Massengill Advisory LLC
+1 (855) 414-3968
  • Home

WSJ: The Fed’s Obama-Era Hangover

5/3/2019

 
Picture
By Phil Gramm and Thomas R. SavingJan. 1, 2019 3:26 p.m. ET


As the Trump economic revival doubled economic-growth rates over the last two years, interest rates, which had fallen in the final two years of the Obama era, have risen by more than 40%. Today no news cycle is complete without speculation about how much the Federal Reserve will raise interest rates or how the president has blasted the Fed for setting rates too high. The latest saga played out last month, with the Fed raising rates for the fourth time in 2018 even though market rates were down slightly since the last Fed hike, in September. Extraordinarily, this debate is occurring at the very moment the Fed—shackled by its bloated asset holdings and the resulting excess reserves of the banking system—has less ability to control interest rates than it has had in its entire 105-year history.+

When the subprime crisis caused financial markets to freeze up in 2008, the Fed responded by pumping liquidity into the banking system. It also did something that was not widely discussed at the time and even a decade later is almost never taken into account: It started to pay interest on reserves, in essence paying banks not to lend. This effectively converted the reserves of the banking system into interest-bearing securities.

Click here for the rest of this article.


Comments are closed.
    Picture

    Author

    Kevin Massengill is an entrepreneur, investor, and award winning Fortune 500 senior executive with a track record of massive business growth.

    View my profile on LinkedIn

    Archives

    September 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    January 2017
    September 2016
    August 2016

    Categories

    All

    RSS Feed

Powered by Create your own unique website with customizable templates.