Michael Kevane

http://prezi.com/embed/tcqs22vdvkm1/?bgcolor=ffffff&lock_to_path=0&autoplay=0&autohide_ctrls=0&features=undefined&token=undefined&disabled_features=undefined

Look at the FRED graph of inflation.  U.S. has only had inflation lower than 2% basically once (early 1960s) in last 50 years.  The economy has done pretty well in that whole time period.  So why mess with success?  I think that is the intuition.

Stockton, California, won court approval of its plan to exit bankruptcy by paying bond investors pennies on the dollar while shielding public pensions, in a case watched by other cities facing heavy retiree costs.“This plan, I’m persuaded, is the best that could be done in terms of restructuring the city’s debts,” U.S. Bankruptcy Judge Christopher Klein said at a hearing today in Sacramento, the state capital.Bankruptcy lawyers and pension advocates nationwide have been following the case to see whether pensions administered by the California Public Employees’ Retirement System would be protected from cuts.  Klein ruled earlier that Calpers doesn’t deserve special protection, the first time the biggest U.S. public pension fund was found vulnerable to cuts in a bankruptcy. Calpers and public-worker groups decried the decision. A bankruptcy judge in Detroit ruled has against pension funds in a similar situation.

via Stockton’s Pension-Protecting Bankruptcy Plan Approved – Bloomberg.

The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.  … Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America BAC Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.

via Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress – Bloomberg.

The U.S. economy finally seems to be climbing out of the deep hole it entered during the global financial crisis. Unfortunately, Europe, the other epicenter of crisis, can’t say the same. Unemployment in the euro area is stalled at almost twice the U.S. level, while inflation is far below both the official target and outright deflation has become a looming risk.Investors have taken notice: European interest rates have plunged, with German long-term bonds yielding just 0.7 percent. That’s the kind of yield we used to associate with Japanese deflation, and markets are indeed signaling that they expect Europe to experience its own lost decade.

via Being Bad Europeans – NYTimes.com.

The Federal Reserve awarded $334.714 billion 213 billion pounds of eight-day term deposits to banks, a record amount, at a test auction held on Monday, it said in a statement on Tuesday.  The U.S. central bank allotted them to 90 banks which will receive an interest rate of 0.29 percent.  This was higher than the $316.020 billion in seven-day deposits awarded a week earlier to 85 banks which received an interest rate of 0.28 percent.  [.01% of $300b is $30m at an annual rate, or about $1 m for the 8 days.]  The Fed has ramped up testing of its term deposit facility after the 2008 financial crisis to help policymakers drain cash from the banking system when they decide to tighten monetary policy.On Sept. 4, the Fed said it plans to conduct a series of eight seven-day TDF operations starting in October. These tests will have an early withdrawal feature in which banks can enter the TDF and pull the money out before the maturity date if they pay a charge.

via Fed Awards $335 Billion of Term Deposits in Test Auction – NYTimes.com.

Will David Carr tell his readers how much money he made for his puff piece on Bill Cosby, and give that to a good charity?

I was one of those who looked away. Having read the Philadelphia magazine story when it came out, I knew when the editors of the airline magazine called that they would have no interest in pursuing those allegations in a short interview in a magazine meant to occupy fliers.  My job as a journalist was to turn that assignment down. If I was not going to do the work to tell the truth about the guy, I should not have let him prattle on about his new book at the time.

via Calling Out Bill Cosby’s Media Enablers, Including Myself – NYTimes.com.

What do I mean by saying that everything changes [at the so-called zero lower bound]? As I wrote way back when, in a rock-bottom economy “the usual rules of economic policy no longer apply: virtue becomes vice, caution is risky and prudence is folly.” Government spending doesn’t compete with private investment — it actually promotes business spending. Central bankers, who normally cultivate an image as stern inflation-fighters, need to do the exact opposite, convincing markets and investors that they will push inflation up. “Structural reform,” which usually means making it easier to cut wages, is more likely to destroy jobs than create them.This may all sound wild and radical, but it isn’t. In fact, it’s what mainstream economic analysis says will happen once interest rates hit zero. And it’s also what history tells us. If you paid attention to the lessons of post-bubble Japan, or for that matter the U.S. economy in the 1930s, you were more or less ready for the looking-glass world of economic policy we’ve lived in since 2008.

via The Inflation and Rising Interest Rates That Never Showed Up – NYTimes.com.

Mario Draghi, the European Central Bank president, strongly signaled on Friday that he and his colleagues were preparing a new round of powerful monetary stimulus to jolt the flagging eurozone economy at a time when the risk of deflation is growing.  Speaking at a conference in Frankfurt, Mr. Draghi said the central bank would “do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us.”If the bank’s current policy did not end the threat, Mr. Draghi added, “we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases… While Mr. Draghi on Friday did not actually say much that was different from previous utterances, there was a significant new emphasis on the risk of deflation in the eurozone.

via Mario Draghi Says E.C.B. Will ‘Do What We Must’ to Stoke Inflation – NYTimes.com.

A report released this week by the Senate Permanent Subcommittee on Investigations found that banks had built up enormous holdings of commodities and infrastructure that allowed the banks to monitor and influence the price of these materials.One potential danger for banks holding commodities infrastructure, like coal mines, is that the infrastructure could be involved in environmental disasters that would expose the banks to significant legal liability.Mr. Tarullo, the Fed governor who oversees regulatory policies, is expected to testify that “physical commodities activities can pose unique risks to the safety and soundness of financial holding companies.”

via Federal Reserve Set to Propose Stricter Rules for Banks in Commodities Markets – NYTimes.com.

China’s central bank on Friday announced a surprise cut to interest rates, in the clearest sign yet that policy makers are growing increasingly concerned the country’s economic slowdown.Despite numerous signs that growth has been flagging, China’s leadership for months has refrained from any broad-based economic stimulus measures as policy makers tried to push through a package of ambitious financial overhauls. Instead, they opted for piecemeal efforts like injecting money into big banks.

via China, in Surprise Move to Prop Up Economy, Cuts Interest Rates – NYTimes.com.

The former chief executive of Landsbanki of Iceland was sentenced to prison on Wednesday, the third of the top executives of the country’s three largest banks that the government has successfully prosecuted and jailed for misconduct during the financial crisis.  Sigurjon Arnason was ordered jailed for a year at a hearing at the Reykjavik District Court on Wednesday, but nine months of his sentence were suspended and will be served as probation.

via Ex-Chief of Iceland Bank Sentenced to Jail for Role in 2008 Crisis – NYTimes.com.

Fed officials have described the statement as indicating that the central bank is most likely to begin raising short-term rates in mid-2015. The account of the October meeting, released after a standard three-week delay, said a couple of officials wanted the Fed to signal that rates might rise sooner, and a couple wanted the Fed to signal that rates might rise later. But the intentions of a majority have not appeared to shift in recent months.The sluggish pace of inflation is displacing unemployment as the primary reason the Fed is not ready to start raising interest rates. The unemployment rate, which fell to 5.8 percent in October, is getting close to the level Fed officials regard as normal. If inflation were rising at the Fed’s preferred pace of 2 percent a year, it is unlikely that they would wait much longer before starting to raise interest rates.

via Fed Sees Limited Impact From Overseas Weakness and Market Turmoil – NYTimes.com.