Category Monetary policy
Pre- Darwinian Macroeconomics
There are signs of economic recovery. Suppose a year from now it is clear that the economy has indeed recovered. What caused it? Was it: monetary policy; fiscal policy; or did the economy recover by itself? I don't know the answer to that question; nor does anyone else. If you have one world recovery, and […]
Banks, Money, and Debt
"You and I can only lend money if we've got some to lend; but banks can create money and debt simultaneously at the stroke of a pen". Might commercial banks be the cause of the increase in debt over the last few years? Maybe partly, but basically no. You can't just look at one side […]
Bagehot on “Who owns the Fed?”
Who owns the Fed? Is the Fed really privately owned? I don't know, and I don't really care (except perhaps out of idle curiosity). Learning who has really owned the Fed all these years would make little or no difference to how I view the Fed.
Money and debt
Could monetary policy have caused the recent rise in levels of debt? The obvious answer is that loose monetary policy lowers interest rates, which causes people to want to borrow and spend more, and so go deeper into debt. That answer is both obvious and wrong, as I explained in a previous post. Low interest […]
How far out of line is the Canadian exchange rate?
No one knows. There is approximately an infinity of exchange rate models out there, and according to the one(s) used at the Bank of Canada, the CAD is over-valued. I don't think anyone will strenuously object to the notion that the CAD is in some sense too high – that is, higher than what most […]
Sterilised, unsterilised, beggar-thy-neighbour, forex market interventions.
The Loonie has been appreciating recently. This has a number of people, including me, a bit worried. What can/should the Bank of Canada do about it?
Why did debt increase?
Updated below. I have heard the argument so many times: "Low interest rates caused people to want to borrow and spend, and that's what caused debt to increase". It's such a simple and obvious explanation; only someone with a PhD in economics could fail to understand it. Unfortunately it's also an explanation that makes no […]
Risks to Canadian recovery
The Bank of Canada says it believes the recession has ended. Maybe they are right; I haven't checked, but I get the impression that their forecasting has been better than most over the last year. This doesn't mean that output and employment will immediately return to normal, of course. But it does mean, if they […]
Why the Bank of Canada should ‘rise’ interest rates
I don't want tighter monetary policy; I want looser. I don't want the Bank of Canada to raise interest rates, but I do want the Bank to do something that would cause it to want interest rates to rise. I want it to buy real assets. We have become so accustomed to thinking about monetary […]
The June CPI release: Deflation isn’t here, and the chances that it will arrive are receding
The June CPI numbers played out according to form. Happily, the good people at Statistics Canada went to great lengths to point out exactly how and why the y/y headline number was negative, so – with the notable exception of the Globe and Mail – journalists were able to put together stories that weren't teeth-grindingly […]
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