Posts filed under “Think Tank”

Trade Deficit

The May Trade Deficit totaled $26b, $4b less than expected and down from $28.8b which was revised lower by $400mm. The improvement was due to both a rise in exports and a reduction in imports. Imports have now fallen for a 10th straight month and are down 35% from its record high in July ’08. Exports are down by 25% from its high. This thus highlights the main reason for the improvement in the trade imbalance, the US consumer buying less. With the trend expected to continue for a few years to come as the savings rate rises and deleveraging continues, the US has to make goods that the rest of the world wants in order to maintain solid export growth. The export gain for May was led by a rise in shipments of capital goods, industrial supplies, consumer goods and food and beverage. Bottom line, the better than expected deficit will lead to a rise in Q2 GDP estimates by a few tenths.

Category: MacroNotes


China’s June trade surplus data today is another statistic reflecting the impact of their stimulus plan on their economy. The surplus contracted to $8.25b, much better than expectations of $15.53b and down from $13.4b in May. The reason was solely due to a much smaller than expected decline in imports as domestic consumption rose, higher…Read More

Category: MacroNotes

An Inconclusive Start to the Q2 Earnings Season?

Good Evening: After an upside surprise from Alcoa and much better than expected initial jobless claims, U.S. stocks were poised to go much higher this morning. Given the almost 10% pullback in some of the major averages during the past four weeks, the news portended some short-covering, or at least a decent sized bounce. Unfortunately,…Read More

Category: Markets, Think Tank

US$ index

Add Nicolas Sarkozy to the choir of calls on the US$ as he is saying at the G8 that the US$ can’t remain the only reserve currency. Even before his comments, the $ index has been weak all day on the heels of the Bank of England MPC statement this morning. The $ index is…Read More

Category: MacroNotes

Federal Reserve independence

Vice Chairman Donald L. Kohn

Federal Reserve independence

Before the Subcommittee on Domestic Monetary Policy and Technology, Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

July 9, 2009

Chairman Watt, Ranking Member Paul, and other members of the Subcommittee, I appreciate the opportunity to discuss with you the important public policy reasons why the Congress has long given the Federal Reserve a substantial degree of independence to conduct monetary policy while ensuring that we remain accountable to the Congress and to the American people. In addition, I will explain why an extension of the Federal Reserve’s supervisory and regulatory responsibilities as part of a broader initiative to address systemic risks would be compatible with the pursuit of our statutory monetary policy objectives. I also will discuss the significant steps the Federal Reserve has taken recently to improve our transparency and maintain accountability.

Independence and Accountability
A well-designed framework for monetary policy includes a careful balance between independence and accountability. A balance of this type conforms to our general inclination as a nation to have clearly drawn lines of authority, limited powers, and appropriate checks and balances within our government; such a balance also is conducive to sound monetary policy.

The Federal Reserve derives much of the authority under which it operates from the Federal Reserve Act. The act specifies and limits the Federal Reserve’s powers. In 1977, the Congress amended the act by establishing maximum employment and price stability as our monetary policy objectives; the Federal Reserve has no authority to establish different objectives. At the same time, the Congress has–correctly, in my view–given the Federal Reserve considerable scope to design and implement the best approaches to achieving those statutory objectives. Moreover, as I will discuss in detail later, the independence that is granted to the Federal Reserve is subject to a well-calibrated system of checks and balances in the form of transparency and accountability to the public and the Congress.

The latitude for the Federal Reserve to pursue its statutory objectives is expressed in several important ways. For example, the Congress determined that Federal Reserve policymakers cannot be removed from their positions merely because others in the government disagree with their views on policy issues. In addition, to guard against indirect pressures, the Federal Reserve determines its budget and staff, subject to congressional oversight. Thus, the system has three essential components: broad objectives set by the Congress, independence to pursue those legislated objectives as efficiently and effectively as possible, and accountability to the Congress through a range of vehicles.

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Category: Federal Reserve, Think Tank

30 year bond auction

The reopening of the 30 year bond auction was mixed as the yield was about 1 bps higher than where the when issued was trading just prior at 4.303% (40 bps below the June auction) and the bid to cover at 2.36% was below the June reopening. But, going back to 2006 when the Treasury…Read More

Category: MacroNotes

Consumer Credit

Nice chart on Consumer borrowing via Asha Bangalore of Northern Trust’s Global Economic Research: > Asha notes: Consumers Continue to Borrow Less but Pace of Decline is Notable Consumer credit declined at an annual rate of 1.5% in May, after a 7.8% plunge in April and a 7.3% drop in March. The consumer deleveraging trend…Read More

Category: Credit, Think Tank

AAII invdividual investor stock market sentiment

Here’s a check up on stock market sentiment in light of the recent pullback that has taken the S&P’s back to levels last seen on May 1st. The AAII (American Assoc of Individual Investors) weekly measure of individual investor sentiment towards the stock market over the next 6 months showed a spread between bulls and…Read More

Category: MacroNotes

June retail comps

Retail Metrics said June comps fell 4.3% which is a touch better than the range of estimates of a decline of 4.5-5%. The month was impacted by the cold and rainy weather, tough comparisons with July ’08 rebate checks (which is the last month of this comparison) and of course sluggish consumer spending.

Category: MacroNotes

Wholesale Inventories

May Wholesale Inventories, which makes up about 25% of Business Inventories, fell .8%, .2% less than expected and April was revised up .1%. It’s the 9th straight month in a row of declines. The biggest contributor to the drop was in the durable good sector led by auto’s and computers. With overall sales falling .2%,…Read More

Category: MacroNotes