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GLG News by this Author

The Very Risky Monetary Policy Adopted at the September Fed Policy Meeting

October 16, 2009

Analysis of:Minutes of the Federal Open Market Committee Meeting of September 22-23 2009 | www.federalreserve.gov

The Bernanke Fed's balance sheet has expanded by a lot to ensure enough credit to promote economic recovery after the financial crisis of "08-'09. By different means, it has taken the same policy attitude as the Greenspan Fed following the 2000 stock market crisis. It has been guarding fiercely against the worst possible economic outcome, and rightly so up until now. But it is still afraid to let down its guard now that the economy is better, a miscalculation reminiscent of Greenspan's day.

Effect of most recent FOMC decsion on markets, the economy, and potential for inflation

December 20, 2008

Analysis of:FOMC statement of Dec. 16 2008 | www.federalreserve.gov

The FOMC on Dec. 16 lowered the federal funds rate to near zero, and said it will consider further expand its balance sheet to support credit markets, such as expanding holdings of mortgage-backed securities, implementing plans to lend against asset backed securities of consumer and small business loans, and doing virtually anything else it can think of. The Fed also said that exceptionally low levels of the funds rate would be warranted for some time. All this a confession of desperation in face of weak economic conditions and no discernible inflation. For the short-run it is a positive for credit markets and equities (because it promises more profits from cheap financing of future business opportunities). But in the longer run the further ballooning of the Fed's balance sheet inherent in today's spectacular policy maneuver will make control of later inflationary pressures more difficult. The further weakness of the dollar in the foreign exchange demonstrates that concern.

Implications of Monetary Policy Action of 1/22

January 23, 2008

Analysis of:FOMC statement, Jan. 22, 2008 | www.federalreserve.gov

(1) Reasons, apart from the stated ones, behind today's (1/22) surprise policy action by the Fed.(2) Implications for economy and future policy.

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