IMF, Warren Sound Alarm on Leveraged Lending

Concerns are building over the extent of leveraged lending, among regulators and politicians and the private sector alike. Some, such as Sen. Elizabeth Warren see troubling signs that recall risks that triggered the Great Financial Crisis.

Real Time Economics: Big Tech vs. Flyover Country

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. The divide between urban and rural America may only be getting worse. Amazon’s and Google’s plans to bulk up on the East Coast underscore the country’s diverging fortunes as some of the biggest companies look for a critical mass of workers with tech and other key skills.  Good morning. Jeff Sparshott here to take you through the day’s top economic news. U.S. retail sales data, a key barometer of consumer spending, are out this morning. We’re also monitoring signs of a global slowdown, the cost of “free” social media, and the fate of Prime Minister Theresa May’s government after two senior members quit over Brexit. Let us know what you think by replying to this email. TO HAVE AND HAVE NOT Amazon.com and Google’s decisions to add tens of Continue reading "Real Time Economics: Big Tech vs. Flyover Country"

Real Time Economics: Fed Stays the Course | How to Pay for Roads and Bridges | Iran’s Appetite for American Soybeans

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. The Federal Reserve spoke volumes while saying hardly anything on Thursday. The takeaway: expect another rate increase next month.  Good morning. Jeff Sparshott here to take you through the day’s economic news. We’ll also look at the looming political struggle to pay for American infrastructure, how Iran is filling some of the void after China stopped buying U.S. soybeans, another low for jobless claims, and how Brexit is a bit like legalizing prostitution.  STEADY AS SHE GOES The Federal Reserve held interest rates steady and highlighted the economy’s strength after its two-day policy meeting. It offered nothing to dispel market expectations that it would deliver its fourth rate rise of the year in December, Nick Timiraos reports. Broad strength in the economy and labor market—powered in recent Continue reading "Real Time Economics: Fed Stays the Course | How to Pay for Roads and Bridges | Iran’s Appetite for American Soybeans"

Some Fed Bond Purchases Spurred Hiring, Central Bank Paper Says

WASHINGTON—At least some of the Federal Reserve’s bond buying in the wake of the 2008 financial crisis bolstered employment, according to a recent paper by staffers at the central bank’s board of governors.

The third round of such purchases, also known as quantitative easing, starting in late 2012, spurred banks with large holdings of mortgage-backed securities to lend more to companies, authors Stephan Luck and Tom Zimmermann found. Shortly thereafter, U.S. counties with such banks saw faster employment growth—up to 0.4 percentage point more per quarter—than counties where banks held fewer mortgage-backed securities.

Employment growth in the two sets of counties was similar for more than 18 quarters before the implementation of QE3, as the program was known.

The findings come as policy makers continue to debate the full impact of the unconventional stimulus measures taken by the Fed after interest rates, reduced to near zero by the end Continue reading "Some Fed Bond Purchases Spurred Hiring, Central Bank Paper Says"

Parsing the Fed: How the November Statement Changed From September

The Federal Reserve releases a statement at the conclusion of each of its policy-setting meetings, outlining the central bank’s economic outlook and the actions it plans to take. Much of the statement remains the same from meeting to meeting. Fed watchers closely parse changes between statements to see how the Fed’s views are evolving. This tool compares the latest statement with its immediate predecessor and highlights where policy makers have updated their language. This is the November statement compared with September. [wsj-responsive-sandbox id = "0" ] RELATED Fed Holds Rates Steady, Signals More Rate Increases Ahead Federal Reserve Likely to Keep Interest Rates Steady

Real Time Economics: Trump’s Trade Agenda | Who Cares About the Economy? | It’s Fed Day!

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. President Trump and Democrats have a shared skepticism of free trade. That doesn’t mean they’ll agree on a renegotiated Nafta—or the rest of the White House’s trade agenda. The new deal with Mexico and Canada could prove an early test when the administration seeks approval from a Democrat-controlled House next year.  Good morning. Jeff Sparshott here to take you through the latest developments affecting the global economy, including lessons and fallout from midterms, what to expect from the Fed, China’s surging exports, and big tech and dying startups. DON’T BET THE HOUSE ON IT President Trump said split control of Congress “could be a beautiful, bipartisan-type of situation.” He praised likely House Speaker Nancy Pelosi, saying he was prepared to negotiate over issues ranging from infrastructure to the environment. Continue reading "Real Time Economics: Trump’s Trade Agenda | Who Cares About the Economy? | It’s Fed Day!"

How Can the Field of Economics Diversify? Here Are Janet Yellen’s Thoughts

To help economics become a field of more diverse thought, perhaps the profession should take a look at what sorts of research is rewarded, former Federal Reserve Chairwoman Janet Yellen contends. On a panel at a Pathways to Gender Equality conference in Washington, D.C., Friday, Ms. Yellen, the first female chief of the central bank in its more than 100-year history, emphasized the importance of diversifying economic research methods and topics. The economics profession, Ms. Yellen said, tends to value mathematical modeling and is increasingly becoming a harder science, which could be biasing economists against new ideas. “What’s happened in economics is that anything that could be called anecdotal or case study types of methods are simply ruled out,” Ms. Yellen said. “To my mind this is a serious methodological bias that is blinding the profession to very important phenomena.” Ms. Yellen highlighted economists’ failure to predict Continue reading "How Can the Field of Economics Diversify? Here Are Janet Yellen’s Thoughts"

