Some analysts are saying that Fed Chair Ben Bernanke is walking a tightrope– if he does not drop interest rates quickly enough, the U.S. will be in recession, but if he goes too far, we’ll see a resurgence of inflation. I am increasingly persuaded that’s not an accurate description of the situation.
Monthly Archives: February 2008
Musings on the Dollar: PPP and Thresholds
As the dollar hits a new low against the euro [0], some thoughts on what arguments make sense, given our knowledge of the statistical properties of real exchange rates.
House prices falling and worries rising
Today we received updates on U.S. house prices from two different sources. The OFHEO national house price index recorded a 1.3% decline in the price of a typical U.S. home during the fourth quarter of 2007, while the S&P/Case-Shiller home price index registered a 5.7% decline during the last three months of 2007. Here in San Diego, the respective numbers showed a 2.6% decline according to OFHEO and 9.1% decline from Case-Shiller during the quarter. For the year as a whole, Case-Shiller calculates that home prices fell 9.8% nationally and 15% locally.
What Explains Deviations from Interest Rate Parity in Emerging Markets?
Some people have the impression that financial capital zips to wherever the returns are highest. Maybe that’s the case. But I’m not sure.
Crony Capitalism Comes (Returns?) to America
Did somebody say stagflation?
Five weeks ago I asked, Will inflation fears restrain the Fed?, and my answer was that they would not. Certainly inflation fears did not prevent the Fed from lowering its target for the fed funds rate by 125 basis points since I offered that assessment. But I believe that this week’s data will force the Fed to be more cautious about the magnitude and pace of subsequent rate cuts.
Iraq rationales: WMDs, Fighting Terrorism, Democracy, Military Keynesianism
From FT yesterday:
$100 a barrel
Crude oil reached a record high on Tuesday, and there’s an embarrassing oversupply of theories to explain why.
Trade, Exchange Rates and Pass Through
Some thoughts on what to make of the trade and export/import price releases.
What you see is what you get
Another week to read what you like into the economic tea leaves.