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I just read the latest depressing news about the Puerto Rican economy:
The news from the global currency markets this morning:
The dollar has continued to strengthen since early July - just take a look at the graph below:
Bubbles, bubbles, everywhere bubbles. There is a lot of talk about bubbles among commentators and central bankers. One of the most common bubble fears is a fear of a bubble in the US bond market (just take a look at this recent "bond bubble"-story). Generally I am very skeptical about all kinds of bubble fears and that also goes for the fear of a bubble in the US bond market.
The most famous monetary policy rule undoubtedly is the so-called Taylor rule, which basically tells monetary policy makers to set the key monetary policy interest rates as a function of on the one hand the inflation rate relative to the inflation target and on the other hand the output gap.
Certainly not perfect, but Fed policy is not worse than during the Great Moderation (an answer to Scott Sumner)
Scott Sumner started his now famous blog TheMoneyIllusion in February 2009 it was among other things "to show that we have fundamentally misdiagnosed the nature of the recession, attributing to the banking crisis what is actually a failure of monetary policy".
From the onset of the Great Recession in 2008 the ECB has been more afraid of doing "too much" rather than too little. The ECB has been obsessing about fiscal policy being too easy in the euro zone and about that too easy monetary policy would create bubbles. As a consequence the ECB was overly eager to hike interest rates in 2011 - way ahead of the Federal Reserve started to talk about monetary tightening.
It is no secret that I think that Stanley Fischer did a good job as governor of the Bank of Israel from 2005 to 2013. He basically saved Israel from the Great Recession by essentially keeping Israeli nominal GDP "on a straight line". During his time in office the Israeli NGDP level diverged no more than 1-1.5% from what we could call the Fischer-trend.