Central Bank Independence Is a Myth. They Need to Be Democratized.

Oct 30, 2019 | Gerald Epstein discusses his new book, a collection of essays on how central banking is shaped, how it shapes the economy, and how it can be made more responsive to people's needs.

Fed Raises Rates after a Pause and Leaves Door Open to More

THE NEW YORK TIMES: Federal Reserve officials raised interest rates to their highest level in 22 years, continuing their 16-month-long campaign to wrestle inflation lower by cooling the American economy.

Officials pushed rates to a range of 5.25 to 5.5 percent, their highest level since 2001, while leaving the door open to further rate increases in the statement announcing their unanimous decision. Jerome H. Powell, the Fed chair, is speaking [in the accompanying video] to journalists to explain the move — and, potentially, to offer some hint at how the central bank is thinking about its next step. (+ video) » | Jeanna Smialek | Wednesday, July 26, 2023

Global Fallout from Rate Moves Won’t Stop the Fed

THE NEW YORK TIMES: The Federal Reserve, like many central banks, sets policy with an eye on the domestic economy. Its battle to control prices is causing pain abroad.

The Federal Reserve has embarked on an aggressive campaign to raise interest rates as it tries to tame the most rapid inflation in decades, an effort the central bank sees as necessary to restore price stability in the United States.

But what the Fed does at home reverberates across the globe, and its actions are raising the risks of a global recession while causing economic and financial pain in many developing countries.

Other central banks in advanced economies, from Australia to the eurozone, are also lifting rates rapidly to fight their inflation. And as the Fed’s higher interest rates attract money to the United States — pumping up the value of the dollar — emerging-market economies are being forced to raise their own borrowing costs to try to stabilize their currencies to the extent possible.

Altogether, it is a worldwide push toward more expensive money unlike anything seen before in the 21st century, one that is likely to have serious ramifications. » | Jeanna Smialek and Alan Rappeport | Friday, October 7, 2022

The Dollar Is Strong. That Is Good for the U.S. but Bad for the World.

THE NEW YORK TIMES: The Federal Reserve may have no choice but to wage a relentless inflation fight, but countries rich and poor are feeling the pain of plunging currencies.

The Federal Reserve’s determination to crush inflation at home by raising interest rates is inflicting profound pain in other countries — pushing up prices, ballooning the size of debt payments and increasing the risk of a deep recession.

Those interest rate increases are pumping up the value of the dollar — the go-to currency for much of the world’s trade and transactions — and causing economic turmoil in both rich and poor nations. In Britain and across much of the European continent, the dollar’s acceleration is helping feed stinging inflation.

On Monday, the British pound touched a record low against the dollar as investors balked at a government tax cut and spending plan. And China, which tightly controls its currency, fixed the renminbi at its lowest level in two years while taking steps to manage its decline.

In Nigeria and Somalia, where the risk of starvation already lurks, the strong dollar is pushing up the price of imported food, fuel and medicine. The strong dollar is nudging debt-ridden Argentina, Egypt and Kenya closer to default and threatening to discourage foreign investment in emerging markets like India and South Korea.

“For the rest of the world, it’s a no-win situation,” said Eswar Prasad, an economics professor at Cornell and author of several books on currencies. At the same time, he said, the Fed has no choice but to act aggressively to control inflation: “Any delay in action could make things potentially even worse.” » | Patricia Cohen, Reporting from London | Monday, September 26, 2022

Fed Makes Another Big Rate Increase

THE NEW YORK TIMES: The Federal Reserve raised rates by three-quarters of a point and projected a more aggressive path ahead, suggesting that borrowing costs would be increased to 4.4 percent by the end of the year.

Federal Reserve officials ramped up their battle against the fastest inflation in 40 years on Wednesday, ushering in a third straight supersize rate increase while projecting a more aggressive path ahead for monetary policy, one that would lift interest rates higher and keep them elevated longer.

Central bankers raised their policy interest rate by three-quarters of a percentage point, boosting it to a range of 3 to 3.25 percent. The federal funds rate was set at near zero as recently as March, and the Fed’s increases since then have made for its fastest policy adjustment since the 1980s.

