InvestingChannel

Today, I will discuss the challenge that we both have been working to solve—how best to conduct monetary policy when short-term interest rates are already pinned close to zero, but the economy is still operating well below its potential. This has required considerable learning. After all, until Japan’s experience began in the 1990s, no major country had actually faced this problem since the Great Depression of the 1930s.

House prices in the UK are too high. How much too high they are depends on where you are: house prices have been rising in London because rich Asian businessmen and French aristocrats are buying up prime real estate as a safe haven investment for their filthy lucre, apparently. But outside London and the South East, house prices have actually fallen over the last few years, a bit. But not much. Certainly not enough to make them affordable for young people on median incomes.

Consider this blatant, and what I consider to be deliberate, deception of this UK Telegraph article, in which journalist Nick Squires reports that newly appointed Pope Francis blamed “free market capitalism” for the economic tyranny spreading across the globe today. Upon reading this, I thought to myself, “Well, we may have yet another religious leader with influence over millions that has no clue as to how the global banking system operates and consequently is going to mislead millions into adopting the belief that free-market capitalism (a market theory that is not practiced by any country in the world), and not the global banking system and bankers, are responsible for conditions of global economic misery.” But my second thought was, "Did the Pope really say what Nick Squires said he stated?"

This morning, the New York Fed released its Quarterly Report on Household Debt and Credit for 2013 Q1. The report uses the FRBNY Consumer Credit Panel to show that outstanding household debt declined approximately $110 billion (about 1 percent) from the previous quarter. The drop was due in large part to a reduction in housing-related debt and credit card balances. Meanwhile, delinquency rates for each form of consumer debt declined, with the overall ninety-plus day delinquency rate dropping from 6.3 percent to 6.0 percent.

One of the unique aspects of the FRBNY Consumer Credit Panel, which is itself based on Equifax credit data, is the detail we obtain for each kind of household debt. This quarter, we have taken advantage of the geographic information available in the data set and are introducing a set of maps of our student loan data, which indicate regional variation in several dimensions of student debt.

Paul Krugman wants to know why there are no deficit celebrations. He says:

One of the primary focuses of "Out of the Box" is on where you might get hurt and, more importantly, seriously hurt. "Preservation of Capital," the first ten rules of my thinking, has reached epic seriousness in a world with interest rates at unsustainable lows and underlying economic fundamentals that cannot support today's yields. The irrational game goes on based upon one thing and one thing only which is the creation of capital by all of the world's central banks. The money must go somewhere and so it does but the disconnect between the equity markets and bond yields from the real world is frightening...

The European Commission raided the offices of Shell, BP and Norway’s Statoil this week as part of an investigation into suspected attempts to manipulate global oil prices spanning more than a decade.

Despite the eagerness of Abenomics and the new BOJ head Kuroda to have their cake and eat it too, in this case manifesting in soaring stock prices, plunging Yen, rising GDP and exports, and most importantly, flat or declining bond yields, so far they have succeeded in carrying out three of the four (assuming Japanese economic data reporting is more accurate than that of its neighbor China), as it is physically impossible for any central planner to completely overrule the laws of math, economics and physics indefinitely. In this vein, we have described on numerous occasions in the past several days the shock to the system that the massive one-way transfer out of all asset classes and into equities has engendered, and resulted in...