How should we judge tomorrow’s speech by Fed Chairman Bernanke? How about Bernanke’s previous comments on a similar macroeconomic challenge? Paul Krugman says Bernanke’s chat on Japan’s malaise are a useful primer for evaluating what we’ll hear to tomorrow. Krugman refers to “Bernanke’s 2000 critique of the Bank of Japan for its failure to take strong action in the face of an economy that was actually in much better shape than the US economy right now.”
Daily Archives: August 25, 2011
Jobless Claims: Stalled Again
Initial jobless claims are going nowhere once more. And that’s the optimistic view. It’s not the first time that the trend looked like it was turning favorable only to hit a wall. It’s probably not the last time we’ll suffer a headfake, but that doesn’t make it any more frustrating. The good news, in relative terms, is that new jobless claims aren’t moving in a fatal direction, not yet. The main fallout is that the hope of a follow-through to the recent drop hasn’t materialized. In other words, we’re still stuck in the land of neutral. That’s not good, but it’s not a smoking gun for expecting a new recession either–not today, at least, given the numbers in hand.
Are We Facing Another Troubling Rise In Money Demand?
Economist John Taylor of Stanford is worried that the appetite for liquidity is rising… again. The source for this concern starts by recognizing that “quantitative Easing (both I and II) has caused the monetary base—the sum of currency and bank reserves—to explode in the past three years, but has not resulted in similarly large increases in the growth of broader measures of the money supply such as M2,” he writes. Why hasn’t M2 followed suit? Because banks are sitting on the liquidity injected into the system.