Hypothetical Bias

Another Great Depression?

From the Morganton News Herald (The Worst of Times), Mark Strazizich forecasts the probability:

"I don't think we're ever going to see another Depression," Strazicich said.

ECO 2040: Exporting inflation

Asian Inflation Begins to Sting U.S. Shoppers:

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.

New monetary policy tools on the Fed's website

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.

1. Open Market Operations
2. The Discount Rate
3. Reserve Requirements
4. Term Auction Facility
5. Primary Dealer Credit Facility
6. Term Securities Lending Facility

My lecture notes suck

I figured out how to save my lecture notes as a PDF file. Here they are from Wed, March 26. Will someone please tell my department chair and dean that I need to be removed from the classroom?

TSLF, AAA, RMBs, CMOs and CMBs

From Real Time Economics (New York Fed Unveils TSLF Terms):

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 return.

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. ...