The Mysterious Case of the Misfiring Monetary Policy

By Karen Shaw Petrou

When former Fed Chairman Bernanke launched a new approach to U.S. monetary policy earlier this year, he prompted many within and outside the U.S. central bank to call for sweeping change that would solve the “mystery” Janet Yellen says bedevils post-crisis monetary-policy transmission.  Just like the blue carbuncle Sherlock Holmes eventually found inside a large goose, central bankers are searching for a new gemstone within reams of data by which to guide increasingly complex policy-transmission channels.  Continue reading “The Mysterious Case of the Misfiring Monetary Policy”

Why Liberal Economics is to Growth and Systemic Risk as the Clinton Campaign was to Winning the White House

By Karen Shaw Petrou

At its October meeting, the IMF’s economists pronounced that global economic prospects are “benign,” with financial risks well within acceptable bounds, at least for now.  But, as Martin Wolf said the following Friday in the Financial Times, the meeting’s mood was anything but calm and confident.  Why?
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Why “Full” Employment is an Empty Promise

By Karen Shaw Petrou

In her speech on September 26, FRB Gov. Brainard deploys a lot of data to raise, but then duck, what I think is the most critical question about post-crisis monetary policy:  Is U.S. employment really “full” enough to justify wider wealth inequality that is in part the Fed’s fault?  Chair Yellen and others defend quantitative easing (QE) and ultra-low rates on grounds that U.S. “full” employment will eventually be matched by growth, consumption, and resilient, robust recovery.
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What $4.5 Trillion Can Do – But Not for You

By Karen Shaw Petrou

Following the Federal Open Market Committee (FOMC) meeting of September 19-20, Chair Yellen admitted that she really didn’t understand if the Fed’s $4.5 trillion portfolio had any role in the slow-go U.S. recovery.  Many have since remarked on the startling fact that the Fed to this day is not sure if quantitative easing (QE) works and, if it does, how.  And, despite all this uncertainty, the Fed appears bent on keeping at least a few trillion in its hands just in case – presumably even if it didn’t work this time around, maybe it will the next time the U.S. economy needs a bit of a boost, or so the Fed seems to think.
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