I’ve been emphasizing that the U.S. Federal Reserve has not been printing money in the conventional sense of creating new dollar bills that have ended up in anybody’s wallets. Instead, the Fed has been creating new reserves by crediting the accounts that banks maintain with the Fed. Today I’d like to offer some further observations on how those reserve balances mattered for the economy historically, how they matter in the current setting, and how they may matter in the future.
Author Archives: James_Hamilton
Good news from autos– for now
The price of oil rose from $80 a barrel in September 2007 to average $134 in June 2008. The toll this took on the U.S. auto industry was in my mind an important factor that contributed to the first year of the Great Recession in 2007:Q4-2008:Q3. Given the recent concerns about oil supplies in North Africa and the Middle East, it’s useful to review what happened three years ago and relate it to where we stand at the moment based on the February auto sales data that were just released.
Libya, oil prices, and the economic outlook
What will be the economic effects of this week’s developments in Libya? We have a fair amount of historical experience from which to try to answer that question.
Brent-WTI spread
Lots of action in oil prices today, as the unrest has spread from Tunisia and Egypt– which produce relatively modest amounts of crude oil— to Libya, the country sandwiched between them, and producer of over 2% of the world’s crude oil supply. Rather than try to guess where those developments are going to lead, I wanted today to try to make sense of another equally striking development in oil markets over the last 6 weeks– the disparity between the price of oil in the Midwest United States and that elsewhere in the world.
New indications of inflation
Where are the inflationary pressures?
Money and reserves
I wanted to offer some clarification on stories about all the money that the Federal Reserve is supposedly printing. It depends, I guess, on your definition of “money.” And your definition of “printing.”
Progress report on QE2
We’re now 3 months into the Fed’s new asset purchase program that has been popularly described as a second round of quantitative easing, or QE2. I thought it would be useful to take a look at what has actually changed during the first 3 months of QE2.
Saudi oil reserves may be overstated by 40%
Stuart Staniford calls attention to this story from the Guardian:
The U.S. fears that Saudi Arabia, the world’s largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.
The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom’s crude oil reserves may have been overstated by as much as 300bn barrels– nearly 40%.
Stuart also notes that in his own independent forensic analysis conducted in May 2007 (to which we called the attention of Econbrowser readers at the time), he estimated that remaining reserves in Ghawar (by far the Saudis’ biggest and most important oil field) were overstated by 40%.
The employment news is good (I think)
The Bureau of Labor Statistics reported yesterday that the unemployment rate has fallen from 9.8% in November to 9.0% in January, as big a two-month drop as we’ve seen in the last 50 years (hooray!). But in the same report, BLS indicated that their seasonally adjusted estimate of the number of Americans employed on nonfarm payrolls increased in January by an anemic 36,000 (oh dear!). Reconciling the very contradictory claims is even harder than usual, but I’ll give it a try.
An improving economic outlook
Looking a little better each day.