IWETHEY v. 0.3.0 | TODO
1,095 registered users | 0 active users | 0 LpH | Statistics
Login | Create New User
IWETHEY Banner

Welcome to IWETHEY!

New CR: Things the Fed might do to save the recovery.
http://www.calculate...might-fed-do.html

[...]

Professor Krugman weighs in with some analysis: How Much Can The Fed Help?

I think it might be useful to revisit Bernanke's 2002 speech for hints of the roadmap: Deflation: Making Sure "It" Doesn't Happen Here This entire speech is worth rereading. Bernanke suggests several policies (many have been used), but this might be a clue to the next possible action:

One relatively straightforward extension of current procedures would be to try to stimulate spending by lowering rates further out along the Treasury term structure--that is, rates on government bonds of longer maturities. There are at least two ways of bringing down longer-term rates, which are complementary and could be employed separately or in combination. One approach, similar to an action taken in the past couple of years by the Bank of Japan, would be for the Fed to commit to holding the overnight rate at zero for some specified period. Because long-term interest rates represent averages of current and expected future short-term rates, plus a term premium, a commitment to keep short-term rates at zero for some time--if it were credible--would induce a decline in longer-term rates. A more direct method, which I personally prefer, would be for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt (say, bonds maturing within the next two years). The Fed could enforce these interest-rate ceilings by committing to make unlimited purchases of securities up to two years from maturity at prices consistent with the targeted yields.

... if operating in relatively short-dated Treasury debt proved insufficient, the Fed could also attempt to cap yields of Treasury securities at still longer maturities, say three to six years.


In the 2002 speech, Bernanke mentioned the possibility of a "specified period" for holding short rates low, as opposed to the "extended period" language (Irwin suggested this in the WaPo article).

However Bernanke clearly prefers targeting longer term maturities. So if the Fed decides to take action, the FOMC might announce "explicit ceilings for yields on longer-maturity Treasury debt" - just like they do with the Fed funds rate at each FOMC meeting. Although the Fed purchased longer term Treasury securities during the crisis, the FOMC didn't announce an explicit interest-rate ceiling.

[...]


(See the original for embedded links.)

Don't expect interest rates to increase significantly any time soon. Bernanke is going to try to find a way to prevent a double-dip as it seems the Senate is incapable (thanks to Republican intransigence) of meaningful action on the economy.

Cheers,
Scott.
New when the socialist run IMF thinks you are spending too much
its time to take a break
New The IMF is socialist?
Step away from the crack pipe.
New read the line again
the IMF is not socialist, it is run by socialists
New For socialists, they sure do make a lot of decisions that
screw workers.
New you ever meet a lender that didnt?
New Yeah.
But it wasn't a bank.

And neither is the IMF... but they sure do like nailing it to poor brown people. It's like what they say about trickle-down economics... "yeah, I know they've been doing trickle-down economics... I've been being trickled on for years!"
Expand Edited by jake123 July 9, 2010, 11:14:43 AM EDT
     CR: Things the Fed might do to save the recovery. - (Another Scott) - (6)
         when the socialist run IMF thinks you are spending too much - (boxley) - (5)
             The IMF is socialist? - (jake123) - (4)
                 read the line again - (boxley) - (3)
                     For socialists, they sure do make a lot of decisions that - (jake123) - (2)
                         you ever meet a lender that didnt? -NT - (boxley) - (1)
                             Yeah. - (jake123)

_ZN4_STL4tanhERKNS_7complexIeEE has been targeted for automatic cpu dispatch.
147 ms