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  • 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…

  • Commentary posted December 9, 2014 by Norbert J. Michel, Ph.D. Jim Grant, Recession and Recovery in 1921

    James Grant’s excellent new book, The Forgotten Depression: 1921: The Crash That Cured Itself, tells the story of “America’s last governmentally untreated depression.” Just prior to the Roaring Twenties, the U.S. went into a deep economic slump but soon recovered—despite no active government stimulus policies. That sort of government inaction, of course, is very…

  • Testimony posted December 3, 2014 by Norbert J. Michel, Ph.D. Improving Financial Institution Supervision Ending the Federal Reserves Regulatory Role

    Testimony before Committee on Banking, Housing and Urban Affairs, Financial Institutions and Consumer Protection Subcommittee United States Senate November 21, 2014 Norbert J. Michel, PhD Research Fellow in Financial Regulations The Heritage Foundation A critical lesson from the Fed’s first 100 years is that an overly broad interpretation of the Fed’s role in…

  • Commentary posted November 25, 2014 by Norbert J. Michel, Ph.D. Should 'Legal But Shady' Be A New Regulatory Standard?

    Last Friday I had the pleasure of testifying at a Senate hearing. The topic was “Improving Financial Institution Supervision: Examining and Addressing Regulatory Capture.” “Regulatory capture” refers to a common phenomenon: individuals serving as regulators come to identify with the firms they regulate at least as much as with the agencies that employ them.  Thus, the…

  • Commentary posted November 12, 2014 by Norbert J. Michel, Ph.D. Repeal Dodd-Frank and End Too Big To Fail

    The Republicans will hold a comfortable majority in the U.S. House and, at most, a 55 seat majority in the Senate for the 114th Congress. That’s not a wide enough margin to override a Presidential veto. Still, the Republicans owe it to their constituents to exercise governance. On election night Sen. Mitch McConnell (R-KY) indicated Republicans will, in fact, try to do…

  • Backgrounder posted November 3, 2014 by Norbert J. Michel, Ph.D. Repealing Dodd–Frank and Ending “Too Big to Fail”

    The financial crisis of 2008 led to the “Great Recession” from which the nation is still recovering. Despite the slow economic rebound, and in the face of contradictory historical evidence, many critics are still trying to blame these events on the supposed failure of the free market. They claim that a lack of regulation caused the crisis and that the federal response…

  • Commentary posted October 28, 2014 by Norbert J. Michel, Ph.D. Consensus Building That the Fed's Policies Were Too Tight

    It’s certainly true that the Fed dropped its target federal funds rate in 2008.  In fact, the Fed started steadily cutting its target in September 2007.  In that month, it cut the target from 5.25 percent to 4.75. By the end of 2008, the target had been slashed to 1 percent. But those cuts don’t mean the Fed’s policies could not have been too tight. Nominal interest…

  • 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…

  • Backgrounder posted October 24, 2014 by Norbert J. Michel, Ph.D. Federal Reserve Performance: Have Business Cycles Really Been Tamed?

    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 October 16, 2014 by Norbert J. Michel, Ph.D. Let's Fully Devalue the Devaluation Idea, Once and For All

    Many bad ideas survive as urban legends. No field is immune, economics included. The list goes on: Unions care more about consumers than about their own members. Minimum wage laws don’t raise the cost of hiring low-skilled workers. Keynesian stimulus policies have worked wonders in the past. And so on. The latest bad idea that refuses to die is that countries should…

  • Commentary posted October 1, 2014 by Norbert J. Michel, Ph.D. The Pseudoscience of Inflation: Part II

    A few weeks back this column discussed some of the basic problems with measuring inflation in the macro economy.  It pointed out that economists use several different price indices because there’s no one, purely objective way to measure inflation. It’s nothing like measuring the volume of water in a container or the chemical makeup of a natural substance.  Still, we…

  • 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 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…

  • 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 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,…