U.S. Economy

U.S. Economy

How Has a Decade of Extreme Monetary Policy Changed the Banking System?

To stem the financial crisis, the Federal Reserve purchased massive volumes of Treasury and government agency MBS, ballooning the Fed’s balance sheet to $4.5 trillion. The Fed kept nominal interest rates close to zero. Even now Fed policy rates are negative in real terms. Banks have accumulated $2.34 trillion in reserves balances that earn interest from the Fed while adapting to a myriad of new post-crisis regulations. How has a decade of exceptional Fed monetary stimulus and the regulatory efflorescence affected the US banking system?


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Posted: October 20th, 2017 | Permalink

Tax Reform Is Critically Important

"First, we will cut taxes for everyday, hardworking Americans,” said President Trump. “Under our framework, the first $12,000 for a single individual and the first $24,000 for a married couple, will be tax-free. …The second plank of our tax framework is to make the tax code more simple, fair, and easy to understand… Third, we will cut taxes on American businesses to restore our competitive edge and to create more jobs and higher wages for American workers. …Finally, our framework encourages American companies to bring back the trillions and trillions of dollars in wealth parked overseas. Trillions of dollars."  

 


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Posted: October 13th, 2017 | Permalink

Obama's Fiscal Legacy

“The cumulative 2009–19 budget deficits are set to end up at $8.93 trillion—$4.6 trillion higher than projected for the same time period when Obama took office. This consisted of $5 trillion in new legislation, partially offset by $400 billion saved by economic factors and technical changes. The economy grew more slowly over this decade than had been projected in 2009. …The Affordable Care Act (ACA) has reduced the 2009–19 budget deficit by $275 billion, as its steep tax increases and Medicare cuts exceeded the cost of new health benefits.”


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Posted: October 11th, 2017 | Permalink

Harvey and Irma Remind Us of the Importance of Energy Infrastructure

“In the wake of Hurricanes Harvey and Irma, Americans from all walks of life set aside their differences to help those in need,” wrote Craig Stevens. “Their example should send a message to policymakers. For too long, Washington has put barriers in the way of the country’s energy infrastructure demands, discouraging investment and ultimately putting communities at risk. It’s time for a paradigm shift. It’s time government regulators partner with the private sector to build the energy network necessary to ensure the United States’ long-term energy security.”

 


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Posted: October 10th, 2017 | Permalink

Demographic Transition and Low U.S. Interest Rates

“A drop in the population growth rate can induce two opposing effects on real interest rates,” wrote analysts at the Federal Reserve of San Francisco. “On the one hand, GDP growth is influenced by population growth. Lower population growth slows down productivity and potential GDP growth, pushing interest rates down. On the other hand, lower population growth eventually drives up the share of older households (retirees) in the population. Because retirees consume out of their savings, the increasing share of retirees leads to an increase in consumption…” 


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Posted: September 27th, 2017 | Permalink

Federal Reserve Will Begin to Unwind Its Balance Sheet


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Posted: September 21st, 2017 | Permalink