Even more notably, policymakers predicted on Wednesday that they will raise borrowing costs to 4.4 percent by the end of the year — suggesting that they could make another supersize rate move, followed by a half-point adjustment. Officials estimated that rates will climb to 4.6 percent by the end of 2023, up from an estimate of 3.8 percent in June, when they last published estimates. » | Jeanna Smialek | Wednesday, September 21, 2022

Why the Fed Can Keep Rates ‘Pretty Aggressively’ in the Short Term: Economist

Zach Griffiths, Wells Fargo Senior Macro Strategist, and Jeanette Garretty, Robertson Stephens Wealth Management Chief Economist, join Yahoo Finance Live to break down consumer positions amid rising inflation and the latest Fed interest rate hike and the significance of the latest unemployment rate reading.

The Federal Reserve Raises Interest Rates by 0.75 of a Percentage Point.

THE NEW YORK TIMES: The Federal Reserve raised interest rates by three-quarters of a percentage point on Wednesday, its biggest move since 1994, as the central bank ramps up its efforts to tackle the fastest inflation in four decades.

The big rate increase, which markets had expected, underlined that Fed officials are serious about crushing price increases even if it comes at a cost to the economy.

Officials predicted that the unemployment rate will increase to 3.7 percent this year and to 4.1 percent by 2024, and that growth will slow notably as policymakers push borrowing costs sharply higher and choke off economic demand. » | Jeanna Smialek | Wednesday, June 15, 2022

Federal Reserve announces biggest interest rate hike since 1994: Fed confirms 0.75 percentage-point increase as Americans across country hit hard by rising prices and shortages of key items »

Praise Ye the Lord! – Mark

Soaring US Inflation Prompts Fed to Hike Up Interest Rates | DW News

Jan 27, 2022 • The US Federal Reserve will begin raising interest rates in March. It's a departure from pandemic-era polices that have been in place since March, 2020, pegging the benchmark rate to zero. Fed Chairman Jerome Powell says the move is designed to temper economic growth. Americans have seen decades-high inflation rates lately, eating into wage gains and household budgets. The Fed Chairman added that he thinks there is quite a bit of room to raise rates "without threatening the labor market."

Fed Eyes 3 Rate Increases in 2022; Slows Stimulus as Prices Rise

THE NEW YORK TIMES: Federal Reserve officials suggested as many as three interest rate increases in 2022 as the economy heals and inflation persists.

“I think the risk of higher inflation has increased,” Jerome H. Powell, the Federal Reserve chair, said while testifying before Congress last month. | Sarahbeth Maney/The New York Times
Federal Reserve policymakers on Wednesday said they will cut back on their stimulus more quickly at a moment of rapid inflation and strong economic growth, capping a challenging year with a pronounced policy pivot that could usher in higher interest rates in 2022.

A policy statement and a fresh set of economic projections released by the central bank detailed a more rapid end to the monthly bond-buying that the Fed has been using throughout the pandemic to keep money chugging through markets and to bolster growth.

Officials are slashing their purchases by twice as much as they had announced last month, a pace that would put them on track to end the program altogether in March. That decision came “in light of inflation developments and the further improvement in the labor market,” according to the policy statement.

Fed Chair Jerome H. Powell, speaking at a news conference following the Fed’s meeting, said a “strengthening labor market and elevated inflation pressures” prompted the central bank to speed up the reductions in asset purchases. » | Jeanna Smialek | Wednesday, December 15, 2021

Janet Yellen: 'We Only Thought of Her as Someone's Wife'

67-year-old new Fed chairman was regarded as her husband's sidekick in 1970s.

Read the Telegraph article here | Katherine Rushton, US Business Editor | Wednesday, October 09, 2013

The Brilliant Fed Chair and the Clueless President

US NEWS AND WORLD REPORT – OPINION: Obama's cavalier treatment of Ben Bernanke is yet another indication of an administration clueless about how serious the country's economic condition is

How good is your memory? Not many people today have personal memories of the Great Depression some 80 years ago, when thousands of banks closed. It would be natural, you'd think, to have a burning memory of what happened just five years ago when the U.S. banking system was on the brink of a similar collapse. The housing bubble burst. Lehman Brothers went bankrupt. Banks pulled back on lending, investors avoided new bonds and everyone seemed to be stockpiling cash. The economy started to contract by 5 percent to 6 percent annually. Trillions of dollars were knocked off the value of U.S. companies. The public and financial authorities had reason to believe nothing much could be done to avert a rerun of the Great Depression.

