Balance sheets of central banks in advanced economies have ballooned by trillions of dollars since the onset of the Great Recession. Now, U.S. policymakers are beginning to focus on the goal of unwinding the balance sheet. While the arguments for doing so are not convincing, it seems inevitable at this point. That said, there are several things that seem to missing from policymakers’ discussions this far of the unwind of which they must be very cognizant. Continue reading Comments on Exiting the Era of Big Balance Sheets
3 days of the “Europe in Crisis” conference in Madison, WI have come to a close. A fantastic conference with even better speakers—ranging from Gillian Tett of the Financial Times to Chad Bown of the Peterson Institute, and everyone in between. Great insights on Brexit, the euro crisis, populism, and more. I presented on Europe’s safe asset shortage and the mechanisms by which it is hindering the economic recovery. (Slides below.) Thanks to all the attendees, speakers, and conference organizers (European Horizons) for the great conference.
Bloomberg is arguably the best source of financial/economic journalism today (and free too!). However, this week they wrote up a story that seems to be an irresponsible analysis. Continue reading Goldman/Bloomberg Use a Pretty Picture to Paint a Not-So-Pretty Picture of the World Economy
The CEO and President of the St. Louis Regional Federal Reserve Bank, James Bullard, recently offered a presentation (here) making a case for reducing the size of the Fed’s balance sheet—at about $4.5 trillion as a result of the Fed’s crisis response (as opposed to less than $1 trillion pre-crisis). Bullard made several excellent points but I wanted to highlight and/or push back against a few. Continue reading Responding to St. Louis Fed President Bullard’s Call to Reduce the Fed’s Balance Sheet
My latest over at The Huffington Post. A wonkish look at the safe asset shortage and the waning efficacy of quantitative easing: http://www.huffingtonpost.com/european-horizons/yes-the-world-does-have-a_b_14636524.html
Weak economic activity, central bank balance sheet risks, and misaligned investor incentives can be alleviated. My latest at the Huffington Post: http://www.huffingtonpost.com/european-horizons/draghi-other-central-bank_b_11968802.html
Perhaps a better question is, why are Bloomberg and others calling them “premiums” and fretting about this? The Bank of England’s new quantitative easing (QE) program to combat the negative economic consequences of Brexit means there is an extra $1.5 billion of sovereign bond demand a week. Continue reading Why Is the Bank of England Paying Premiums?