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  • Backgrounder posted September 23, 2016 by David R. Burton, Norbert J. Michel, Ph.D. Financial Privacy in a Free Society

    Privacy, both financial and personal, is a key component of life in a free society. Unlike in totalitarian or authoritarian regimes, individuals in free societies have a private sphere free of government involvement, surveillance, and control. The United States Constitution’s Bill of Rights, particularly the Fourth, Fifth, and Ninth Amendments, together with structural…

  • Backgrounder posted September 14, 2016 by Norbert J. Michel, Ph.D. Fixing the Regulatory Framework for Derivatives

    Many policymakers have strong opinions on the risks of derivatives, but there is no objective economic reason to regulate derivatives as a unique product. To the contrary, it is best to avoid regulating derivatives as a unique product because doing so is bound to result in a complex set of rules filled with special exemptions for select users. Prior to the 2008 financial…

  • Backgrounder posted August 31, 2016 by Norbert J. Michel, Ph.D. Money and Banking Provisions in the Financial CHOICE Act: A Major Step in the Right Direction

    House Financial Services Committee Chairman Jeb Hensarling (R–TX) has released a discussion draft of a major regulatory reform bill called the Financial CHOICE Act.[1] This legislation would replace large parts of the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act. Key sections of the bill would reduce the risk of future financial crises and bailouts, and…

  • Backgrounder posted April 28, 2016 by Norbert J. Michel, Ph.D. The Myth of Financial Market Deregulation

    A persistent myth regarding the 2008 financial crisis is that it was caused by deregulation of financial markets. All such claims are wrong. From an aggregate perspective, the industry has always been regulated, and there has never been a substantial reduction in financial regulations in the U.S. during the past 100-plus years. Instead, this time period has included an…

  • Issue Brief posted April 1, 2016 by Norbert J. Michel, Ph.D. The Fed Needs Reform: Six Changes for Monetary Policy

    In the wake of the longest recession since the Great Depression, policymakers have contemplated many monetary policy reforms. While some of these ideas, such as the Fed Oversight Reform and Modernization Act of 2015 (the FORM Act), introduced by Representative Bill Huizenga (R–MI), have received support in the U.S. House of Representatives, the Senate has yet to undertake…

  • Posted on January 12, 2016 by Philip Wegmann Find Out If Your Senators Voted to Audit the Fed

    Legislation that would have given Congress the authority to audit the Federal Reserve was blocked Tuesday in the Senate....…

  • Issue Brief posted December 22, 2015 by Curtis S. Dubay JCT Should Not Predict Federal Reserve Actions in Dynamic Scoring

    The Joint Committee on Taxation (JCT) provides estimates of the budgetary effects of tax legislation for Congress. In 2015, for the first time, Congress mandated that the JCT provide dynamically scored estimates of major legislative changes.[1] Dynamic scoring takes into account the macroeconomic feedback effects of changes in tax policy on revenues and spending. In other…

  • Issue Brief posted December 15, 2015 by Norbert J. Michel, Ph.D. Fascination with Interest Rates Hides the Fed’s Policy Blunders

    The Federal Reserve (Fed) has not changed its federal funds target rate since 2008. Such a policy is unsustainable in the face of market forces that change interest rates. This statement may seem surprising given the widespread belief that the Fed sets interest rates, but, in fact, the Fed does not set interest rates. As a matter of fact, the Fed does not set even the…

  • Commentary posted November 20, 2015 by Norbert J. Michel, Ph.D. Monetary Policy Devils Are In The Details: Easy To Dismiss Ideas Too Quickly

    During the last debate Senator Ted Cruz, Ben Carson, Mike Huckabee and Senator Rand Paul all waded into monetary policy, a hot topic since the 2008 crisis. Predictably, the last few days have seen a flurry of news articles attacking their views. Some of these stories, such as Greg Ip’s, are quite thoughtful. But on balance they are too dismissive of legitimate policy…

  • Issue Brief posted November 3, 2015 by Curtis S. Dubay JCT Dynamic Score of Bonus Depreciation: Highly Flawed

    Congress requires the Joint Committee on Taxation (JCT) to account for the macroeconomic impact of large tax bills.[1] Dynamic scores, as opposed to static scores, include the budgetary feedback effects of changes in the economy. For instance, when a policy change increases economic growth, the dynamic score would include the effect that more growth has on the federal…

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  • Commentary posted September 8, 2014 by Norbert J. Michel, Ph.D. Is the Federal Reserve Running On Empty?

