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John Taylor challenges Ben Bernanke's defence of why he and Greenspan at the Fed kept interests rates too low for too long thus helping create the housing bubble. Bernanke ignored the Taylor rule which at the time would have called for increasing interest rates, using forecasted inflation which turned out to be too low rather than actual inflation as the Taylor rule would call for, and which had been used says John Taylor in the previous 20 years for proper central bank interest rate policy actions.

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Michael Barr was appointed in July 2022 to the Federal Reserve Board of Governors by president Biden, and made the vice chair of financial supervision. As a legal scholar at the University of Michigan with a number of books published on the plight of black Americans after the financial crisis of 2008, he is familiar with the problems created by banks from a laissez fairre approach to regulation.  Barr helped write the rules for the legislation on supervision of banks after the financial crisis of 2008 that hurt worker and families, and minorities particularly in places like Detroit. He is now responsible for correcting the problems created by the Trump legislation that exempted banks under $250 billion from this regulation. Barr will bring this down to $100 billion, the original 2008 legislation has a threshold of $50 billion for banks to be subject to oversight by the central bank and stress testing. In 2018 Barr said about Trump's legislation to limit regulatory oversight in an op-ed in American Banker- "The rules (after 2008) were not meant to apply only to the largest handful of systemically important firms. It is the very antithesis of macro-prudential supervision to focus only on the largest handful of financial firms and to ignore risks elsewhere in the system." ...

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Hilsenrath describes how the Federal Reserve missed the signs of the mortgage financial crisis of 2008, the bubble economy, and how low interest rates and other actions of the Fed to rescue the economy led to a situation which hurt savers. The lack of a serious plan for homeowner rescue as part of the actions by the government further hurt the working and middle class. The rescue also lacked credibility because the banks ended up becoming bigger than they were, and no action was taken in the U.S. which had been pushed by the U.S. in similiar situations overseas- for example on South Korean banks for overborrowing during the 1997 Asian financial crisis.  At the 2014 Boston Fed sponsored conference on Inequality, Fed chairman Janet Yellen described what she called the largest inequality in the U.S. not seen since the 19th century. The average net worth of the lower half of the distribution, said Yellen, of 62 million households, was $11,000, and a quarter of them had zero net worth. These were the shocking statistics that propelled two unlikely outsiders forward- Donald Trump to the Republican nomination for president, and Bernie Sanders who coming close to getting the Democratic nomination settled for a big part of setting the Democratic agenda supported by nominee Clinton in 2016. ...

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Having missed the housing bubble how likely is it that the Fed will catch a bubble in the stock market in the future?

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The U.S. vice presidential debate between Mike Spence and Tim Kaine showed Kaine focussing attention on Trump's crude attacks on women, praise for Russian president Putin, and opposition to the minimum wage. Spence's tone was measured and his focus was on deflecting the attacks on the crude language used by Trump in the campaign by saying Trump was "not a polished professional politician," like the others, and not responding to the Kaine references to Trump. Spence stuck to issues about immigration open borders, abortion, president Obama's inaction in Syria, the plight of workers in Scranton, Pennsylvania. He did not respond to repeated questions on Trump's failure to disclose his tax returns and his business failures leading to close to a billion dollars in losses and not having paid taxes for 18 years, as disclosed by the New York Times. Spence had to choose between hurting his own chances for reelection with the traditional Republican voters alienated by Trump and standing up for Trump's crude language against women and minorities. He deftly tried to the best using his skills as a radio broadcaster. Kaine who is usually more measured and thoughtful, had to choose between his traditional style of speaking and the role he was expected to play bringing to the public's attention the crude language and style of the Trump campaign and the instability reflected in it. He used his skills as a litigator to ask repeated questions on Trump, especially on the taxes, which leads to questions about funding infrastructure development and jobs without the wealthy paying their share of taxes. ...

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Janet Yellen, Fed chairwoman, says the financial system is safer now after the financial regulation, stress testing, living wills and other changes that the Federal Reserve has implemented. She says there is no need for a reduction in these key regulatory rules. One of the changes is that banks now use a safer mix of financing- equity financing has doubled for capital, and wholesale borrowing is cut in half, since the 2008 financial crisis that took the U.S. and with it the global financial system to the brink of disaster. The appointment of Randall Quarles to the Fed by the Trump administration was intended to  reduce regulation, and this is Yellen's response to such proposed ideas. 

