Larry Summers, former Director of the National Economic Council for President Obama, recently wrote a Washington Post article advising "What Jerome Powell should say on inflation." To support his latest excuses for the Fed to "hit the brakes some more," he added a strange graph claiming, "The last decade of U.S. inflation mirrors 1966 to ...

With a State of the Union address coming up, nobody could blame President Joe Biden if he mentions January's supposedly huge 517,000 gain in seasonally adjusted payrolls rather than the actual unadjusted 2,505,000 loss. Economist Mark Zandi, long the go‐​to guy for every fiscal stimulus scheme (Democrat or Republican), tweeted the BLS jobs ...

In the first half of 2022, January to June, CPI inflation averaged 0.89% a month (nearly 1%). In the second half, the monthly changes averaged 0.16% (less than two‐​tenth of one percent). Just multiply the average monthly inflation rate times twelve to see that the annual rate of inflation slowed from 10.7% in the first half to 1.9% in the ...

The yield on 10‐​year Treasury bonds fell below 3.5% recently–down from 4.25% on October 24 before the Federal Open Market Committee (FOMC) last raised the top fed funds rate to 4%. The 10‐​year bond yield has been lower than the interest rate on 3‑month Treasury bills for well over a month, leaving the spread between short and long rates ...

Year‐​to‐​year percentage changes in the CPI will always be called "stubborn" in the headlines simply because each new month is averaged together with eleven previous months.
Even on a year‐​to‐​year basis, however, CPI inflation has been falling for All Items Less Shelter (Rent), as I noted in a previous blog. The year‐​to‐​year change in ...

A favorite Wall Street Journal columnist, James Mackintosh, quotes an economist saying that because the price‐​earnings ratio for stocks rises when bond yields fall, "The most capitalist valuation metric in the world, the P/E of the S&P 500, is now just completely dominated by monetary policy." That would make sense if increases in the ...

The Federal Reserve used to focus on holding down "core" personal consumption expenditure (PCE) inflation. The median FOMC projection of core PCE inflation at the June meeting was 4.3% for this year, for example. But the last three reports were well below the FOMC's expected norm for 2022. Core PCE prices rose at an annual rate of only 3% ...

This year marks the thirteenth time since 1954 that the Federal Reserve Board's policy‐​making Federal Open Market Committee (FOMC) began gradually ratcheting up the federal funds rate on bank reserves in a series of recurring steps. Eventually, however, the rate increases always stopped and the FOMC began bringing the "fed funds rate" back ...

In 1997, Former Federal Reserve Chairman Ben Bernanke, while still an academic, wrote a famous historical study for the Brookings Institution: "Systematic Monetary Policy and the Effects of Oil Price Shocks" with Mark Gertler and Mark Watson. It began by documenting that "essentially all the U.S. recessions of the past thirty years have ...

The May 3–4 Minutes of the Federal Open Market Committee earned a welcome relief rally from stock and bond investors, which includes nearly everyone with an IRA or 401(k) retirement account. Why? In my judgement it was because FOMC participants sounded more pragmatic and humbler about predicting and managing the unknowable future. ...

Federal Reserve officials spent months talking‐​up their visions of a linear upward path for the overnight federal funds rate on bank reserves, but with few clues about when the increase might stop or why. But markets do not wait for the Fed to act. The policy‐​making Federal Open Market Committee (FOMC) had done nothing until now except to ...

President Biden plans to tap the Strategic Petroleum Reserve (SPR) for a million barrels a day for six months, describing this as "a wartime bridge to increase oil supply until production ramps up later this year." This is only the second time that the SPR has been used for the purpose Congress intended in 1975 – to counteract temporary spikes ...

Monthly reports about inflation are too often uncritically expressed on a year-to-year basis, such as the percentage change in the consumer price index from November 2020 to November 2021. Relying on year-to-year percentage increases to describe or predict trends in inflation is frequently misleading, however, for reasons I previously ...

Before they were awash with reserves, banks often paid interest to other banks in the "federal funds" market if they needed more reserves to support more lending (due to reserve requirements). Since 2008 and massive "quantitative easing" (buying federal debt with new reserves), reserve requirements stopped limiting commercial bank credit. ...

Another Wall Street Journal editorial once again confuses a rising year‐​to‐​year change in a price index with a monthly inflation rate for November. A chart supposedly "shows how wholesale price have risen every month but one this year on an annual basis." This factoid is said to be "a monumental rebuke" to the Fed, which (because of that ...

