Pay attention to what the economists Anat Admati and Martin Hellwig have been saying for years: Focus on leverage not risk-adjusted assets. US financial regulators have been working on what’s optimistically known as Basel III Endgame – the long, slow effort to reform global banking rules following the crash of 2008. They’re apparently getting ...

Consumers consider the cost of money part of their cost of living, but most calculations of inflation don’t factor in the impact of changes in interest rates. The apparent disconnect between the state of the US economy and voters’ perceptions of it has puzzled economists for months. Unemployment is low, inflation has come way down and real ...

Automatic stabilizers and a non-partisan fiscal council could help public borrowing respond more effectively to business cycles. Federal Reserve Chair Jerome Powell briskly dispensed with the idea of raising the central bank’s inflation target in his speech at the Jackson Hole conference last week. But the idea isn’t going away. It has ...

The central bank was right to raise interest rates, but the chairman’s explanation is puzzling. The Federal Reserve embarked last week on its long-advertised monetary tightening: a quarter-point increase in interest rates, with the suggestion of six more by the end of the year, and a plan to run down its stock of government debt (details ...

MMT correctly acknowledges the problem of rising prices, but it offers no plausible solution. The squabbling over whether Modern Monetary Theory is a Copernican revolution for public policy or a load of nonsense hasn't been very enlightening. The prevailing sentiment in both camps — "You just don't get it" — is a declaration of faith that ...

The post-pandemic era of monetary policy will likely be very different. Whether that’s a good thing is anyone’s guess. The coronavirus crisis is quite likely to void the contract under which the U.S. Federal Reserve and the world’s other main central banks have operated for decades. As the full costs of the pandemic emerge, the main idea in ...

It should change not only the way it makes policy but also he way it talks about it. In the past couple of months, the flaws in the Federal Reserve';s management of the economy have become hard to ignore. The central bank's current way of doing things is increasingly self-defeating. To its credit, the Fed seems to realize this and is conducting ...

When central banks start exploring strange new worlds, the results aren't always ideal.Quantitative easing wasn't just a change in monetary policy, but a whole new kind of monetary policy -- a journey into the unknown. It isn't over yet, but there's already a debate about drawbacks and unintended consequences. With that question far from ...

Calling on any nation to repudiate its history is asking a lot. Asking this of the United States -- a country that is animated, more than most, by its great national myths -- may be asking the impossible.This was the thought that stayed with me after reading Ta-Nehisi Coates's "Between the World and Me" earlier this year. Protests at ...

My Bloomberg colleague Michael McKee asked a really good question at Janet Yellen's press conference Thursday: If the Federal Open Market Committee expects below-target inflation for years, why do most its members think a rise in interest rates before the end of this year is called for?The headline from the statement was that interest rates ...

With both sides said to be drawing up final proposals, and a definitive debt crunch thought to be imminent, the months of brinkmanship over Greece may at last be drawing to a close. But who knows, really? You might think making this shambles any worse would challenge even these principals. I don't know. I think they're up to it.
Whatever ...

Let's agree, for the sake of argument, that severe inequality is a bad thing in its own right. Does it also act as a drag on the economy? Recent research suggests it does, and calls into question the standard justification for tolerating rising inequality -- namely, that it's the price a society must pay for economic growth and ...

The Brookings Institution has just republished a classic study on economic policy -- Arthur Okun's "Equality and Efficiency: The Big Tradeoff," which first came out in 1975. It's a favorite book that really shaped my thinking. Re-reading the new edition I thought it had lost none of its force. If anything, I think it's gained some.
A lot about ...

In his excellent new blog, former Federal Reserve chairman Ben Bernanke argues against the view that the economy is caught in a trap of persistently slow growth -- "secular stagnation." He discusses a paper by James D. Hamilton, Ethan S. Harris, Jan Hatzius and Kenneth D. West, which anybody interested in the subject should read. It's the ...

The U.S. Federal Reserve wants to get monetary policy back to normal without scaring or surprising the financial markets. Now, try defining "normal," and you can see it's going to be difficult.
A vital instrument of abnormal monetary policy has been the promise to keep interest rates at (roughly) zero for an extended period. Once rates have ...

Every central bank tries to steer expectations about monetary policy. If businesses and consumers expect the Federal Reserve to let inflation surge out of control, the chances are fair that inflation will surge out of control. If they expect the Fed to keep inflation on track, inflation is more likely to stay on track. Shaping expectations ...

John Williams, president of the Federal Reserve Bank of San Francisco, gave a good interview to the Financial Times this week. Williams is seen as a moderate on monetary policy, a centrist on the dove-hawk spectrum. He thinks the economy is now close to full employment and the time for raising interest rates is getting "closer and ...

My Bloomberg View colleagues Megan McArdle and Noah Smith have been discussing whether it's all right to call somebody stupid. Larry Kotlikoff got them started by attacking Paul Krugman for calling Paul Ryan stupid. No, Paul Ryan isn't stupid, said Kotlikoff. "No one, and I mean no one, deserves to be called stupid." When I see four ...

{The Congressional Budget Office's report on the effects of a higher minimum wage has caused gnashing of teeth on the left. It was bad enough when the CBO said the Affordable Care Act would reduce employment. Now this? The CBO's non-aligned economists say the proposed increase to $10.10 would lift around 900,000 people out of poverty, ...