Financial markets have become increasingly dependent on the Federal Reserve. The Fed is dependent on data (just in case you didn’t know). The data for the next few months will be distorted by the federal government shutdown during the first half of October. So what’s a responsible policy maker or investor to do to get a handle on how the U.S. economy is faring?
In their important new book, “The Bankers’ New Clothes,” Anat Admati and Martin Hellwig challenge a cherished belief of people who run big banks: Equity is “expensive” and requiring banks to fund themselves with more equity (relative to their debts) will somehow slow the economy.
Inflation is sometimes referred to as a hidden tax. Unlike other taxes, it doesn’t require legislation by Congress or the states. It doesn’t merit a line item on the 1040 federal income-tax form many Americans will file this week. And it doesn’t appear on the bottom of sales’ receipts as a percentage markup on the things we buy.
The Federal Reserve Bank of New York, which carried out central-bank rescues of money markets and Wall Street firms, is poised to have its powers expanded even more -- at the risk of reduced independence.
Washington is filled with self- congratulation this week, with Republicans claiming that they have opened serious discussion of the U.S. budget deficit and President Barack Obama’s proponents arguing that his counterblast last Wednesday will win the day.