Real Time Economics: Why U.S. Economic Growth Is Poised to Slow

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning. Today we look at whether U.S. economic growth has already peaked, the mystery of low inflation, how tariffs are reshaping the Farm Belt, and key elections in Latin America and Europe. THE TIDE IS HIGH The U.S. economy just posted one of the best six-month stretches of the past decade. There’s a good chance it’s all downhill from there. Economists surveyed by The Wall Street Journal estimate growth will slow in the coming quarters. The Fed is expecting a lowly 1.8% rate by 2021. “We think U.S. growth may have just peaked,” said Michael Gapen, chief U.S. economist for Barclays Capital. Few believe a recession is near, and the expansion is widely expected to become the longest on record next year, Jon Hilsenrath and Harriet Continue reading "Real Time Economics: Why U.S. Economic Growth Is Poised to Slow"

Real Time Economics: Why U.S. Economic Growth Is Poised to Slow

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning. Today we look at whether U.S. economic growth has already peaked, the mystery of low inflation, how tariffs are reshaping the Farm Belt, and key elections in Latin America and Europe. THE TIDE IS HIGH The U.S. economy just posted one of the best six-month stretches of the past decade. There’s a good chance it’s all downhill from there. Economists surveyed by The Wall Street Journal estimate growth will slow in the coming quarters. The Fed is expecting a lowly 1.8% rate by 2021. “We think U.S. growth may have just peaked,” said Michael Gapen, chief U.S. economist for Barclays Capital. Few believe a recession is near, and the expansion is widely expected to become the longest on record next year, Jon Hilsenrath and Harriet Continue reading "Real Time Economics: Why U.S. Economic Growth Is Poised to Slow"

Real Time Economics: Markets Are Volatile But the Underlying Economy Is Steady As She Goes

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning. Today we look at third-quarter economic growth, how government spending is goosing while housing is hurting GDP, and why Fed Chairman Jerome Powell has a secret weapon against political pressure that Paul Volcker never did.  THE STOCK MARKET ISN’T THE ECONOMY U.S. stocks tumbled Wednesday, sending the Dow industrials into the red for the year and putting the Nasdaq Composite Index down more than 10% from its recent high. Few investors are predicting a recession in the near term, but some are debating whether the market will withdraw further under pressure from higher interest rates, softening global growth expectations and continued political tumult. The short-term economic outlook in the U.S., by contrast, is bright. Gross domestic product data out Friday is expected to show the Continue reading "Real Time Economics: Markets Are Volatile But the Underlying Economy Is Steady As She Goes"

Real Time Economics: Does Jerome Powell Look Happy? | Gut Check for Manufacturers | Capitalism Meets Coffee Prices

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning. Today we look at President Trump’s latest attack on the Fed, emerging risks for U.S. factories, international postal rates, Alaska’s long slog out of recession, a little competition among restaurants and retailers, the unprecedented rejection of Italy’s budget, and a White House history of socialism. JAY WALKING President Trump stepped up his attacks on Federal Reserve Chairman Jerome Powell, calling the Fed the biggest risk to the economy. “Every time we do something great, he raises the interest rates,” the president said. Mr. Powell “almost looks like he’s happy raising interest rates.” In an interview with the WSJ’s White House team, Mr Trump stopped short of saying he’d try to fire the Fed chief: “I’m just saying this: I’m very unhappy with the Fed because Obama Continue reading "Real Time Economics: Does Jerome Powell Look Happy? | Gut Check for Manufacturers | Capitalism Meets Coffee Prices"

Real Time Economics: Expect the Fed to Keep Tightening | China’s Not Manipulating the Yuan | Canada Legalizes Pot

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning. Today we look at the steady rise in U.S. interest rates, how the Trump administration is and isn’t pressuring China, rising revenues at America’s largest aluminum producer, and the biggest country yet to legalize recreational marijuana. RAISE THE ROOF The Federal Reserve has lifted interest rates eight times since late 2015. President Trump doesn’t like it but broad trends show the increases haven’t derailed the economy: consumer spending is strong, job creation solid and there’s been a recent pickup in growth for the second-longest U.S. expansion on record. But higher rates aren’t without consequences. “Tighter Fed policy is indeed weighing on interest-sensitive spending (housing and autos),” says Phil Suttle of Suttle Economics. The latest evidence: U.S. new-home construction fell last month and the pipeline isn’t looking Continue reading "Real Time Economics: Expect the Fed to Keep Tightening | China’s Not Manipulating the Yuan | Canada Legalizes Pot"

Real Time Economics: Trump’s Fed Criticism Intensifies | Brexit’s Toll On the U.K. | The U.S. Economy Is Booming

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning. Today we look at how the Fed might react to President Trump’s criticism, the steep cost of unwinding globalization, more evidence the U.S. economy is firing on all cylinders, and the most competitive economy in the world.  TRUMP ATTACKS THE FED (AGAIN) President Trump again said the Federal Reserve is raising short-term interest rates too fast, calling the U.S. central bank “my biggest threat.” The president acknowledged Jerome Powell was his pick to lead the Fed but demurred when asked directly if the chairman would be out of a job if his decisions prove misguided, Kate Davidson reports. “I put him there, and maybe it’s right, maybe it’s wrong,” he said in an interview with the Fox Business Network. “I put a couple of other people Continue reading "Real Time Economics: Trump’s Fed Criticism Intensifies | Brexit’s Toll On the U.K. | The U.S. Economy Is Booming"

The Effectiveness of Large-Scale Asset Purchases

This is Naked Capitalism fundraising week. 551 donors have already invested in our efforts to combat corruption and predatory conduct, particularly in the financial realm. Please join us and participate via our donation page, which shows how to give via check, credit card, debit card, or PayPal. Read about why we’re doing this fundraiser and […]