George Santayana (and before him the 18th century British philosopher and politician Edmund Burke) had history in mind when he observed that those who can't remember the past are condemned to repeat it. Five years hardly qualifies as "history," so it is unnerving that even supposedly well-informed people have forgotten how we got out of the mess. Last year, for example, the House of Representatives followed the lead of former Texas Republican Rep. Ron Paul (now taken up by his son, Kentucky Sen. Rand Paul) in passing a motion for an audit of the Federal Reserve, as if the Fed had been a cause of our problems.

On the contrary, the Federal Reserve was quite simply our last hope. It was the chairman of the Federal Reserve Ben Bernanke who came to the rescue. Bernanke, a former Princeton professor, was a scholar of the Great Depression, a background that proved critical. Right from his start in 2006, he demonstrated a tough independence. Unconvinced of inflation predictions in 2007, he refused to continue ratcheting up interest rates – and he was proved right. When the crisis hit in 2008, he went way beyond the standard response of a central banker, which would have been to lower interest rates and hope that cheaper credit would somehow work its way to more borrowing, more activity, more jobs. » | Mortimer B. Zuckerman | Friday, August 09, 2013 [?]

Everything You Need to Know About Janet Yellen

Oct. 9 (Bloomberg) --- Bloomberg Television's Erik Schatzker examines the career of Janet Yellen, President Obama's nominee to be Fed Chairman. (Source: Bloomberg)

THE DAILY TELEGRAPH: Barack Obama to nominate Janet Yellen as Federal Reserve chairman: President Barack Obama set to name Janet Yellen as first female chairman of US Federal Reserve on Wednesday afternoon » | Katherine Rushton, US Business Editor | Wednesday, October 09, 2013

My comment:

The American Dream is over. If the US keep on printing money – and it will under Janet Yellen – the great US experiment will also soon be over too. One can only conclude that the US is on the skids. – © Mark

This comment appears here too.

Dollar Falls to New Low as Markets Await Fed's Next Move
THE GUARDIAN: Ben Bernanke, chairman of Federal Reserve, expected to maintain loose monetary policy

The US dollar has fallen to new lows against other major currencies, undermined by predictions that the US would continue to resist pressure to raise interest rates.

In early trading, the dollar dropped to its weakest level ever against the Swiss franc, having touched a record low against the Australian dollar overnight. It also hit a four-week low against the yen, while the dollar index, which measures it against a basket of rival currencies, was close to its lowest level since August 2008.

The fall came a few hours ahead of the start of the Federal Reserve's monthly two-day meeting to set monetary policy.

City experts believe that this will be a defining week for the dollar. Ben Bernanke, chairman of the Fed, will for the first time hold a press conference on Wednesday evening immediately after the Federal open market committee has voted. Traders expect no change to the Fed's current loose monetary position. » | Graeme Wearden | Tuesday, April 26, 2011

«Bernanke pumpt eine weitere Blase auf»
TAGES ANZEIGER: Der Chef des Bostoner Vermögensverwalters GMO, Jeremy Grantham, hält Aktien für überbewertet und warnt vor grossen Risiken am Bondmarkt.

Wenige Investoren haben in den vergangenen Jahren so viel Klarsicht bewiesen wie Jeremy Grantham. Der Gründer des Bostoner Vermögensverwalters GMO warnte vor 2007 wiederholt vor einem Kollaps am US-Immobilienmarkt und vor einem Börsencrash. Im März 2009, auf dem Höhepunkt der Marktpanik, empfahl er in einem Kundenbrief mit dem Titel «Reinvesting When Terrified» den Kauf von Aktien. Heute ist er skeptisch. Die Aktienmärkte seien als Folge der enorm expansiven Geldpolitik der US-Notenbank bereits überbewertet, während der Bondmarkt für Investoren «tödlich» sei – ein Riesendilemma für Anleger, sagt Grantham. Er rät zum Aufbau von Cashreserven. » | Von Mark Dittli, Finanz und Wirtschaft | Donnerstag, 14. April 2011

Billige Dollar: Schäuble – Die Fed bricht internationale Abmachung
WELT ONLINE: Die US-Notenbank will die Wirtschaft mit der Notenpresse ankurbeln. Finanzminister Schäuble übt daran nun ungewöhnlich scharfe Kritik.

