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The latest data show that the yearly rate of growth of the US consumer price index (CPI) climbed to 4.1% in May from 3.9% in the month before. Most economists and Federal Reserve policy makers attribute this to sharp increases in commodity prices. In his speech at the Federal Reserve Bank of Boston, Fed Chairman Bernanke said, Inflation has

On Wednesday July 30, the Federal Reserve announced that investment houses could tap the central bank for a quick source of cash through January 30. The program, started on March 17, was originally supposed to last until mid-September. Another program, where investment firms can temporarily swap more risky investments for safe Treasury securities

On Sunday, September 7, 2008, the US government seized control of mortgage finance companies Fannie Mae and Freddie Mac. According to the government’s statement, the financial health of both Fannie and Freddie (FF) had deteriorated to such an extent that it could have posed a serious threat to the US economy. Congress established the FF in order

Given last week’s dramatic events — the bankruptcy of Lehman Brothers, the end of Merrill Lynch’s independence, and an $85 billion US-government bailout of insurer AIG — most financial institutions are likely to become more sensitive to the state of their net worth. For instance, all it takes for a financial institution that has a net worth of $30

In his testimony to the Congress on September 24, Fed Chairman Bernanke urged the legislators to quickly approve the bailout of the financial sector with a package of $700 billion. Bernanke echoed Treasury Secretary Paulson’s view that the bailout expense, while hefty, is needed to remove from banks’ balance sheets the mortgage-linked assets,

Did Chairman Bernanke learn the correct lesson from the Great Depression? On Wednesday October 8 the Federal Reserve, European Central Bank, and four other central banks lowered interest rates in an emergency coordinated bid to ease the economic effects of the financial crisis. The Fed, ECB, Bank of England, Bank of Canada, and Sweden’s Riksbank

Now that governments and central banks are subjecting their economies to aggressive  monetary and fiscal-stimulus policies, many people say that the ideas of Keynes are back in fashion. We heard that Keynesian remedies can save world economies from plunging into a severe economic slump. In the United States, for instance, Republicans and Democrats

In the midst of the most serious financial crisis since the Great Depression, some economists are currently trying to come up with answers as to how to stabilize the financial system. Most experts are of the view that greater control of financial markets is the answer. The late professor Milton Friedman would have been dismayed by such ideas. He

On Tuesday, December 16, 2008 the Federal Open Market Committee ( FOMC ) lowered the federal-funds-rate target from 1% to between 0.25% and 0%. According to the FOMC statement, The Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time. Another main reason behind

On Thursday, January 8, 2009, US President-elect Barack Obama said, I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible. If nothing is done, this recession could linger for years. Most economists and various commentators are in agreement. They hold that the US government must sharply