    Politico ran an attention-grabbing headline last week: The Mystery Woman Who Runs Our Economy.  The article itself offered an interesting look at what makes Yellen tick, but the title presupposed way too much. No single person or committee runs our economy, no matter how hard the Federal Open Market Committee tries.  Far from harmless, this notion that someone in…

  • Backgrounder posted February 11, 2015 by Norbert J. Michel, Ph.D. Why Congress Should Institute Rules-Based Monetary Policy

    Many economists take for granted that the Federal Reserve has contributed positively to economic stabilization in the U.S., but its track record warrants a critical appraisal. Since the creation of the Federal Reserve in 1913 the U.S. has experienced the Great Depression in the 1930s, severe inflation and unemployment during the 1970s, a major banking crisis in the 1980s,…

  • Commentary posted August 22, 2014 by Norbert J. Michel, Ph.D. Bitcoin Currency: The New Frontier for the CFPB

    The Consumer Financial Protection Bureau (CFPB) has unparalleled powers over nearly every consumer financial product and service.  Given that virtual currencies can serve as a form of electronic money, the CFPB has, predictably, decided to weigh in on this topic. A CFPB statement this week warned people about the dangers of private digital currencies such as Bitcoin,…

  • Commentary posted April 7, 2015 by Norbert J. Michel, Ph.D. Risks From Fed's Interest On Reserves Threaten More Than Monetary Policy

    The Federal Reserve started paying interest on reserves (IOR) in October 2008. Many now suggest this policy has blunted the effectiveness of its expansionary monetary policies. One possibility is that IOR has helped keep all the excess reserves the Fed created in check. That is, because banks receive interest on these excess reserves, they’re not using them to create new…

  • Backgrounder posted October 27, 2014 by Norbert J. Michel, Ph.D. Federal Reserve Performance: What Is the Fed’s Track Record on Inflation?

    Central banks … will do wisely to lay aside their inexpert ventures in half-baked monetary theory, meretricious statistical measures of trade and hasty grinding of the axes of speculative interests with their suggestion that by so doing they are achieving some sort of vague “stabilization” that will, in the long run, be for the greater good. —H. Parker Willis, first…

  • Commentary posted July 15, 2014 by Norbert J. Michel, Ph.D. Will the Fed Go Tone Deaf When Fine-tuning the Economy?

    Has the economy recovered enough for the Fed to reverse course and start raising interest rate targets? Should it pull the plug on quantitative easing? The latest Federal Open Market Committee (FOMC) announcement did nothing to settle this debate. Nor did it contain any real surprises. As expected, the Fed announced it will continue its taper.  Beginning in July, it…

  • Commentary posted May 27, 2014 by Norbert J. Michel, Ph.D. Transparency More Important Than "Full" Board of Governors

    Senator Rand Paul (R-Ky.) wants an up or down vote on his bill that would require a full audit of the Federal Reserve, but Senate Majority Leader Harry Reid doesn’t want to let that happen. To force the issue, Paul is trying to block new nominees to the Federal Reserve’s Board of Governors. On Wednesday, Paul failed to stop the confirmation of Stanley Fischer to the…

  • Commentary posted September 8, 2014 by Stephen Moore, Norbert J. Michel, Ph.D. The Fed Can’t Fix the Economy

    A strange thing happened at the Federal Reserve Bank’s summer-end conference in Jackson Hole, Wyo. Usually these are boring affairs, but liberal protesters crashed the party this time, and demanded that the Fed help the poor by holding interest rates close to zero and injecting more dollars into the economy. An exchange between Reggie Rounds of Ferguson, Mo., and Fed…

  • Commentary posted September 17, 2014 by Norbert J. Michel, Ph.D. Tarullo Wants Banks to Pay for Being Too Big: Who Will Pay the Banks?

    The Federal Reserve’s Daniel Tarullo, the Fed governor who oversees regulatory policies, testified before the Senate that the central bank is going to propose new capital requirements for large banks. It appears these new requirements will be even more stringent than those called for under the latest round of international regulations.  According to Tarullo, the Fed…

  • Commentary posted December 11, 2014 by Norbert J. Michel, Ph.D. Ease up on Easing?