Finanzminister Schäuble kündigt an, die "amerikanischen Freunde" auf dem G-20-Gipfel kritisch ansprechen zu wollen. Foto: Welt Online
Bundesfinanzminister Wolfgang Schäuble (CDU) hat die jüngste Maßnahme der US-Notenbank zur Ankurbelung der Wirtschaft als Bruch internationaler Abmachungen kritisiert. Die großen Wirtschaftsprobleme der USA seien mit noch mehr Schulden nicht zu lösen, sagte Schäuble am Donnerstagabend den ARD-„Tagesthemen“. „Das war übrigens gemeinsame Politik, der sich noch alle Industrieländer, auch die USA, beim G-20-Gipfel in Toronto (...) ausdrücklich verpflichtet haben.“

US-Notenbankchef Ben Bernanke verteidigte dagegen den geldpolitischen Kurs der Federal Reserve. Die US-Notenbank hatte verkündet, Staatsanleihen für 600 Milliarden Dollar zu kaufen. Nach den Worten Schäubles bereiten die USA der internationalen Finanzwelt damit zusätzliche Probleme. Experten fürchten eine ausufernde Inflation sowie eine Verschärfung der weltweiten Währungsungleichgewichte.

„Wir werden das auch in bilateralen Gesprächen, aber natürlich auch beim G-20-Gipfel in der kommenden Woche in Südkorea mit unseren amerikanischen Freunden kritisch ansprechen“, kündigte der Minister an. Die USA wollen mit dem umstrittenen Manöver die Kreditzinsen senken, um auf diese Weise die schleppende Nachfrage anzukurbeln. Die neue Milliardenstütze der US-Notenbank lässt Europas Währungshüter kalt. EZB-Präsident Jean-Claude Trichet stellte am Donnerstag klar, dass die Europäische Zentralbank (EZB) an ihrem Kurs festhält und den Geldhahn allmählich zudrehen wird. >>> dpa/tma | Freitag, 05. November 2010

Widerstand gegen Fed-Chef Bernanke wächst: Bis zu zehn Demokraten wollen keine nochmalige Nominierung
NZZ ONLINE: Im amerikanischen Senat wächst der Widerstand gegen eine zweite Amtszeit von Notenbankchef Ben Bernanke. Mehrere Senatoren von Barack Obamas demokratischer Partei kündigten an, gegen den Kandidaten des Präsidenten zu stimmen.

Eine Woche vor dem Ablauf der Amtszeit des amerikanischen Notenbankchefs Ben Bernanke wächst im Senat der Widerstand gegen eine nochmalige Nominierung. Auch in den Reihen der Demokraten kündigten am Freitag zwei weitere Senatoren an, Bernanke ihre Zustimmung zu verweigern.

Russell Feingold aus dem Bundesstaat Wisconsin warf Bernanke vor, die Finanzaktivitäten genehmigt zu haben, die zur schwersten Finanzkrise seit der grossen Depression geführt hätten. Bernanke habe die Politik von Ex-Präsident Bush mitgetragen, die für die aktuelle Wirtschaftskrise mitverantwortlich sei. Einer der schärfsten Kritiker Bernankes, der unabhängige Senator Bernie Sanders, sagte, mit einer Neubesetzung des Postens könnten auch die Regeln für das Finanzsystem neu geschrieben werden. >>> sda/apa/afp | Samstag, 23. Januar 2010

Bernanke's Rare Intervention Fails to Calm Fears Over Weak Dollar
With the dollar going into steep decline, with the price of gold rising to record levels, with the US’s huge deficit having to be financed through printing money (or ‘quantitative easing’ as they prefer to call it by way of euphemism these days), with Ben Bernanke talking about the dollar “remaining strong” and a “source of global financial stability”, one really has to question the competence, judgment and ability of the head of the Fed – Ben Bernanke! This is, after all, the age of the resurgence of soup kitchens in America, a country in which fifty million Americans are finding it difficult to get adequate nourishment. It is also an age in which bankers continue to pay themselves ginormous bonuses. Surely, this must be the age of ultimate financial mismanagement. Shame on Ben Bernanke! Shame on them all! – © Mark

THE TELEGRAPH: Federal Reserve chairman Ben Bernanke's attempt to shore up support for the US currency failed yesterday as the dollar fell to fresh 15-month lows.

