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The Federal Reserve has declared that it will begin reducing its balance sheet and boosting interest rates. However, the Fed's actions announced on Wednesday are extremely cautious. The Federal Reserve is significantly behind the curve.
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By highlighting erroneous inflation figures, central banks will not be able to determine the best policies.
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Marx and Engels are not only anti-capitalist. They observe that by limiting everything to monetary exchange, the reality of exploitation became more visible.
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Following a year of soaring inflation, Russia's war in Ukraine is forcing policymakers and commentators to take stock. The days of thoughtless demand stimulus, guaranteed bailouts, and active climate measures must now be put behind us, according to new macroeconomic realities.
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Theoretically, the US might avoid inflation and avoid a recession by achieving massive productivity improvements. However, do not count on it.
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Why do the vast majority of economists believe the Fed should control the money supply from a central location?
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Monetary policy cannot undo the damage caused by negative supply shocks such as war or government shutdowns caused by a pandemic.
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The federal government must maintain interest rates low in order to continue borrowing billions of dollars for continuous 'relief' programs and new wars.
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Banks used to pay interest to other banks in the 'federal funds' market if they required additional reserves to support greater lending before they were awash with reserves (due to reserve requirements).