Tag: Interest rates

Presidents Disagreeing with the Fed is Nothing New


President Trump, in his usual way of speaking, told Joe Kernan of CNBC that he doesn’t necessarily agree with the Federal Reserve’s raising of interest rates. This act, known alternatively as “moral suasion” or “jawboning,” has actually been happening for a while. Economic adviser Larry Kudlow did almost the same thing on Fox News three weeks ago.

Criticism has been coming in from many quarters, not all from the usual sources. Keith Hennessey, formerly of the Bush 43 White House, “disagree[s] with President Trump on every aspect of this.” Most of the claims are that this breaks from a long-standing tradition. But for how long? Pres. George H. W. Bush blamed Fed chair Alan Greenspan for his electoral loss in 1992, a theme that his administration began as early as 1989. President Ronald Reagan in 1981 told a group of supporters, “The Fed is independent, but they’re hurting us.” Perhaps the most famous act, done more privately, was when LBJ shoved then Fed chair William McChesney Martin around a room, shouting at him, “Martin, my boys are dying in Vietnam, and you won’t print the money I need.”

This reticence of presidents to talk about the Fed, then, is fairly recent history, started by Bill Clinton’s Treasury secretaries Robert Rubin and Larry Summers. Greenspan having enough credibility to be called a maestro probably stayed the hand of Bush 43’s staff (you might argue they needed to jawbone rates higher) and the Obama White House used breakfasts to persuade Bernanke and Yellen in private more than with public statements.

Janet Yellen’s Back-to-the-’50s Interest Rates


Janet Yellen told us last week that the fed funds target rate will be raised slightly later this year. But after that, future rate hikes will be small and gradual over the next several years. In fact, we may never have true normalization (4 percent). In my view, Yellen is offering a back-to-the-’50s approach to interest rates. And she’s right, though for many wrong reasons.

For average folks, what might this policy mean? I’ll take a guess: No boom and no bust. No inflation and no recession. All the post-war recessions were preceded by an inverted Treasury yield curve, where short rates are higher than long rates. That won’t happen for many years. Plus, upward oil-price spikes lead recessions, but we’re now in a downward energy-price cycle.

Member Post


Russia has spiked its interest rates to 17% from 10.5%, the largest single increase in Russian interest rates since 1998 (shortly before Russia defaulted on its then extant debt and debauched its ruble) in an effort to stop the hemorrhaging of its ruble, which has spiked down 49% this year. It raises a couple related […]

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Coming Up Next on That 70s Show: Stagflation?


shutterstock_167938691Last week, the European Central Bank lowered interest rates — to negative 0.1%. “What,” you may ask, “is a negative interest rate?”

As the New York Times explained before the move,

When a bank pays a 1 percent interest rate, it’s clear what happens: If you deposit your money at the bank, it will pay you a penny each year for every dollar you deposited. When the interest rate is negative, the money goes the other direction.