US monetary policy: 15 divergent views!

The contemporary US monetary policy environment provides a very interesting source of reading lately. It seems as though uncertainty runs rampant and conflicting opinions are at the order of the day. Enjoy the following 15 articles on today’s US monetary policy – everything from Ben Bernanke, chairman of the Federal Reserve Bank, being praised for doing an excellent job to the US government actually running monetary policy instead of the Federal Reserve Bank!

The first article reminds us that monetary policy cannot be judged as tight or expansionistic based purely on where the nominal interest rate currently stands:

1. http://mungowitzend.blogspot.com/2012/08/aaargh-monetary-policy-is-not-tight.html

Here’s an argument that an expansionary monetary policy will increase income inequality:

2. http://www.econbrowser.com/archives/2012/08/guest_contribut_20.html

This blog summarises a paper by Olivier Coibion, Yuriy Gorodnichenko, Lorenz Kueng, and John Silvia that extends more detail on how contractionary monetary policy increases different kinds of inequality: income, labour earnings, consumption and total expenditure:

3. http://economistsview.typepad.com/economistsview/2012/08/monetary-policy-and-inequality-in-the-us.html

In a report by the IMF, Ranjit Teja, the report’s lead economist, said emerging economies had complained that easy monetary policy in the US, Europe and Japan had created a surge in capital inflows, higher commodity prices and raised the risk of asset bubbles:

4. http://www.taipeitimes.com/News/biz/print/2012/08/04/2003539378

In a very interesting paper (part 3), Roger E. A. Farmer highlights how unconventional US monetary policy since the 2008 financial crises helped to stabilise inflation expectations:

5.http://www.rogerfarmer.com/NewWeb/PdfFiles/Monetary%20Policy%20Rules%20NBER%20R11.pdf

This article “The Treasury and Fed Disagree” discusses J.P. Morgan’s Economic Research Note. Apparently some evidence indicates that fiscal and monetary policies in the US are conflicting in goals and even the government (not the Fed) taking action to affect interest rates!

6. http://www.bondsquawk.com/2012/08/03/the-treasury-fed-discord/

Chandra Tamirisa states his opinion that monetary policy should currently be more structurally-focused and less focused on interest rates:

7. http://ctamirisa.com/2012/07/20/the-case-for-structural-monetary-intervention/

Vincent Cignarella, a currency strategist/columnist for DJ FX Trader, indicates that the Federal Reserve Bank may have power over short-term interest rates, but less over long-term interest rates as these are rather controlled by the market through, for example, corporate bonds:

8. http://blogs.wsj.com/marketbeat/2012/08/09/is-the-fed-finished/

This article favours a current contractionary monetary policy as it provides an argument that expansionary policy might cause an asset bubble:

9. http://marginalrevolution.com/marginalrevolution/2012/08/will-a-more-expansionary-monetary-policy-give-rise-to-a-bubble.html

In contradiction, Tyler Cowen supports a current expansionary monetary policy as he reckons that the cost of higher inflation will not be too serious:

10. http://marginalrevolution.com/marginalrevolution/2012/07/the-best-argument-for-a-more-expansionary-monetary-policy.html

Joe Weisenthal argues in his blog, “The Biggest Myth In Monetary Policy Today” that the Federal Reserve Bank is acting under pressure from short-term criticism and losing long-term economic interests from sight:

11. http://articles.businessinsider.com/2012-04-14/markets/31340747_1_chairman-bernanke-monetary-policy-interest-rates

The blog article, “Why Bernanke’s “Quantitative Easing” Isn’t Fooling Anyone” strongly opposes Ben Bernanke, chairman of the Federal Reserve Bank, in his confidence that printing US Dollars is the right thing to do right now and that the negative side effects of his Quantitative Easing 3 campaign might not yet be apparent:

12. http://articles.businessinsider.com/2010-11-15/news/30011702_1_chairman-bernanke-monetary-policy-ben-bernanke

Ben Bernanke, chairman of the Federal Reserve Bank, declared that monetary policy can ease financial conditions to help strengthen the recovery (from the financial crisis):

13. http://www.goldalert.com/2012/08/bernanke-there-is-scope-for-further-action-by-the-federal-reserve/

BK Asset Management noted on Monday 27 August that there is much uncertainty among investors concerning the Federal Reserve Bank’s current stance on monetary policy. It is further suggested that this issue might be resolved by the upcoming Jackson Hole Summit, scheduled for Friday 31st August:

14. http://www.bkassetmanagement.com/us-outlook/why-is-the-jackson-hole-summit-important_2213/

In a blog “Donkeylicious”, Matt Yglesias and Ryan Cooper see the size of the US economy as a factor detracting from the success of monetary policy and point towards smaller countries being more successful at monetary policy:

15. http://www.donkeylicious.com/2012/08/why-small-countries-do-monetary-policy.html

— By Peet Naude (Freakonomics4)–

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