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My readers will know that I think that the Federal Reserve has taken a step in the right direction with its latest policy action. I do think that the fed finally after four years of failure is moving towards a more rule based monetary policy. However, it is certainly far from perfect and there is still a lot of risks involved.
Bernanke says Friedman would have approved of Fed's recent actions - I think is he more or less right
Ben Bernanke today in a speech further tried to explain the Fed's recent policy actions. As Scott Sumner says in a comment: "The Fed seems to be getting a bit more market monetarist each day". That might be slightly too optimistic of what is going on at the Fed and I remain frustrated about about two things in how Bernanke is communicating. First he is focusing on real variables (the labour market) rather than on nominal variables. Second, his discussion of the monetary transmission mechanism is overly focused on yields and interest rates rather than on money creation. That said, I continue to believe that the Fed is moving in the right direction. Bernanke's speech today is further prove of that and I must say I feel increasingly optimistic that this will pull the US economy out of the crisis.
I am still in Provo Utah and even though I have had a busy time I have watch a bit of Bloomberg TV and CNBC over the last couple of days (to fight my jet lag). I have noticed some very puzzling comments from commentators. There have been one special theme and that has come up again and again over the last couple of days among the commentators on US financial TV and that is that "yeah, monetary easing might be positive for the markets, but it is not have any impact on the real economy". This is a story about disconnect between the economy and the markets.
I am writing this while I am flying with Delta Airlines over the Atlantic. I will be speaking about the European crisis at a seminar on Friday at Brigham Young University in Provo, Utah.
I wonder if any of my readers remember my post about how "“Good E-money” can solve Zimbabwe’s ‘coin problem’".
This week I attended a presentation by my good friend and professor of political science at the University Copenhagen Peter Kurrild-Klitgaard about the upcoming US presidential elections. In his presentation Peter presented some of his models for predicting the outcome of US presidential elections.