Economist Cochrane: We Should Applaud the Fed for Keeping Big Balance Sheet

Monday, 25 Aug 2014 08:40 AM

By Dan Weil

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
While most conservatives offer heavy criticism of Federal Reserve policy, John Cochrane, a finance professor at the University of Chicago, sees things a bit differently.

"As Fed officials lay the groundwork for raising interest rates, they are doing a few things right," he writes in The Wall Street Journal. "They need a little cheering, and a bit more courage of their convictions."

The central bank has built its balance sheet to $4.4 trillion through quantitative easing.

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

When it decides to raise interest rates, the Fed can simply boost the rates it pays on bank reserves, Cochrane says. It doesn't have to sell trillions of dollars of its assets to absorb trillions of dollars of those reserves

"The Fed's plan to maintain a large balance sheet and pay interest on bank reserves, begun under former Chairman Ben Bernanke and continued under current Chair Janet Yellen, is highly desirable for a number of reasons — the most important of which is financial stability," Cochrane writes.

"Short version: banks holding lots of reserves don't go under."

Meanwhile, CNBC contributor Ron Insana says that the Fed shouldn't rush to raise rates.

"Commodity prices have fallen sharply since the last Fed meeting, . . . housing is still struggling . . . and the global economy looks weaker than it did a month and a half ago," he writes on CNBC.com.

"It does not seem to me that, while the economy is much improved, a pre-emptive strike on phantom inflation would do the economy much good."

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

Related Stories:

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
You May Also Like

Kudlow: Obama's Head Will Spin From New Conservative Agenda

Friday, 24 Oct 2014 21:35 PM

The vast majority of political journalists , and I include some of my conservative colleagues , are missing a very big s . . .

Stocks Rise on Earnings, S&P 500 Caps Best Week Since 2013

Friday, 24 Oct 2014 17:09 PM

U.S. stocks rose, with the Standard & Poor's 500 Index capping its best week since 2013, as companies from Procter & Gam . . .

Investors Sour on Dollar After Strong Rally

Friday, 24 Oct 2014 14:32 PM

My how things can change.
Just three weeks ago the dollar hit a six-year high against the yen and a two-year high  . . .

Most Commented
Top Stories

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved