Category Monetary policy
Why “everyone” should be forced to take Intro Economics
The reason is not what you are expecting. It's because maybe if he had been forced to take Intro Economics, the 12th President of the Federal Reserve Bank of Minneapolis, who holds a PhD in Economics from the University of Chicago, who is a specialist in money and macro, who has a CV that creams […]
Monetary policy as asset prices
As every economist knows, interest rates don't really exist. They are a mathematical construct derived from observed bond prices. Take a really simple example: suppose a bond (OK, a bill, if you want to be picky) promises to pay $100 one year from today. We observe that bond to be trading at a price of […]
The Bank of Canada’s balance sheet reverts to its pre-crisis state
Last Friday's Weekly Financial Statistics release marks the end of the Bank of Canada's policy of providing liquidity to financial markets by means of securities purchased under resale agreements (SPRA). In the first three months following the introduction of these measures in September 2008, the Bank's balance sheet increased by 56%, and almost half of […]
On Canada’s exit strategy
In my previous post, I noted that the Canadian economy was moving towards the end of the recovery phase of the recent recession. But what exactly does that mean in terms of a shift in the government's policy stance? And just when should that shift take place?
What were they thinking? One view
This post was written by Simon van Norden of HEC-Montréal. Krugman on Sunday bemoaned the thinking at the US Fed, writing So I just read the latest speech from Richard Fisher of the Dallas Fed; it’s one of the most depressing things I’ve read lately, and given what I read that’s saying a lot. Much […]
Cash as the real real option — to do anything
Option theory was originally about financial assets called options. A put option is a derivative that gives you the right to sell some asset at a pre-specified price. A call option is a derivative that gives you the right to buy some asset at a pre-specified price. They are called options because you have the […]
Canadian monetary policy if half the world turns Japanese?
The latest Statistics Canada Labour Force Survey confirms the impression that the Canadian economy is recovering well. Inflation is still a little below the 2% target, but should rise as the recovery continues. The Bank of Canada's overnight rate target is at 0.50%, which is much lower than normal, and is clearly negative in real […]
“Fire!” in Noah’s Flood. Optimal scare tactics?
Suppose I were an American blogger. Suppose I had a very large popular following, that believed everything I said. But suppose the people who actually influenced and controlled policy thought I was a total airhead. I'm not sure what I would do, but I know what I would be very tempted to do: yell "Inflation […]
The eurozone pain is mainly in Spain
In a previous post, I charted the employment losses for the G7 countries and noted that while the US was still bouncing along the trough of of a deep recession, the other countries were less badly-hit. But there was an important country missing from that graph – and it wouldn't have been included in a […]
Confidence: In what?
It's a very old argument, and there's some truth in it. Financial crises and recessions are caused by a loss of confidence. And policies that might normally help end the recession might actually make things worse, if they worsen confidence. Confidence in what? The problem right now is that there is too much confidence: in […]
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