Tag: Neel Kashkari

Let's Move Forward, Not Back

Posted on by George Yacik

Since the beginning of the coronavirus crisis, the Federal Reserve has probably done more to try to ease the financial pain of businesses, consumers, and institutions than just about any other organization on earth with their monetary policy. It’s lowered interest rates, purchased trillions of dollars of assets – some of which, like corporate bonds, it’s never bought before – eased bank capital requirements, and increased existing or created new lending programs to help Americans weather the storm and get back on their feet.

Now the president of the Minneapolis Fed and a current voting member of the Fed’s monetary policy committee is calling on people to suffer a few more weeks in quarantine in order to get the virus under control and the economy back on an upward trajectory – as if it weren’t on that already.

“If we were to lock down really hard, I know I hate to even suggest it. People will be frustrated by it,” Neel Kashkari told CBS’s Face the Nation program. “But if we were to lock down hard for a month or six weeks, we could get the case count down so that our testing and our contact tracing was actually enough to control it the way that it's happening in the Northeast right now. That’s the only way we’re really going to have a real robust economic recovery.”

“Now, if we don't do that and we just have this raging virus spreading throughout the country with flare-ups and local lockdowns for the next year or two, which is entirely possible, we're going to see many, many more business bankruptcies, small businesses, big businesses, and that's going to take a lot of time to recover from to rebuild those businesses and then to bring workers back in and re-engage them in the workforce. That's going to be a much slower recovery for all of us.”

If we take his advice and do another “hard lockdown” for six weeks or a month, how many more businesses will fail, and how many more people will be laid off or lose their jobs permanently in the meantime? Continue reading "Let's Move Forward, Not Back" →

Is Janet Coming Back?

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


A lot of names have been thrown around to be the next head of the Federal Reserve. But who is the most likely person President Trump will name?

The current occupant, Janet Yellen, has to be considered the front-runner, although that doesn’t necessarily mean she’ll be renominated. Indeed, I would put the odds of her being reappointed at less than 50-50 – a lot less.

She does have several things going for her. First and foremost, she’s a known quantity. The markets would certainly be happy if Yellen were reappointed, if for no other reason than that they’ll know what they’re getting. With the major stock indexes all at or near all-time highs, and the bull market already nine years old, the market doesn’t want anything untoward to upset the status quo.

But as we should know well by now, stability isn’t exactly Trump’s comfort zone. Two weeks ago, he had no problem telling investors in billions of Puerto Rican bonds that they could pound sand, which caused a major meltdown in the price of those bonds (administration officials subsequently walked back his remarks).

Would he risk something like that happening to the entire bond and stock markets by not reappointing Yellen? (Even if she doesn’t get reappointed as Fed chair, Yellen’s term as a member of the Fed’s Board of Governors doesn’t end until January 2024, although it’s expected that she’ll resign if she’s not renamed as chair).

Besides the stability factor, the main reason why the markets like Yellen, of course, is because, in the words of Mr. Trump himself on the campaign trail in May 2016, “She is a low-interest rate person, she’s always been a low-interest rate person, and let’s be honest, I’m a low-interest rate person.” He reiterated those feelings in July in an interview with the Wall Street Journal, in which he added, “I think she’s done a good job.” Continue reading "Is Janet Coming Back?" →

What Happens When The Fed Starts Selling?

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


The financial markets have been fixated for years at the prospect of interest rate increases by the Federal Reserve but have largely ignored the $4.5 trillion elephant in the room, namely the Fed’s gargantuan balance sheet. But last week several members of the Fed began publicly discussing their support to finally start winding down that massive portfolio.

Way back before the global financial crisis, the Fed’s portfolio held pretty steady in the high $800 billion to low $900 billion range. Then, as the crisis hit full force in the last three months of 2008 after the Lehman Brothers collapse, the portfolio more than doubled, ending that year at slightly north of $2 trillion. While the worst of the crisis may have been reached at that point, that was only the beginning of the balance sheet’s growth.

Between the end of 2008 until the end of 2012, the Fed’s portfolio grew gradually by another $800 billion or so, before spiking again, adding another $2 trillion over the next two years as the Fed embarked on quantitative easing. Eventually the portfolio reached $4.5 trillion, including both Treasury and mortgage-backed securities, at the end of 2014, where it has held largely steady ever since. Continue reading "What Happens When The Fed Starts Selling?" →