Fiscal Gridlock: Light at the End of the Tunnel? The House of Representatives has just passed a budget deal that will, in principle, avert another showdown on fiscal policy for at least two years. The new deal will increase permitted discretionary spending by $48bn over the next two years. This will replace the cuts that […]
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Rising Velocity of Circulation of Money: A Risk for US Financial Markets
US Monetary Policy Transmission Mechanism: Set to Change in 2014? One of the salient features of the financial environment since the collapse of Lehman Brothers in 2008 has been the ability of the Fed to boost the money supply (M2) without generating inflation. In fact, the opposite appears to have happened: deflation is a still […]
US Monetary Policy: Fed Shifting Focus to Federal Funds Target
US Monetary Policy Communication: Entering a Crucial Period Historically, the credibility of the Fed ultimately hinged upon the implementation of policy measures aimed at achieving its dual mandate. The twin policy goals were bestowed on the Fed in 1978 when unanticipated inflation was wreaking havoc in financial markets and the real economy. Not surprisingly, in […]
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