The free ride for American consumers is ending. For two generations, Americans have imported goods produced ever more cheaply from a succession of low-wage countries — first Japan and Korea, then China, and now increasingly places like Vietnam and India.
But mounting inflation in the developing world, especially Asia, is threatening that arrangement, and not just in China, where rising energy and labor costs have already made exports to the United States more expensive, but in the lower-cost alternatives to China, too.
The Fed has added 3 new monetary policy tools on their webpage. Numbers 1-3 are in every economics textbook. Number 4 was new back in February when I first checked with my macro class. Numbers 5 and 6 were added in March.
The Federal Reserve Bank of New York announced the
terms of its first Treasury swap auction set for March 27, indicating
that it will offer $75 billion in government securities to the primary
dealer banks and modifying the type of collateral it will accept in
The Term Securities Lending Facility, announced in
early March, is an extension of an already existing facility at the New
York Fed. Under the extended facility, primary dealers not only can
offer a broader range of collateral against Treasury securities, they
can also borrow for a longer term — 28 days versus overnight.
In total, the New York Fed has been authorized to lend up to $200
billion of Treasury securities through TSLF auctions. TSLF, the Fed’s
latest tool to help revive strained financial markets, was created last
week and will supply banks with scarce Treasury securities in exchange
for less-liquid securities.
Market participants hope the new tool with help to ease conditions
in strained securities repurchase markets and curb investors’ mad dash
for cash. ...