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Who is Nandalal Weerasinghe? This report in The Daily News gives some idea about the man chosen to help Sri Lanka negotiate a deal with the IMF.  Dr. Nandalal Weerasinghe was an alternate executive director at the International Monetary Fund before being appointed deputy governor of the Ceylon Central Bank in 2012. Before this he managed several macroeconomic departments at the central bank and was assistant governor of the central bank from 2007 to 2009, He has spent the large part of his career in economic positions at the Central Bank of Ceylon after getting his PhD in economics from the Australian National University. Weerasinghe is the leading expert in macroeconomics from Sri Lanka who has IMF experience. He says "things will get worse before they get better." He retired early from the central bank with a change in government in 2019. He was reappointed as Sri Lanka faced a debt crisis in March 2022 following the two year long pandemic, and the Ukraine war in 2022 that was bad for emerging market economies. Weerasinghe says about the crisis facing Sri Lanka- Recent decisons followed Modern Monetary Theory. This has dire consequences. In recent times the savings brought about by the low tax and interest rate regime passed savings on to the corporate sector and took away spending power from savers and pensioners. Surging inflation made things even worse for the lower income middle class and older parts of society. Years of accumulated debt have brought Ceylon to this point. In Ceylon one is seeing the effects of savings being passed on to the corporate sector in an economy dependent on tourism and remittances from overseas workers, both hit by the two year long pandemic. This is part of  a trend that has hurt emerging market economies from Argentina and Pakistan which also turned to the IMF to Turkey.  In other countries in the European Union savings also passed on to the corporate sector with low tax and low interest rate regime. With high inflation resulting in the cost of living crisis seen today in France and Germany. This type of policy that Weerasinghe calls 'Modern Monetary Theory' is not healthy for the European Union and the US, as these policies led to the neglect of much needed and vital investments in infrastructure, health and education. Only now are these effects being corrected by new administrations of Biden in the US and Scholz in Germany, with Biden's 2 trillion plan for workers and families, and a similar plan from chancellor Scholz. With this come needed investments to tackle climate change, all of which was neglected before. India has taken a different approach. By following good governance, managing vaccination effectively during the pandemic, social emphasis for food, water, electricity, cooking gas, medicine for the vast population of 1.2 billion, and a Master plan for building Made in India manufacturing,  India has avoided such crises and maintained strong economic growth. In this sense it is a model for South Asian, South East Asian, African, and Latin American emerging market economies that face a difficult situation today. Good governance is critical.   ...

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In a policy shift the Bank of England's Governor, Mark Carney, announces that the central bank will keep interest rates low and bond purchases at the current level till the unemployment rate drops to 7%. This is similiar to the policy action of the U.S. Federal Reserve chairman, Ben Bernanke, to keep interest rates low till the unemployment rate reaches 6.5%. Carney said conditions under which this could change are if inflation increased or financial stability was affected by the easy monetary policy. He said: "Our biggest concern is the possibility that as the recovery gathers pace, that there is an unwarranted change in expectations about the pace of the withdrawal of monetary policy stimulus." "That is one of the principal points of providing explicit forward guidance." BOE said the official unemployment rate was 7.8% in the three months to May, and it is unlikely to decline to the 7% level till early 2016. The inflation rate for Britain was 2.9% in June. The higher inflation rate is partly due to the higher taxes and large increase in university tution fees which are unlikely to be repeated. The BOE's Monetary Policy Committee sees inflation declining to 2% by 2015....

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At 79 years, Wilbur Ross will be one of the oldest people serving in any administration, as he serves as Commerce Secretary in the Trump administration. Wilbur Ross is best known for the turnaround efforts in the steel industry. In 2002 he acquired LTV Corp, a third largest steel producer in the U.S. facing tough times and legacy costs, for $125 million in cash and $200 million in environmental liabilities. In 2005 he sold his International Steel Group to Arcelor Mittal for $4.5 billion, and is still an independent director on the Arcelor board. Ross's earlier experience was as a bankruptcy specialist at Rothschild Inc. in the 1970's working on restructurings at Texaco, TWA and Continental Airlines. Analyst Charles Bradford is cited in this report by WSJ's John Miller, who competed with Ross in restructuring proposals for failing assets, and describes Ross as working harder and being tougher to make the deals. Some of these restructurings involved cutting pensions and large layoffs. The entire U.S. steel industry faced problems from foreign competition and legacy costs at the time. This included representing bondholders for Taj Mahal Casino in Atlantic City. At the time Ross told creditors considering seizing the asset for a possible missed payment that it would be better to keep Trump in charge for Trump properties as they would be worth more with Trump inside. This led to Ross later providing critical backing for the Trump campaign and raising money from the business community. Mitt Romney had similiar work at Bain Capital in turnaround of failing companies, later turning to politics as Governor of Massachusetts, and 2012 Republican nominee for president. Both Romney and Ross have come under criticism for their role in cost cuts at companies involving layoffs and cutting worker benefits. ...

