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Ignores the pandemic induced supply shock, but the greedflation hypothesis has legs imo.
https://heisenbergreport.com/2023/03...-greedflation/
Musk wanted then to lower the rate
That would have been better
Fools
Ignores the pandemic induced supply shock, but the greedflation hypothesis has legs imo.
https://heisenbergreport.com/2023/03...-greedflation/
Fed started posting weekly losses last September, this week it has reached operating losses of ~$40b.The reason why is the same asst liability-maturity mismatch that sunk SVB. Technically, the losses are booked as deferred assets and don't affect the Fed's ongoing operations, but Fed remittances (~$100b a year) to the US Treasury will cease until the shortfall is made up for.
It's the first operating loss in the Fed's history
Political pressure will be applied to monetary policy.
I posted an article about a taper tantrum that didn't happen in 2016 because it has no contemporary political axe to grind, most of the articles I could find that came out this week do. AEI dudes, Mises Ins ute flacks, crypto bros, goldbugs and Catholic fascists.
https://www.businessinsider.com/wall...tantrum-2016-9The crisis comes when Congress realizes the Fed is paying the government nothing (or next to nothing) while s ing out billions to the banks. Several members of Congress have already been critical of Fed payments to banks, but they’ve largely missed the mark. When the next budget crisis arises without the Fed paying it’s perceived “fair share,” all it would take is a few impassioned speeches to stir the masses and make monetary policy a de facto political animal.
The worst possible outcome would be for a fickle and indecisive Congress to assert its authority over monetary policy. Unfortunately, by waiting seven years to raise rates—and into an economy growing at best modestly—the Fed has backed itself into a corner. The Fed has clearly chosen the banks over the best interests of the taxpayers, and this will eventually come back to bite Chair Yellen.
Fed started posting weekly losses last September, this week it has reached operating losses of ~$40b.The reason why is the same asset liability-maturity mismatch that sunk SVB. Technically, the losses are booked as deferred assets and don't affect the Fed's ongoing operations, but Fed remittances (~$100b a year) to the US Treasury will cease until the shortfall is made up for.
It's the first operating loss in the Fed's history
Political pressure will be applied to monetary policy.
I posted an article about a taper tantrum over rate hikes that didn't happen in 2016 because it has no contemporary political axe to grind, most of the articles I could find that came out this week do. AEI dudes, Mises Ins ute flacks, crypto bros, goldbugs and Catholic fascists.
https://www.businessinsider.com/wall...tantrum-2016-9The crisis comes when Congress realizes the Fed is paying the government nothing (or next to nothing) while s ing out billions to the banks. Several members of Congress have already been critical of Fed payments to banks, but they’ve largely missed the mark. When the next budget crisis arises without the Fed paying it’s perceived “fair share,” all it would take is a few impassioned speeches to stir the masses and make monetary policy a de facto political animal.
The worst possible outcome would be for a fickle and indecisive Congress to assert its authority over monetary policy. Unfortunately, by waiting seven years to raise rates—and into an economy growing at best modestly—the Fed has backed itself into a corner. The Fed has clearly chosen the banks over the best interests of the taxpayers, and this will eventually come back to bite Chair Yellen.
Red diaper babies at WSJ
the commies at Business Insider
https://www.businessinsider.com/why-...es-jobs-2023-4But a new paper from the University of Massachusetts Amherst economists Isabella Weber and Evan Wasner argues that our current bout of inflation is what they call sellers' inflation. Bottlenecks — like those rampant supply-chain shortages — give firms what the economists call "temporary monopoly" status. Compe ion between firms in the industry, as well as the possibility of new companies trying to edge in on their territory, dwindles. And because many of these industries are so concentrated, with just a handful of companies dominating the market in any given area, it's easier for firms to reach an implicit agreement that, yes, they're all going to raise their prices.
Companies that don't fall in line and try to undercut their rivals to attract deal-conscious customers face discipline for not following the status quo. Wasner and Weber use the examples of Target and Walmart, which both tried to weather some costs without raising prices in an attempt to hold onto customer loyalty. This effort to keep prices low was greeted with disdain. Investors saw the price-hike-driven profits being made by compe ors and sold off their Walmart and Target stock, in effect "penalizing their pricing strategy," according to Wasner and Weber.
Researchers at the Federal Reserve Bank of Boston similarly found in a 2022 study of inflation patterns that monopolistic concentrations in some sectors made price increases worse than they had to be. If there's no one challenging you with better deals or cheaper goods, you have free rein to hike prices as you wish.
we've been doing this for 14 years, basically paying banks tens of billions of dollars a year to sit on their treasure hoard, doing nothing with it.
https://cepr.org/voxeu/columns/extra...ons-its-originOne legacy of quan ative easing (QE) is that banks have ac ulated huge amounts of bank reserves. As a result, the bank reserves market is characterised by a large excess supply. This has kept the money market (interbank) rate stuck at the zero lower bound for many years, until the central banks felt compelled, from early 2022 on, to raise interest rates to fight inflation. Given the excess supply of bank reserves central banks could only perform this feat by raising the rate of remuneration of bank reserves. As a result, this rate of remuneration became the new (not zero) lower bound in the money market (De Grauwe and Ji 2023a, 2023b).
This policy now has created a lot of ‘collateral damage’. Since the stock of bank reserves is extremely high, the central banks now pay out large amounts of interest rate remunerations to banks, which increase with every interest rate hike. We show this in Table 1. This presents the outstanding bank reserves in the euro area, the US, and the UK in May 2023. We also show the interest rates prevailing at that time (second column). The third column presents the total interest payments made by the respective central banks to their domestic banks. The last column expresses these as a percent of GDP.
These are substantial numbers. To give some perspective, these interest payments exceed the seigniorage gains (profits) of modern central banks. For the US, for example, it has been estimated that seigniorage gains are less than 0.5% of GDP (Barro 1982, Cutsinger and Luther 2022). 1 Thus, as a result of their anti-inflationary policies, central banks transfer more than the total seigniorage gains to private banks. An extraordinary outcome of the fight against inflation. This is all the more spectacular as the seigniorage gains of central banks find their origin in the monopoly power granted by governments to central bankers. One would expect that these monopoly profits would then be returned to the government. Instead, they are returned more than fully to private agents.
Table 1
Source: De Grauwe and Ji (2023b), Board of Governors of the Federal Reserve, and ECB.
Fed remittances (~$100b a year) to the US Treasury will cease until the shortfall is made up for.
- The deal, orchestrated and backed by the Swiss government, was also much more costly than UBS initially bargained for, the filing showed.
- Over the course of the brief negotiations, the sum trebled from around $1.1 billion (1 billion Swiss francs) to roughly $3.3 billion (3 billion Swiss francs).
https://www.forbes.com/sites/roberth...suisse-rescue/
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