    Two reasons the Federal Reserve should stop trying to stimulate the economy: The policies it has enacted so far have contributed very little to the economic recovery. It has likely already reached the limits of what monetary policy can do to boost the economy. The Fed's quantitative easing programs have filled the banking system with excess reserves. The federal funds…

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  • Backgrounder posted September 23, 2016 by David R. Burton, Norbert J. Michel, Ph.D. Financial Privacy in a Free Society

    Privacy, both financial and personal, is a key component of life in a free society. Unlike in totalitarian or authoritarian regimes, individuals in free societies have a private sphere free of government involvement, surveillance, and control. The United States Constitution’s Bill of Rights, particularly the Fourth, Fifth, and Ninth Amendments, together with structural…

  • Backgrounder posted September 14, 2016 by Norbert J. Michel, Ph.D. Fixing the Regulatory Framework for Derivatives

    Many policymakers have strong opinions on the risks of derivatives, but there is no objective economic reason to regulate derivatives as a unique product. To the contrary, it is best to avoid regulating derivatives as a unique product because doing so is bound to result in a complex set of rules filled with special exemptions for select users. Prior to the 2008 financial…

  • Backgrounder posted August 31, 2016 by Norbert J. Michel, Ph.D. Money and Banking Provisions in the Financial CHOICE Act: A Major Step in the Right Direction

    House Financial Services Committee Chairman Jeb Hensarling (R–TX) has released a discussion draft of a major regulatory reform bill called the Financial CHOICE Act.[1] This legislation would replace large parts of the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act. Key sections of the bill would reduce the risk of future financial crises and bailouts, and…

  • Backgrounder posted April 28, 2016 by Norbert J. Michel, Ph.D. The Myth of Financial Market Deregulation

    A persistent myth regarding the 2008 financial crisis is that it was caused by deregulation of financial markets. All such claims are wrong. From an aggregate perspective, the industry has always been regulated, and there has never been a substantial reduction in financial regulations in the U.S. during the past 100-plus years. Instead, this time period has included an…

  • Issue Brief posted April 1, 2016 by Norbert J. Michel, Ph.D. The Fed Needs Reform: Six Changes for Monetary Policy

    In the wake of the longest recession since the Great Depression, policymakers have contemplated many monetary policy reforms. While some of these ideas, such as the Fed Oversight Reform and Modernization Act of 2015 (the FORM Act), introduced by Representative Bill Huizenga (R–MI), have received support in the U.S. House of Representatives, the Senate has yet to undertake…

  • Issue Brief posted December 22, 2015 by Curtis S. Dubay JCT Should Not Predict Federal Reserve Actions in Dynamic Scoring

    The Joint Committee on Taxation (JCT) provides estimates of the budgetary effects of tax legislation for Congress. In 2015, for the first time, Congress mandated that the JCT provide dynamically scored estimates of major legislative changes.[1] Dynamic scoring takes into account the macroeconomic feedback effects of changes in tax policy on revenues and spending. In other…

  • Issue Brief posted December 15, 2015 by Norbert J. Michel, Ph.D. Fascination with Interest Rates Hides the Fed’s Policy Blunders

    The Federal Reserve (Fed) has not changed its federal funds target rate since 2008. Such a policy is unsustainable in the face of market forces that change interest rates. This statement may seem surprising given the widespread belief that the Fed sets interest rates, but, in fact, the Fed does not set interest rates. As a matter of fact, the Fed does not set even the…

  • Issue Brief posted November 3, 2015 by Curtis S. Dubay JCT Dynamic Score of Bonus Depreciation: Highly Flawed

    Congress requires the Joint Committee on Taxation (JCT) to account for the macroeconomic impact of large tax bills.[1] Dynamic scores, as opposed to static scores, include the budgetary feedback effects of changes in the economy. For instance, when a policy change increases economic growth, the dynamic score would include the effect that more growth has on the federal…

  • Issue Brief posted October 23, 2015 by Norbert J. Michel, Ph.D. U.S. Treasury Debt Is Not the Foundation of the Global Economy

    Congress is once again facing a decision on the debt limit. If lawmakers do not raise the $18.1 trillion limit by the end of October, the U.S. Treasury may not have enough cash on hand to meet all of its obligations as they come due.[1] If they do raise the limit, the Treasury will borrow more money by offering new debt—Treasury securities—for sale. For many in Congress,…

  • Issue Brief posted October 23, 2015 by Norbert J. Michel, Ph.D. Federal Reserve Dividend Reduction Deserves Thorough Debate

    In July, the U.S. Senate introduced a plan to offset new highway spending by reducing the dividend that the Federal Reserve pays to member banks. While it is still unclear exactly where this idea originated, an anonymous Democratic staffer recently referred to the dividend as “an unnecessary and wasteful subsidy.”[1] It now appears that the dividend reduction will go…

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