The Center for Financial Stability (CFS) hosted remarks and a discussion with Federal Reserve Board Governor Christopher J. Waller on the economic and monetary outlook on Friday, November 19.

Remarks and the discussion are available at:
https://youtu.be/hQIA4bVFKXw

Thanks also to Howard Marks, John Ryding, Michelle Caruso-Cabrera, Colin Teichholtz, Nick Sargen, Colby Smith, Nick Silitch, Lisa Lee, Bruce Tuckman, and Jeff Young for excellent questions.

Today, The Wall Street Journal published my op-ed titled “How the Fed Rigs the Bond Market.”  Themes include:

High inflation should no longer be surprising, nor should it be labeled “transitory.” Its existence should prompt serious reflection on policy decisions and spur action to avoid a financial crisis.

The big issue is financial stability.

– The U.S. Treasury bond market has been rigged and manipulated since the Federal Reserve’s second quantitative-easing program began in 2010. The consequence of this blurred line between Fed and Treasury responsibilities—”monetizing the debt”—is inflation.

– Sales by the infamous “bond vigilantes” used to serve as a warning of inflationary policies. The signal has been muted.

The op-ed offers specific actions for Congress, Treasury, and the Fed to defuse imbalances and gradually restore market dynamics to the determination of bond yields.

We look forward to any comments you might have.

To view the full article:
https://www.wsj.com/articles/how-the-fed-rigs-the-bond-market-inflation-yields-financial-crisis-treasury-11637165868

This morning, Bloomberg’s John Authors said it well “We have October’s inflation numbers, and they were bad. Indeed, they were worse than the worst fears, with U.S. CPI exceeding the highest estimates provided by economists to Bloomberg. When you go below the surface, they’re even more troubling than they look.”

Macro and financial market analysis often includes a bit of guesswork. However, there are certain mathematical forces of nature in markets, economics, and debt management that are frequently ignored. Money, the government’s budget constraint, and the resulting seigniorage tax are among them.

Under the leadership of Professor William A. Barnett, the Center for Financial Stability (CFS) has provided many tools for investors and officials to reduce the probability of errors in making meaningful decisions.

Here are a few to help frame the new debate around what John Authors suggests is “how long it will last.”

Two Measures for the Fed and Investors
https://centerforfinancialstability.org/research/Measures_Fed_110221.pdf
Inflation Fears Offers the Fed a Chance to Modernize with Money
https://centerforfinancialstability.org/research/Modernize_Money_042621.pdf
Post-Pandemic Economic Risks
https://centerforfinancialstability.org/research/Post_Pandemic_Economic_Risks_050521.pdf
Advances in Monetary and Financial Measurement (AMFM)
https://centerforfinancialstability.org/amfm_data.php

We look forward to any comments you might have.