The decision of the Federal Reserve Board (this is not the Federal Reserve Open Market Committee that decides on monetary policy) to increase the discount rate (it calls it the ‘primary credit rate’) by 25 basis points to 0.75% and to reduce the maximum maturity of the borrowing at the discount window to just a [...]
If the People’s Bank of China surprised many with its early tightening move – it raised reserve requirements on banks by 0.5% - Google managed to kick it off front pages with its decision to reconsider all operations in China. You can see the whole thing here.
This is not very surprising. In the final analysis, [...]
I have not posted in a long time. It was not meant to be this way. It just happened. Let me break the stalemate with a post on bubbles. Nothing original. It just so happens to be the topic on which I spoke in Mumbai over the weekend. The Indian Alumni Association of the Asian [...]
Business Standard writes a good editorial on the need for fiscal deficit consolidation in India. It is a timely reminder:
The deterioration in fiscal parameters in 2008-09 and 2009-10 has been on account of both the fiscal stimulus and pre-election populism…..If during the downturn monetary policy had to accommodate the needs of fiscal policy, in months [...]
One of my friends forwarded me this blog post by Paul Krugman and asked me what Paul meant by ‘that right now the United States has nothing to fear from Chinese threats to diversify out of the dollar’.
What he means is this:
If China sells dollars and puts the proceeds into other currencies, it helps the [...]
On the flight back from Zurich to Singapore, I caught up with Paul Volcker’s statement to the Banking Services Committee of the U.S. Congress (House of Representatives). The full statement is here. He raises some uncomfortable questions:
However well justified in terms of dealing with the extreme threats to the financial system in the midst of [...]
I missed this one and caught it accidentally. The FT report says that Fed staffers have said that the economy needed a negative interest rate of -5.0%. Perhaps, it meant a negative real rate. One cannnot generate a negative nominal rate. One can generate a negative real rate with commensurate inflation.
Wonder if this marked the [...]
Inflation vs. deflation debate between Allan Meltzer and Paul Krugman is a rather interesting and insightful one for the rest of us:
(1) Inflation Nation by Alan Meltzer:
(2) Krugman’s response: History lesson for Alan Meltzer
One quick thought that came to my mind on seeing Krugman’s post was that if only all things in economics and markets [...]
… the opening remarks by Merwyn King, while releasing the quarterly inflation report of the Bank of England, are clear and candid. Gives a good glimpse into the problems and prospects of economies in the process of reducing their debt. You can find it here. It puts all the talk of ‘Green Shoots’ in perspective.
The Fed’s loose policy from 2003 to 2005 created the commodity and credit bubbles that made these countries flush with dollars. Given their low domestic propensity to consume, these countries then recycled those dollars back into dollar-denominated assets, such as Treasurys and real-estate-related assets such as Fannie Mae securities. The Fed itself had created the [...]
Bare Talk at Mint
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