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Jimmy Carter comes back to us from a different era. He was born in a tiny town of Plains, Georgia, in 1924 and grew up on a family farm in a home that lacked plumbing, electricity, as a boy.  Jimmy Carter attended college for 2 years in Georgia, then enrolled at the US Naval Academy graduating in 1946. It shows the changes happening in the US with Franklin Roosevelt and Harry Truman in the efforts to industrialize America, bringing electricity and new opportunity for college education to rural areas in 1932-1952 which continued with highway systems under Eisenhower 1952-1960.  Carter also led the unwinding of the Democratic party with roots in the Roosevelts-Wilson era since 1902, going back to Teddy Roosevelt who as a Republican pushed hard for integrity, pro worker and antimonopoly policies in the administration. A process that went on with another Southerner, this time from Arkansas that led China's entry into the WTO and world trade without any safeguards for American workers 1992-2000. Policies that went unchanged under another Democrat Obama in 2008-2016. Instead of staying in the Navy he joined his family's peanut farm business in 1953, followed by running for governor of Georgia and grasping the opportunity to run for president as an evangelical from the South to bring moral integrity to the White House.   ...

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DW.com sees the choice of Timothy Kaine for Democratic vice presidential nominee as a safe choice, with no effort to mobilize the base activated by Bernie Sanders using a choice from that segment of the party. Both Hillary Clinton and Timothy Kaine come from the moderate wing of the party. This is likely to help Hillary Clinton in the swing state of Virginia. Kaine's choice may also be a way to balance the more serious Clinton with the sunnier disposition and campaigning energy of Kaine. To bring a different set of campaigning skills from Kaine- conveying a positive message for Democrats on how they could help the middle and working class, and appeal to independent undecided voters.

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The different opinions of Fed Governors of Kansas City and Boston show the divergence of opinion that is being heard by the Fed chairman Jay Powell as he plans smaller interest rate increases in 2023. Susan Collins of the Boston Fed is concerned about the effects on unemployment. Kansas City Fed's Esther George is concerned about the Fed not staying in the fight against inflation long enough. Powell says "We wouldn't ... try to crash the economy.. and then cleanup afterwards. I wouldn't take that approach at all." The difficult aspect of the interest rate increases is that it takes about 1 year to know the full effects of rate increase.

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Former Louisiana fovernor Bobby Jindal comes under severe criticism from the Washington Post for policies it says hurt the poor by turning down federal Medicaid funds under Obamacare, for using rainy day funds, and cutting spending on education and other needed programs in the state. It says Jindal pursued Grover Norquist's no tax pledge leading to spending cuts in the state and budget gaps, merely to appeal to voters in the GOP presidential primaries. Jindal's appeal to Republican voters actually fell sharply because of unpopular policies and he did not qualify for participation in the presidential televised Republican debates. Republican voters turned to outside candidates such as Trump, Carson and others.

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How the ECB provided a good hand in handling the recent credit crisis under its Chairman Trichet. Details of the way the crisis evolved and how ECB responded. The decisive action by Trichet and the six governors and the work by ECB staffers leading to that action, lending about 95 billion euros to calm the financial markets in Europe, has increased the confidence in the ECB and the euro. Since the ECB is a new institution formed in 1998 and the euro a new currency, this is one of the first occasions when the ECB had to meet a challenge of this nature after the subprime exposure of European banks led to a general loss of confidence.

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Tim Kaine tells the audience at the Democratic National Convention that Hillary Clinton was in Spanish "lista" which means ready, the biggest compliment he said in Latin American life from his days in Honduras. He used Spanish frequently during his speech at the convention.  Kaine wins good marks for his knowledge of Spanish. Other politicians have used Spanish in an awkward way, failing to sound authentic, including president George W. Bush and Mayor De Blasio of New York.

