Having considered the Fed's pre-crisis approach to monetary control, with its emphasis on interest-rate targets reached with the help of open-market operations, we must now come to grips with the quite different methods it has been employing since, and how the switch to them came about. The…
ONCE UPON A TIME, when my twin brother and I were tots, our father convinced us that he could make a traffic light change from red to green whenever he wanted it to. Raising his hand to the light as we sat at an intersection, he would…
Since the financial crisis of 2007-09, and especially in recent months, Europe and the United States have seen zero and even slightly negative short-term nominal interest rates, and sub-zero risk-free real interest rates (see the figure below). In June I participated in a conference on “Zero Interest…
A new issue of the Cato Journal, which collects the proceedings of last year’s Annual Monetary Conference, was released last week. Those proceedings include a paper by Claudio Borio, head of the Bank for International Settlement's monetary and economic department, which Alt-M readers may find particularly interesting….
Plenty of writers have claimed that the Fed fueled the sub-prime boom by holding interest rates too low for too long after the dot-com crash. But hardly anyone has tried to explain why it did so. Yours truly has taken a stab at it, together with his…