In a rare moment of intervention into the currency markets from America's leading central banker, Mr Bernanke admitted the Fed is watching the dollar "closely" as part of its focus on employment growth and price stability.

Mr Bernanke stressed the dollar will remain "strong" and continue as a "source of global financial stability". >>> James Quinn, US Business Editor | Tuesday, November 17, 2009

Gold Hits Record against Euro on Fear of Zimbabwean-style Response to Bank Crisis
THE TELEGRAPH: Gold has surged to an all-time high against the euro, sterling, and a string of Asian currencies on mounting concerns that global authorities are embarking on a "Zimbabwe-style" debasement of the international monetary system.

"This gold rally is driven by safe-haven fears and has a very different feel from the bull market we've had for the last eight years," said John Reade, chief metals strategist at UBS. "Investors are seeing articles in the press saying governments should deliberately stoke inflation, and they are reacting to it."

Gold jumped to multiple records on Tuesday, triggered by fears that East Europe's banking crisis could set off debt defaults and lead to contagion within the eurozone. It touched €762 an ounce against the euro, £675 against sterling, and 47,783 against India's rupee.

Jewellery demand – usually the mainstay of the industry – has almost entirely dried up and the price is now being driven by investors. They range from the billionaires stashing boxes of krugerrands under the floors of their Swiss chalets (as an emergency fund for total disorder) to the small savers buying the exchange traded funds (ETFs). SPDR Gold Trust has added 200 metric tonnes in the last six weeks. ETF Securities added 62,000 ounces last week alone.

In dollar terms, gold is at a seven-month high of $964. This is below last spring's peak of $1,030 but the circumstances today are radically different. The dollar itself has become a safe haven as the crisis goes from bad to worse – if only because it is the currency of a unified and powerful nation with institutions that have been tested over time. It is not yet clear how well the eurozone's 16-strong bloc of disparate states will respond to extreme stress. The euro dived two cents to $1.26 against the dollar, threatening to break below a 24-year upward trend line.

Crucially, gold has decoupled from oil and base metals, finding once again its ancient role as a store of wealth in dangerous times. >>> By Ambrose Evans-Pritchard | Wednesday, February 18, 2009

SKY NEWS: Bank To 'Print Money' To Tackle Recession

The Bank of England could begin 'printing money' next month in a bid to tackle the recession.

Minutes of the Bank's Monetary Policy Committee (MPC) showed members were in agreement that more radical measures were needed to ward off deflation.

The committee voted 8-1 in favour of the half point rate reduction of the interest rate to an historic low of 1%.

The Bank of England does not actually print money when it moves to increase the amount of cash in the economy.

Instead it engages in a process known as quantitative easing, whereby it creates money to buy up Government securities - gilts - and private sector assets. >>> | Wednesday, February 18, 2009

THE NEW YORK TIMES: Fed Offers Bleak Economic Outlook

The Federal Reserve cut its economic outlook for 2009 on Wednesday and warned that the United States economy would face an “unusually gradual and prolonged” period of recovery as the country struggles to climb out of a deep global downturn.

In gloomy economic projections released by the central bank, the Fed’s Open Market Committee said it expected that the economy would contract by 0.5 percent to 1.3 percent this year, that unemployment would rise to 8.5 to 8.8 percent and that inflation would remain under greater pressure.

Bleak economic data reflecting a sharpening slide in housing, trade, industrial production, spending and employment rates “more than offset” any potential impact from an economic stimulus plan, the Fed said, forcing it to cut its economic outlook. >>> By Jack Healy | Wednesday, February 18, 2009

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The Dawning of a New Dark Age (Paperback – USA)
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