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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Seeking to boost housing and jumpstart the flagging economy, the Federal Reserve will push down mortgage rates a bit by purchasing $400 billion in long term Treasury securities.

Operation Twist will likely raise short rates even as it lowers long rates, because the Fed will sell Treasurys with maturities of less than three years to purchase an equal amount of Treasurys with maturities from six to 30 years. Those purchases will be undertaken gradually and completed by the end June 2012

Lowering mortgage rates a bit may help, but it won’t have the salutary effect on home purchases needed to raise real-estate prices and get consumers, whose balance sheets remain weak and have lost confidence in President Obama and Congress, to start spending again. Continue reading…

These are the views of Thomas Lam, group chief economist at OSK Group/DMG & Partners:

With the policy decision on interest rates universally expected to have remained unchanged at the April 26-27 meeting, the focus, as always, was on the accompanying Federal Open Market Committee (FOMC) statement. The evolution of the statement, however, contains minimal surprises. Instead, the key highlight was Chairman Ben Bernanke’s post-meeting press briefing debut (going forward, the briefings will be held four times a year, coinciding with the release of the economic projections from participants–FOMC members and other FRB Presidents–normally in January, April, June and November).

In the April statement, the FOMC toned down their description of the ongoing economic recovery to “proceeding at a moderate pace” from “firmer footing” in March, but gained more conviction in the “gradually improving” labor market conditions. This implies that the Committee does not view the 1Q 2011 soft patch in the economy as a likely turning point.

In addition, while the FOMC further acknowledges the pass-through from higher commodity prices to inflation, the Committee maintains that the spillover is likely to be “transitory” and that it is crucial to be vigilant of the changing dynamics of longer-term inflation expectations and underlying inflation.

Finally, the FOMC also confirmed, as we expected, its intention to “complete” the $600 billion Treasury purchase program by June and maintain the existing reinvestment policy for now.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Wednesday, Federal Reserve Chairman Ben Bernanke will discuss with reporters decisions taken by the Federal Open Market Committee. For this unprecedented press conference to be successful, Bernanke must venture where Fed chairmen are most reluctant to go–into politics.

Economists have long held that transparency about goals and means makes monetary policy more effective. However, genuine transparency requires that Bernanke acknowledge the limits imposed on the Fed policy by the actions of Congress, the administration and foreign governments.

Inflation is heating up, thanks to rising oil, food and other commodity prices. Many in Congress and financial markets blame QE2–the Fed’s policy of purchasing Treasury securities to moderate interest rates on mortgages, corporate bonds and the like–but easy money is not causing inflation.

China and several other Asian governments choose to keep their currencies substantially undervalued against the dollar and regulate domestic gasoline and other commodity prices. Those policies boost Asian exports and growth, slow U.S. and European growth, and push up global prices for oil and other commodities.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

On Friday, the Labor Department will report September employment, and forecasters expect the economy added zero new jobs. Unemployment is projected to rise a notch to 9.7%.

Completion of temporary jobs cloud the picture, subtracting an expected 75,000 positions, but the Labor Department is likely to show that the private sector added about the same number of jobs; core private sector employment–private jobs, less government-subsidized health care and social services, and temporary services–likely added a paltry 35,000 jobs.

Core private wage earners must be added to pay taxes for new positions mandated by new federally subsidized health benefits, financial sector regulations, and alternative energy technologies, or the federal deficit will fly into orbit; nevertheless, new tax-paying jobs are simply not materializing in sufficient numbers. Continue reading…

By Michael S. Derby
    A Dow Jones Column

NEW YORK (Dow Jones)–Congressional testimony by Federal Reserve Chairman Ben Bernanke Wednesday flagged a potentially seismic shift in how the central bank communicates its objectives to financial markets.

He said odds are high that when policy makers decide to lift short-term interest rates, they will target something other than the fed funds rate, for decades the primary focus of central bank policy. “It is possible that the Federal Reserve could for a time use the interest rate paid on reserves, in combination with targets for reserve quantities, as a guide to its policy stance, while simultaneously monitoring a range of market rates,” he said in written testimony to the House Financial Services Committee, adding “no decision has been made on this issue.” Continue reading…

These are the personal views of Axel Merk, president and chief investment officer of Merk Investments, a currency-focused firm based in Palo Alto, Calif.:

Forget about the flight to the dollar at the peak of the financial crisis: the yen was the ultimate beneficiary. The endlessly quoted unwinding of the carry trade was a factor, but there may have been a more important force at play. As that force may now be under increased pressure, the yen may be in trouble. The force we are talking about is the free market.

How can market forces drive up the yen when Japan has been a leader in quantitative easing, the “art” of printing money? Japan epitomizes the battle between market and government forces. Left to its own powers, Japan’s economy would have imploded after its asset bubble burst in 1990. While painful, the good news about a deflationary collapse is that you can rebuild; a collapse is also a brutal way of weeding out those with too much debt. Instead, the government has, to varying degrees, been fighting market forces ever since. However, as of late, the Japanese have relaxed their attack on free market dynamics, in large part as a result of weak leadership.

Fighting market forces can be extremely expensive. If market forces ultimately win–i.e. the collapse ultimately happens–it’s possible for a country to destroy its currency along the way. Left to market forces, those with debt likely go broke. Left to policy makers, everyone may eventually go broke.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Goldman Sachs, J.P. Morgan and other big Wall Street banks are awarding multi-million dollar bonuses to the same financiers who pushed the nation to the brink of financial ruin.

President Barack Obama voices outrage but fails to stem the abuse.

Wall Street leaders argue those bonuses were earned, much like jewel thieves refer to a big heist snatched from an impenetrable safe.

Wall Street has kept its mischief legal by salting the pockets of politicians running for Congress and president, and by making certain that key policy makers at the Treasury Department and the Federal Reserve are faithful Goldman Sachs alumni. Continue reading…

NEW YORK — Summarizing the extremes of the Senate Banking Committee hearing today on the renomination of Ben Bernanke to lead the Federal Reserve will take two quotes.

We’ll start with Sen. Jim Bunning (R., Ky.), the only member of the upper chamber to vote against Bernanke the first time around and a time-tested antagonist of the U.S. central bank.

“In short, you are the definition of moral hazard,” he said.

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By Neal Lipschutz
A DOW JONES NEWSWIRES COLUMN

The U.S. Federal Reserve missed a low-cost opportunity to reassure those investors worried about future inflation while burnishing its own reputation.

All it would have taken was omitting or changing a word or two or three.

Instead, the U.S. central bank ended a two-day meeting of its rate-setting Federal Open Market Committee with a statement barely changed from the one issued at the conclusion of the prior get-together in late September.

The rate decision, of course, was not in doubt. The federal funds rate will stay effectively near zero for some time. And there was some further and understandably reserved positive talk today about the continued pick-up in the U.S. economy. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Wall Street greed and irresponsibility have nearly destroyed the U.S. economy. Big bonuses for bankers encourage reckless risk taking and were a principal cause of the credit crisis and Great Recession.

Pay must be regulated to avoid another calamity.

A generation ago, banks took deposits, made loans and collected payments. Bankers quickly felt the consequences of money lent to folks unlikely to repay.

Continue reading…