Trump’s attacks on central bank threaten its independence − and that isn’t good news for sound economic stewardship (or battling inflation)

  Nearly every country in the world has a central bank – a public institution that manages a country’s currency and its monetary policy. And these banks have an extraordinary amount of power. By controlling the flow of money and credit in a country, they can affect economic growth, inflation, employment, and financial stability.

  These are powers that many politicians – including, currently, U.S. President Donald Trump – would seemingly like to control or at least manipulate. That’s because monetary policy can provide governments with economic boosts at key times, such as around elections or during periods of falling popularity.

Why SVB and Signature Bank failed so fast – and the US banking crisis isn’t over yet

  Silicon Valley Bank and Signature Bank failed with enormous speed – so quickly that they could be textbook cases of classic bank runs, in which too many depositors withdraw their funds from a bank at the same time. The failures at SVB and Signature were two of the three biggest in U.S. banking history following the collapse of Washington Mutual in 2008.

  How could this happen when the banking industry has been sitting on record levels of excess reserves – or the amount of cash held beyond what regulators require?

US is spending record amounts servicing its national debt – interest rate hikes add billions to the cost

  Consumers and businesses aren’t the only ones feeling the pain of higher borrowing costs because of Federal Reserve rate hikes. Uncle Sam is too.

  The U.S. government spent a record US$213 billion on interest payments on its debt in the fourth quarter, up $63 billion from a year earlier. Indeed, a jump of almost $30 billion on the previous quarter represents the biggest quarterly jump on record. That comes as the Fed lifted interest rates a whopping 4.25 percentage points from March through December.

5 things to know about the Fed’s biggest interest rate increase since 1994 and how it will affect you

  The Federal Reserve on June 15, 2022, lifted interest rates by 0.75 percentage point, the third hike this year and the largest since 1994. The move is aimed at countering the fastest pace of inflation in over 40 years.

  Wall Street had been expecting a half-point increase, but the latest consumer prices report released on June 10 prompted the Fed to take a more drastic measure. The big risk, however, is that higher rates will push the economy into a recession, a fear aptly expressed by the recent plunge in the S&P 500 stock index, which is down over 20% from its peak in January, making it a “bear market.”

How raising interest rates curbs inflation – and what could possibly go wrong

  After about three decades of relatively low inflation, consumer prices are skyrocketing again.

  The price of gasoline, for example, was up 40% in January 2022 from a year earlier, while used cars and trucks jumped 41%, according to data released on Feb. 10, 2022. Other categories experiencing high inflation include hotels, eggs, and fats and oils, up 24%, 13%, and 11%, respectively. On average, prices climbed about 7.5%, the fastest pace of inflation since 1982.

Fed’s rate cut signals a recession may be ahead – and it may not have enough ammunition to fight it

  The Federal Reserve seems a lot more concerned about the state of the economy than it’s been letting on.

  The Fed lowered its target interest rate by a quarter-point on Sept. 18, the second such cut since July – and the first reductions since the Great Recession more than 10 years ago.

  Judging by the words of Fed Chair Jerome Powell, this isn’t that big a deal. In his statement following the decision, he said: “We took this step to help keep the U.S. economy strong in the face of some notable developments and to provide insurance against ongoing risks.”

Norbert J. Michel: Ease up on easing?

  Two reasons the Federal Reserve should stop trying to stimulate the economy:

-The policies it has enacted so far have contributed very little to the economic recovery.

-It has likely already reached the limits of what monetary policy can do to boost the economy.

David A. Bergeron: The bipartisan Student Loan Certainty Act would protect our students

  This week the Senate will vote on the Bipartisan Student Loan Certainty Act, a bill written by Sen. Tom Harkin (D-IA), chairman of the Senate Health, Education, Labor and Pensions, or HELP, Committee. Sen. Harkin worked with Sens. Dick Durbin (D-IL), Joe Manchin (D-WV), Tom Carper (D-DE), Lamar Alexander (R-TN), Richard Burr (R-NC), Angus King (I-ME), and Tom Coburn (R-OK) to develop this bipartisan compromise, which would lower interest rates for the 11 million student-loan borrowers who either have taken out or will take out a new federal student loan after July 1, 2013.

Sheldon Richman: Cutting government would boost economy

  Budget sequestration is as modest a step toward cutting Leviathan as one can imagine. Further progress will be difficult as long as people believe that slashing the size of government conflicts with reviving the economy. Nothing could be further from the truth.

  In his recent debate on Charlie Rose, Nobel Prize-winning economist and New York Times columnist Paul Krugman said that even wasteful government spending should not be cut, because it would undermine job creation and economic recovery. This view isn’t quite as popular as it once was, but it is still influential.