Tag Archives: reserve

Foreigners Are Fleeing From Treasury Bonds, But It’s Probably Not Trump’s Fault

by HallieLockhart Posted on February 13, 2017

Mother Jones

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Bloomberg reports that foreigners are tripping over themselves to unload their holdings of US treasuries:

In the age of Trump, America’s biggest foreign creditors are suddenly having second thoughts about financing the U.S. government.

….From Tokyo to Beijing and London, the consensus is clear: few overseas investors want to step into the $13.9 trillion U.S. Treasury market right now. Whether it’s the prospect of bigger deficits and more inflation under President Donald Trump or higher interest rates from the Federal Reserve, the world’s safest debt market seems less of a sure thing — particularly after the upswing in yields since November. And then there is Trump’s penchant for saber rattling, which has made staying home that much easier.

….Combined with the unpredictability of Trump’s tweet storms, interest-rate increases in the U.S. could further sap overseas demand….Right now, it’s just “much easier to stay home than go abroad,” said Shyam Rajan, Bank of America’s head of U.S. rates strategy.

Hmmm. The age of Trump? According to the Treasury Department, the selloff started in June:

Preliminary figures from Japan suggest that December will be much the same as November, which means foreigners will have sold off nearly a half-trillion dollars worth of treasuries in six months. That’s 7 percent of their total holdings. The only other time there’s been a selloff this sustained was at the tail end of the dotcom boom.

But is it Trump’s fault? Nobody thought he had a chance of winning until November, so it’s hard to see how he could have caused uneasiness with federal debt back in June. I don’t imagine Trump has done the US debt market any favors, but on this score, at least, I suspect he’s getting more blame than he deserves.

Continued here:  

Foreigners Are Fleeing From Treasury Bonds, But It’s Probably Not Trump’s Fault

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As Always, Inflation Is Yet Again Right Around the Corner

by LeolaGeach156 Posted on December 13, 2016

Mother Jones

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The Wall Street Journal has annoyed me again today. See if you can spot how they got my dander up:

A rallying stock market, rising bond yields and the return of inflationary pressures are creating new challenges for the Federal Reserve….Many Fed watchers see the prospect of tax cuts and fiscal spending under Donald Trump, as well as rising oil prices and inflation expectations, pointing to a pickup in the pace of rate increases.

….Many money managers say an upsurge of inflation throughout 2017 ranks among the top risks to a continued advance in U.S. stocks….On the bond market, meanwhile, a gauge of 10-year inflation expectations rose to the highest level in more than two years and edged above the Fed’s 2% inflation target….The fiscal stimulus Mr. Trump has proposed could boost demand and send inflation higher. Expectations of higher inflation have firmed further after the agreement by oil-producing nations boosted crude prices.

Sigh. Here’s a chart of all the commonly used inflation measures:

The ordinary measures of inflation (in red) are rising, but only to the level of two years ago—and well below the Fed’s target of 2 percent. The core measures of inflation (in blue) are pretty steady at well under 2 percent. And the 10-year-breakeven (in brown), which is a measure of inflation expectations, has been on a steady downward march for three years.

The only measure that’s both rising and breaking past the 2 percent target is the 10-year-breakeven—but only if you look at the daily change over just the past five weeks. So which measure does the Journal show in its chart? The daily change of the 10-year-breakeven over the past five weeks.

Inflation is always right around the corner, isn’t it? No matter how you have to twist things to make it come out that way, it’s always right around the corner.

But maybe we should turn the corner first before we panic. After all, 2 percent is a target, not a ceiling. After years of sub-2-percent inflation, surely we can wait until we’ve had at least a few months of 3 percent inflation before we break out the hammer and shatter the punch bowl?

More here: 

As Always, Inflation Is Yet Again Right Around the Corner

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The Head of the Federal Reserve Just Gave a Rousing Speech on Inequality

by GudrunMcInnes Posted on October 17, 2014

Mother Jones

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On Friday, Janet Yellen presented a thorough speech outlining the inherent problems income inequality presents to the American ideology, proving once again she is committed to using her role as Federal Reserve chair to tackle widening income inequality rates.

“The extent of and continuing increase in inequality in the United States greatly concern me,” Yellen told the Federal Reserve of Boston. “The past several decades have seen the most sustained rise in inequality since the 19th century after more than 40 years of narrowing inequality following the Great Depression.”

“I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity,” she added.

The speech, titled “Perspectives on Inequality and Opportunity from the Survey of Consumer Finances,” follows several notable instances in which Yellen has indicated she would be actively working towards reducing wealth inequality–a more pointed approach that distances her from her predecessors, former chairs Alan Greenspan and Ben Bernanke. In Friday’s speech, Yellen also echoed Sen. Elizabeth Warren’s (D-Mass.) calls to fix the burden of rising higher education costs.

As continued evidence has shown, income inequality rates have soared over the last few decades, with the average income of the one percent rising more than 175 percent since 1980, while the bottom 90 percent hardly moved.

While Yellen’s speech on Friday made no mention of any specific policy changes the Federal Reserve may take on to combat inequality rates, it did signal a significant shift in how the Federal Reserve views inequality as a serious hindrance to the country’s economic health. To read Yellen’s speech in its entirety, click here.

Source – 

The Head of the Federal Reserve Just Gave a Rousing Speech on Inequality

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Elizabeth Warren to Fed: Stop Delegating on Enforcement

by RayIokkidgk Posted on February 12, 2014

Mother Jones

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On Tuesday, Sen. Elizabeth Warren (D-Mass.) and Rep. Elijah Cummings (D-Md.) called on the heads of the Federal Reserve, the US central bank that sets monetary policy and helps regulate Wall Street, to take a more active role in bank oversight.

The Fed metes out dozens of penalties against banks each year, for infractions including faulty foreclosure practices and inadequate money laundering protections. But the seven board members—including newly-minted Fed chair Janet Yellen—who head the Federal Reserve rarely vote on penalty and enforcement decisions. Of the roughly 1,000 formal enforcement actions taken by the Federal Reserve over the past 10 years, only 11 were voted on by the board. The rest were delegated to Fed staff, sometimes even mid-level employees. Warren, who sits on the Senate banking committee, and Cummings, the ranking member of the House oversight and government reform committee, have been critical of this arrangement, arguing that the delegation of authority results in penalties that are too lenient. On Tuesday, the two Democrats sent a letter to Yellen asking her to tighten the Fed’s rules governing when the Board of Governors may delegate regulatory decisions, and when they must take important supervisory duties into their own hands.

“We respectfully request that the Fed…require that the Board retain greater authority over the Fed’s enforcement and supervisory activities,” Warren and Cummings wrote. “We believe that increasing the Board’s direct role in overseeing enforcement and supervision would strengthen the Fed’s efforts to reduce systemic risk in our financial system.”

The two note that the Fed Board gives more attention to monetary policy decisions than to its other mandate, bank oversight: “While the Board votes on every important decision the Fed makes on monetary policy, the board rarely votes on the Fed’s important supervisory and enforcement policy decisions.” Other Wall Street regulators, such as the Securities and Exchange Commission (SEC), require that all bank penalties be approved by their head panels.

In their letter, Warren and Cummings ask Yellen to require the Fed board to vote on any penalty agreement that exceeds $1 million or that involves changes in bank management. They also urge that all board members be notified before staff members enter into an enforcement action against a bank.

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Elizabeth Warren to Fed: Stop Delegating on Enforcement

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