As the conviction grows that the Federal Reserve will adopt a second round of quantitative easing (dubbed by some as “QE2”), I thought it might be helpful to survey some of the different estimates of what effect this might have on long-term interest rates.
Author Archives: James_Hamilton
Causes of the flash crash
Donald Marron calls our attention to the report of the CFTC and the SEC on the causes of bizarre prices at which some stocks traded last May.
When do recessions end?
Warren Buffett thinks the U.S. is still in a recession, declaring in a CNBC interview last week:
I think we’re in a recession until real per capita GDP gets back up to where it was before. That is not the way the National Bureau of Economic Research measures it. But I will tell you that to any– on any common-sense definition, the average American is below where he was before, or his family, in terms of real income, GDP.
I don’t presume to be able to tell Warren Buffett what investment strategies work best. But I can provide some clarity on how economists use the term “recession,” and hopefully shed some light on the issue that Buffett and others have raised.
What’s the Fed signaling?
There’s an aspect of Tuesday’s statement from the FOMC that’s not being emphasized by many analysts.
The fat lady sings
The NBER Business Cycle Dating Committee issued a statement today declaring that the bottom of the most recent recession was reached in June of 2009, with the economy in the expansion phase of the business cycle during the 15 months since then. This confirms the announcement issued by the Econbrowser Business Cycle Dating Committee last April.
What’s holding back employment growth?
I certainly agree that the most important factor holding back employment growth at the moment is low demand for firms’ products and services. But I disagree with those who suggest that this is the only factor.
Links for 2010-09-15
Quick links on sources of job creation, recession probabilities, and alternative ways to access your favorite economic books.
Should the Fed try to depress long-term yields further?
I’ve been sharing with readers my recent research with Cynthia Wu, in which we found that the Fed could likely lower long-term interest rates further by buying more long-term securities, even though the short-term rate is essentially zero and even though the newly created reserves would simply sit idle in banks’ accounts with the Fed. Here I’d like to take up the question of whether such a policy would be desirable.
August auto sales
August auto sales worst in 27 years, declared some headlines. While the statement may be true, I don’t think it’s the best way to summarize what we’re seeing.
Policy tools that could lower interest rates further
Even though the overnight interest rate has been stuck near zero for 20 months, are there options available to the Federal Reserve or the U.S. Treasury to bring longer-term yields down further? I have been looking into this question with Cynthia Wu, an extremely talented UCSD graduate student. We present our findings in a new research paper, some of whose results I summarize here.