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The results of the February 24, 2011, CBS/New York Times poll show strong support for public workers in schools, firefighters, police and other functions. On collective bargaining 60% opposes weakening the bargaining rights of public workers, only 33% support it. On reducing the benefits and pay of public workers to reduce deficits, 56% opposed cutting pay or benefits, only 37% support it. Are public workers overpaid or have overly generous health and pension benefits. On this issue 61% -including over half of Republicans- say the salaries of public workers were either "about right" or "too low" for the work they do. So how are states to reduce their deficits? The people polled say they prefer tax increases over benefit cuts for public employees- only 22% chose to reduce the benefits of public employees, 40% said they would increase taxes, 20% said they would cut financing for roads, only 3% said they would cut financing for education. How this breaks down in politcal groups. 71% of Democrats opposed weakening collective bargaining rights, the opposition was also strong from Independents with 62% of Independents opposing weakening of collective bargaining rights. Followup interviews showed independents saying the public workers work hard and still struggle to have a home, saving for retirement, and sending their kids to college, with both spouses generally having to work, which is why they oppose weakening collective bargaining rights. Which segment of the populations support cutting pay and benefits of public workers? The one income group that showed support for cutting pay and benefits- those earning over $100,000 a year! There 45% said they favored cutting pay and benefits, even here 49% opposed it. On the intentions of the governors and state legislators trying to cut pay or benefits of public workers- 45% said they did this to cut the deficits, and as many as 41% said the saw this as an effort to weaken unions. Which takes one to the last question, so how are unions perceived in the U.S. in 2011? A far smaller number of people, 37% saw unions as having "too much influence" on American life and politics vs. 48% who said that unions had the "right amount" or "too little" influence....

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David Reilly says the Fed's response to the large volatility in the stock market after the credit downgrade of the U.S. to AA+ makes sense. The Fed's Open Market Committee voted 7-3 on August 9, 2011, to keep interest rates exceptionally low till mid-2013. With credit markets working and the financial system having sufficient liquidity the Fed did not need to take drastic action. Coming only a short period after the end of QE II, a QE III could be seen as an over-reaction. Another reason for the Fed's action- more pressure was needed for the U.S. government and Congress to shoulder responsibility for the economy. In an earlier statement the Fed had pointed out that the Fed by itself can only do so much and this is consistent with that thinking. There are important headwinds from housing, large consumer debt, deficits, and high unemployment that the Fed alluded to in that statement that will take time to reverse with policy action on several fronts over a longer period. In the speech made on June 6, 2011, U.S. Federal Reserve chairman, Ben Bernanke, said "monetary policy cannot be a panacea."...

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Experts compare the performance of two states with thriving economies California and Texas, but run by governors who are different, one passionately liberal Democrat and the other passionately conservative Republican. The Texas economy is slowing following the drop in oil prices. The Dallas Fed has lowered the forecast for growth in Texas to 0.5%-1% from the 1.5% rate projection. This compares with a growth rate of 3.4% in 2014. During the economic downturn following the financial crisis of 2008, Texas was lucky to have laws that prevented the kind of housing bubble that happened in California. It also benefitted from high oil prices. California has recovered from the worst effects of the crisis with unemployment dropping from 12% in 2011 to 6.3% in 2015, and half million jobs added in the last 12 months. Many of the jobs are in the higher paying tech sector. Critics point to the weakness in education and lower paying jobs in Texas. Texas has diversified ite economy since the 1980's, with about 13% of the state's GDP from the oil and gas industry in 2015 compared to 19% in the earler period. ...

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This opinion by Mr. Swain, editorial page writer at the Wall Street Journal says it is regrettable that the expert class in America has failed to acknowledge its errors or conduct self-criticism. A new generation of journalists, think tank authors, and experts, will soon replace the old. They, he says, will make a fair assessment of the Trump years and look at their forerunners as acting in crucial moments, as idiots. He offers an alternative view of lockdowns as hurting the economy and causing a sharp recession in which people had to go without income, and some even hungry. To support this he says many parts of the country did not lock down and managed to keep hospitals running fine. California and New York with Democratic governors and large numbers of Democratic voters have borne the brunt of the pandemic in America. He points out the changes in the Middle East with policy that has brought Israel and the Arab world closer. The wars in foreign lands that are no longer being fought wasting precious resources. Democrats and the news media acted to consider Mr. Trump's election as illegitimate and the result of collusion with a Russian president, says Swain, till the Mueller investigation proved this to be not true. The real reason for Trump's election being that the Clinton-Obama Democrats had neglected working class interests and sent jobs overseas, and the Democratic party had shifted far from its working class base. That there is much for reflection in both political parties is stated in this view as the Democrats rush to a second impeachment Feb. 9, after president Biden has setup his new administration, and in the middle of a national emergency pandemic.   ...