Trump Says The Federal Reserve Is the “Biggest Threat” to His Presidency. So Why Hasn’t He Done Anything About It?

Ultimately, Trump’s goal in criticizing the central bank seems to be distancing himself from any damage they inadvertently inflict on the economy. But the president has had the opportunity to pick a Fed board that would better reflect his own intuitions about interest rates. If his failure to do so backfires on the economy, he’ll deserve all the blame that inevitably comes his way.

Jordan Weissmann

Economic Growth, Technological Change, and Climate Change

Jonathan Wight

Everything is going right for the Federal Reserve. It needs to change what it’s doing.

What the Fed needs, then, is a policy framework that gets interest rates up and keeps them there. Its 2 percent inflation target just isn't getting the job done. A 4 percent target might, or, if that was too much, maybe a more flexible 2 percent target that tried to make up for any past shortfalls by letting prices go up by more than that later so that inflation averaged 2 percent over the course of the business cycle. But somethingneeds to change. Otherwise, interest rates are going to keep falling to zero every time there's a recession, recessions are going to keep being worse than they need to be because the Fed will have trouble doing enough to help the economy, and recoveries are going to keep being slow for the same reason.

Matt O'Brien

The financial crisis and the foundations for macroeconomics

Yet it has to be acknowledged that the principle of building macroeconomics on microeconomic foundations, as applied by economists, contributed next to nothing to predicting, explaining or resolving the Great Recession. The insights into the financial meltdown that policymakers found most valuable came from scholars, such as Hyman Minsky and Charles Kindleberger, who thought in terms of broad aggregates and made no effort to establish micro foundations. The market participants, such as Ray Dalio, who were most prescient with respect to the crisis ignored microeconomics as they theorized in terms of debt and credit aggregates.

Larry Summers

The White House Tried to Take Credit for the Economy. It Wasn’t Very Convincing.

Jordan Weissmann

Is the housing price-rent ratio a leading indicator?

The FRED Blog

Donald Trump Was Too Incompetent to Pick a Fed Chair He Agreed With, and Now He’s Mad About It

It would have been trivially easy for Trump to nominate a more dovish Fed chair better aligned with his own instincts on monetary policy. (“Hawkish“ central bankers are apt to raise interest rates, while “dovish” ones prefer to keep them low.) But Trump blew the call because he’s an incurious bullshitter who fails to do a modicum of basic homework before making major decisions, and is thus at the mercy of his advisers. While all presidents get advice from their advisers, and most presidents choose at least some officials who later go on to do things they don’t agree with, flubbing the Fed nomination in this way is indeed the kind of thing that could only happen to Trump.

Jordan Weissmann

A few comments on the Labor Force Participation Rate

Bill McBride

Has wage growth been slower than normal in the current business cycle?

The FRED Blog

Corporate profits versus labor income : Risk & reward versus slow & steady

The FRED Blog

How 2,000 year old roads predict modern-day prosperity

Christopher Ingraham

What Economists Still Don’t Get About the 2008 Crisis

To lots of people, it seems obvious that the 2008 crisis was long in the making — the product of years of financial and regulatory folly. In general, the notion that economic booms cause busts, instead of being random unrelated events — an idea advanced by the maverick economist Hyman Minsky — seems to have much more currency beyond the ivory tower than within it.

Noah Smith

People are worried about these economic warning signs. They can relax. For now.

Andrew Van Dam

For the last time: Trump inherited a good economy, and he hasn’t made it better

Matt O'Brien

Donald Trump Goes Rogue

In half a week, between Quebec and Singapore, Trump showed that the liberal order is hateful to him, and that he wants out.

George Packer

Maybe This One Dumb Chart Explains the Economy

Jordan Weissmann

There is no productivity crisis, experts say

In a presentation at the Dallas Fed on Friday, Chad Syverson, an economics professor at the University of Chicago, said technological history has been one of lag-times between the launch of new technologies and their visibility in productivity numbers.

Steve LeVine

Econ Grapples With What Causes Recessions

Noah Smith

Need Work? Maybe That's a Job for Government

Lots of good things can happen when people are employed.

Noah Smith

The real reason the Republican tax cut isn’t going to work

Now, the important thing to understand here is that profits are supposed to be like a bat-signal showing businesses where to invest. When they're high, it usually means that there's so little supply of what consumers demand that companies can charge almost anything for it. Other firms, then, should be able to swoop in and compete away some of these profits while still making enough themselves for their upfront costs — the investments they have to make — to be more than worth it. That's what's supposed to be the magic of the market: Just by having everyone pursue their own self-interest, we can figure out how much of everything we need better than any bureaucrat could.

But this process has lost some of its mojo recently. Corporate profits, adjusted for taxes, inventories, and depreciation, have hit an all-time high as a share of the economy the past 10 years, but business investment has not. Nowhere close. It has been average at best.

Matt O'Brien