Every once in a while Barataria has to take a pause from deep economic rumination. It’s time rundown the odd stories that may not have received enough attention elsewhere. There is a lot of news in these chaotic times that smells like it may be important one day but hasn’t quite bubbled up to the level where it hits the mainstream yet. This is just one of those days.
Monthly Archives: November 2013
The “Facts” are Failing
Back in the 1950s, people who studied complex things like economies felt they were making real progress. The general belief was that by understanding how it all worked we could even things out and usher in a new era of continuous prosperity that would benefit everyone.
Some of the underlying “facts” that were identified at this time have been accepted as simple truths. Growth is always good, and economic growth always flows to workers, making their lives better generation by generation. There’s only one problem lately – some of the “facts” appear to not be as true as they used to be. That means that the underpinnings of modern economic theory are all being questioned and, perhaps, if we don’t keep our eyes open the new era of prosperity will be far more elusive than anyone thought.
Fed Funds Future Foggy, Fudgy
The stock market is surging on solid corporate profits. Jobs are being created, if a bit slowly. Should the Federal Reserve continue its policy of Quantitative Easing? The short answer is probably not. But the policy of buying $85B in mortgage backed securities is continuing, at least for the foreseeable future. And with Janet Yellen, the Fed Vice Chair, slated to replace Ben Bernanke in January we have every reason to believe that the policy will continue.
It’s time to examine how the Fed sets their benchmark interest rate, the Fed Funds Rate, and what we can reasonable expect them to do with it in the near future. It shows just how much the Fed is really in charge of the economy – absent a Federal Government that is doing what needs to be done.
Barataria - The work of Erik Hare 