find that expanding the money supply is not as easy as it used to be..
The problem is that "The Banks" are not actually "banks" anymore, so that FED policy of controlling retail lending interest rates with the discount rate does not work anymore. When the FED lowered to the current rate, they assumed that the Banks would begin to lend - they did not.
What they did do was take the cheap money and "invested" it in their investment banking system. That is where the profit were before, and that is where they had find more profits now - to "cover" (up?) their RE lending losses.
Any self respecting monetarist, if there are any left (or is that on the Far Right), should be turning over in their graves. Their economic system is now broke (as in technically BK), broken (and Congress is not going to fix it) and unable to do what they assumed that it still could do.
How sad, how bad.
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Dr. Peter Morici:
The Fed, the yuan and the failure of diplomacy
Simply, Fed policy is much less relevant to US growth and price stability than in the days of Paul Volcker, because China’s yuan policy has substantially limited the importance of Fed interest rate decisions by severing the historic link between short interest rates—like the federal funds rate it targets—and long rates on mortgages, corporate bonds, and the securities banks use to finance lending on cars and credit cards. Through the boom years of the last decade, Beijing printed yuan to purchase hundreds of billions of dollars in foreign exchange markets. That made the yuan and Chinese products on US store shelves artificially cheap, and imports from China, coupled with higher prices for imported oil, pushed the US trade deficit to more than five percent of GDP from 2004 to 2008
http://www.finfacts.ie/irishfinancenews/article_1019971.shtml
============
Dr. Peter Morici:
The Fed, the yuan and the failure of diplomacy
Simply, Fed policy is much less relevant to US growth and price stability than in the days of Paul Volcker, because China’s yuan policy has substantially limited the importance of Fed interest rate decisions by severing the historic link between short interest rates—like the federal funds rate it targets—and long rates on mortgages, corporate bonds, and the securities banks use to finance lending on cars and credit cards. Through the boom years of the last decade, Beijing printed yuan to purchase hundreds of billions of dollars in foreign exchange markets. That made the yuan and Chinese products on US store shelves artificially cheap, and imports from China, coupled with higher prices for imported oil, pushed the US trade deficit to more than five percent of GDP from 2004 to 2008
http://www.finfacts.ie/irishfinancenews/article_1019971.shtml
============
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