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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Topic: Federal Reserve

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January 6, 2015 at 10:36 AM

Welcome to the fragile year

Specialist Jarret Johnson works at his post on the floor of the New York Stock Exchange on Tuesday as oil prices continue to slide and stocks extend their slump. (Richard Drew/AP Photo) Market moves usually don’t speak with one voice and are best ignored in favor of the fundamentals. But when the stock market pulls a…


Comments | More in Energy | Topics: eurozone, Federal Reserve, Greece

October 31, 2014 at 10:37 AM

Vote: Was the Fed’s QE successful?

My answer is yes, but with many caveats. This Federal Reserve confronted the worst downturn since the Great Depression with the aggressiveness that Milton Friedman argued its predecessor lacked, causing the calamity after 1929. It acted as the lender of last resort, stopping the financial panic and preventing catastrophic bank failures. It cut interest rates to…


Comments | More in Federal Reserve | Topics: Federal Reserve, QE stimulus

October 17, 2014 at 10:19 AM

Vote: Are you anxious about the economy

The laugh line in the otherwise somber play The Shadow Box is delivered by the saucy (and dying) grandmother to her repressed and puritanical daughter: “Does that make you anxious?” So here we are with the Dow up 300 points a few days after dropping 400 points. The stock market indices, as the great economist Paul…


Comments | Topics: deflation, eurozone, Federal Reserve

September 11, 2013 at 10:37 AM

The great unknown of Fed ‘tapering’

Over lunch this week, a Seattle financial executive told me he believed the market has already priced in the “tapering off” of the Federal Reserve’s massive bond-buying program. Maybe so. It’s an open question as to whether the central bank should change course with the economy growing so slowly and unemployment still high. But Chairman Ben Bernanke seems committed to the move. Overseas, things might not go so well. Stephen Roach, the former chief economist for Morgan Stanley, wrote on Project Syndicate recently that “the global economy could be in the early stages of another crisis” partly because of the Fed.

As I wrote last week, the problem is centered in emerging economies. “Hot money,” short term investments, rushed into nations such as India, Indonesia, Brazil and Turkey because of the artificially low interest rates of the Fed’s QE programs. This allowed for large current account deficits to be cloaked by seeming prosperity. Now, investment is flowing back out with damaging results. Roach writes:

Under the leadership of Ben Bernanke and his predecessor, Alan Greenspan, the Fed condoned asset and credit bubbles, treating them as new sources of economic growth. Bernanke has gone even further, arguing that the growth windfall from QE would be more than sufficient to compensate for any destabilizing hot-money flows in and out of emerging economies. Yet the absence of any such growth windfall in a still-sluggish US economy has unmasked QE as little more than a yield-seeking liquidity foil.


Comments | More in Federal Reserve | Topics: Fed tapering, Federal Reserve

July 26, 2013 at 10:24 AM

Vote: Who should lead the Fed?

Rarely has the speculation about the next Federal Reserve chairman received so much early handicapping — or provoked such acrimony. The White House has floated the trial balloon of Larry Summers, the former Clinton Treasury Secretary and president of Harvard. The other favorite is Janet Yellen, former president of the Federal Reserve Bank of San Francisco and current vice chairman of the Fed’s Board of Governors.

“No more second chances for Larry Summers,” thunders Fed watcher William Greider in the Nation. In addition to being a boorish and failed president of Harvard, Summers as Treasury Secretary helped tee up the financial crisis by backing deregulation. Then he made millions working on Wall Street. An insightful piece in the New York Times looks at the “battle between the California girls and the Rubin boys.” Rubin being Robert, the former Treasury Secretary, head of Goldman Sachs and tier of exquisite tie knots. Yellen, meanwhile, is supported by economists Laura D’Andrea Tyson, chief of President Clinton’s Council of Economic Advisers and Christina Romer, who held the same position early in President Obama’s first term.

Whomever replaces Ben Bernanke will be left to wind down the Fed’s record expansion of the monetary base and more than $3 trillion in assets, while contending with a tepid recovery, high unemployment and a question over whether the Fed will use its new Dodd-Frank powers to rein in the big banks and prevent another panic. Care to make an early vote?

Read on for some of the most interesting econ and business stories you might have missed this week…and the haiku.


Comments | More in Federal Reserve | Topics: Federal Reserve, Janet Yellen, Larry Summers

June 28, 2013 at 10:49 AM

Vote: Interest rates and you

Worries that the Federal Reserve may end its bond-buying program or even raise its benchmark interest rate helped push the yield of 10-year Treasury notes as high as 2.61 percent this week. In May, it was 1.63 percent. Mortgage rates have followed, with the average 30-year loan rate rising to 4.46 percent from 3.93 percent….


Comments | More in Federal Reserve, Interest rates | Topics: Federal Reserve, interest rates, mortgage rates