeo

mercadeo — Sun, 11 Nov 2012 15:38:11 +0000

Jeffrey Lacker, president of the Richmond Federal Reserve Bank, said the Libor scandal is fuelling public anger toward the banks. “The revelations broadly are another episode that is damaging to people’s confidence in the financial services industry, and that’s a shame,” he said in an interview with Reuters last week.

Comment on A Blatant Misuse of History by Richard S. Grossman

Richard S. Grossman — Tue, 21 Aug 2012 18:28:28 +0000

Hi, Noah. I would argue that the tax cuts–combined with the increase in military spending (due to the wars in Afghanistan and Iraq)–got the macroeconomic boom off the ground. Aided by expansionary monetary policy, this contributed to the boom in the subprime market.

Comment on A Blatant Misuse of History by Noah Enelow

Noah Enelow — Tue, 21 Aug 2012 15:42:14 +0000

Hi Richard,

In what way did the Bush tax cuts contribute to the recession? I always thought of those two events as separate, and the recession as caused by the subprime housing bubble fueled by loose monetary policy. I thought the Bush tax cuts were just a giveaway to the rich that hurt our fiscal position but didn’t affect growth very much.

Thanks!

Best,
Noah