Fifty years ago, July 1971, I wrote "The Case Against Wage and Price Control" and sent it to National Review. I was early because I could see it coming. Sure enough, on August 15, President Nixon announced a 90-day freeze on wages, prices, and rents. One year earlier, Congress had granted the President a blanket power to sabotage the price ...

Wall Street Journal columnist James Mackintosh recently contemplated "How to Know When Inflation Is Here to Stay." It concluded with advice to keep an eye on expectations about future inflation. "Inflation expectations can become self-fulfilling," writes Mackintosh, " and are watched closely by the Fed. One-year consumer inflation ...

An innovative new study by economists Raj Chetty, Nathaniel Hendren and Michael Stepner of Harvard University, and John N. Friedman from Brown, asks "How Did COVID-19 Stabilization Policies Affect Spending and Employment?" They deploy microdata from Harvard's Opportunity Insights team, partly funded by the Gates Foundation and the ...

Stock prices fell sharply before the Labor Day weekend, following an astonishing rise from March lows. Information technology stocks in the S&P 500 fell from a peak of 22128.1 on September 2 to 2046.27 by 2:30 two days later. But that was just the equivalent of losing two weeks of gains. Momentum trading had surely pushed some high fliers ...

If Joe Biden were to win the presidency and also a Senate majority, we already know one part of his economic agenda because it has already been enacted by the House. On July 16, 2019 House Democrats voted to raise the federal minimum wage to $8.40 on enactment, then adding $1.10 each year until it reaches $15 six years after enactment. If it ...

In the latest Wall Street Journal survey, economic forecasters "see rising risks of downturn." The cited risks mention two that have dissipated — December stock market declines and fear of endless robotic Fed rate hikes. The single most frequently mentioned risk (four times) is "a worsening trade dispute with China," and a related "slowdown ...

Hillary Clinton’s most memorable economic proposal, debuted this summer, is her plan to impose a punishing 43.4% top tax rate on capital gains that are cashed in within a two-year holding period. The rate would drift down to 23.8%, but only for investors that sat on investments for six years. This is known as a “tapered” capital-gains tax, and ...

The European Central Bank has ballooned its "quantitative easing" bond-buying spree to about 60 billion euros a month, as announced in late January. Judged by a key rationale for QE — namely, to raise inflation to 2% — world markets have already given the plan a resounding vote of "no confidence."
On the first day of QE, 10-year debt was ...

The statistics used to claim that average incomes have stagnated since 1980 also show stagnation since 1968. In the “Economic Report of the President” released on Feb. 19, the White House’s Council of Economic Advisers defines “middle class economics” primarily by the average income of the bottom 90%. “Average income for the bottom 90 percent ...

U.S. inflation was 1.7% over the past year according to the consumer price index, or 1.4% as measured by personal consumption expenditures (PCE). That may sound like good news, yet we are being told it is actually very bad. "The Fed needs a clear strategy for getting the inflation rate higher," warns a recent news report, "after falling short ...

Why are long-term interest rates so low and so similar in so many countries?

Recent yields on 10-year government bonds, according to the Economist, were 2.24% in the U.S., 2.16% in Italy, 2.19% in Britain, 2.28% in Singapore, 2.15% in Israel, 1.98% in Spain, 2.03% in Norway and 1.94% in Canada. ...

Private retirement plans rose to $12.4 trillion in 2012 from $875 billion in 1984. None of it is reported on tax returns. No book on economics in recent times has received such a glowing initial reception as Thomas Piketty's "Capital in the Twenty-First Century." He remains a hero on the left, but the honeymoon may be drawing to a sour close ...

The Japanese economy grew by 4.7% a year from 1983 to 1991, but by less than 1% ever since.

Despite all the media buzz about Prime Minister Shinzo Abe's effort to boost the economy, the first two arrows of Abenomics missed their target. ...

The unstimulating stimulus ignored basic principles of economic incentives. Nearly five years since the recession ended in June 2009, economic policy discussions continue to focus on dubious short-term countercyclical measures to "stimulate demand." The Economic Report of the President for 2014 wastes an entire chapter rehashing the ...

We have all been watching a long mystery with no ending: What the Federal Reserve governors are trying to do, how they intend to do it and why they imagine their efforts will work.

The key questions boil down to two: (1) What target should the Fed aim at, and (2) what policy instruments should it use to hit that target? ...

Those who obsess over income shares should welcome stock market crashes and deep recessions because such calamities invariably reduce 'inequality.'

A recent report from the Congressional Budget Office (CB0) says, "The share of income received by the top 1% grew from about 8% in 1979 to over 17% in 2007." ...