FOMC-Protokolle

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Contents

Protokolle, Presseerklärungen etc. des Federal Open Market Committee (FOMC)

Die kompletten Dokumente stehen auf der Homepage der Federal Reserve zur Verfügung[1].

Anhang 1 – FOMC: gefährlich niedriges Zinsniveau

19.03.2002 Meeting of the Federal Open Market Committee

Seite 57 ff. MR. HOENIG: First, monetary policy is clearly stimulative, with the real fed funds rate in the neighborhood of zero. (…)

My second point is that the current fed funds rate, as others have said, is clearly below equilibrium, and I would say perhaps significantly below equilibrium. At its current level, it is generating substantial amounts of liquidity and, therefore, setting up conditions that I think will give rise to future economic imbalances.

Seite 61 ff., MR. GUYNN: Suppose we ask ourselves, What should the nominal funds rate be with a real GDP forecast of 3 to 4 percent, as now reflected in the Greenbook, and PCE inflation between 1.4 and 1.6 percent? It seems clear that the answer would not be “near 1¾ percent” but something more like “4 to 4½ percent.” This means that we have a lot of work to do.

Seite 74, MR. GRAMLICH: We would not want to raise rates too quickly and risk snuffing out the turnaround, nor would we want to tarry too long with rates well below equilibrium and risk inflation down the road. That dilemma is still there. But with every day’s news I find myself worrying less about the first side of the dilemma, premature rate rises, and more about the second, tarrying too long.

Seite 78 ff., MR. REINHART: In a regime-switching model, we can view market participants as expecting the nominal funds rate to return to a more sustainable level rapidly once the tightening process starts but hedging their bets as to when that tightening will begin.

Seite 81, MR. PARRY: (…) to wait another year seems to me to be extremely dangerous, although I clearly see big advantages to that alternative outcome.

Seite 83, MS. MINEHAN: (…) I don’t think we should wait even one year. I know we have to bring the funds rate up from the current 1.75 percent. The questions are when, how fast, and what our ultimate goals are.

Seite 88 ff., CHAIRMAN GREENSPAN. And having gone through this whole period, one could argue in retrospect that we may have moved too fast on the downside. But we were facing significant risks in that period, and I think our policy moves turned out just fine.

My impression at this point is that we are of necessity looking at something different. This is a different type of economy. This is a different type of business cycle. We now seem to be at a reasonably good point. We have come to that point in part by good policy judgment and in part by just plain luck, but I think it is one from which we can work. My impression without getting into much detail is that short-term rates in general clearly are lower than we may want them to be. If the economy begins to rebound rather quickly, I think we’re going to want or like to see long-term rates move up. Indeed if the mortgage rate goes up, we will get some restraining effects on personal consumption expenditures because a goodly part of PCE has been financed by equity extraction from the appreciation in housing values. (…)

So as far as I can see, the balance of risks is no longer tilted toward weakness; the risks clearly are about equal in both directions. And I do think we may have a short period when doing nothing is the best policy alternative. I would certainly suggest that we do nothing on the fed funds rate today. (…)

My thought is that at least one way to get a leg up on the possibility that we may want to move in May, without moving the balance of risks to heightened inflationary pressures at this meeting, is to indicate in our press statement today that we view monetary policy as accommodative, without any further elaboration. That, I think, would enable us to move in May, if we choose, without generating any serious reactions in the markets. And if we decide not to move in May, that would be accepted as well. By the time of the May meeting, I think we will have learned a good deal about what is happening to inventory investment and its impact on the economy and, of course, about trends in profits and capital investment. (…)

Accordingly, I will put on the table the proposal that we keep the funds rate target unchanged at 1¾ percent and that we move the balance of risks statement to balance.

Seite 91 ff., MR. POOLE: (…) I am attracted to the idea that Jerry Jordan mentioned about trying to condition the market to the concept that we have some undoing of the insurance policy that we took out after September ll—that that level of rates is sort of a baseline to go back to. I do think that we run the risk of getting behind if we move only in 25 basis point steps. Just counting that out, it’s clear that it could take quite a few meetings before we got back even to undoing the easing since September 11.


02.05.2002, FOMC „Bluebook“, Monetary Policy Alternatives

With the current real federal funds rate well below its likely equilibrium value, the Committee may believe that the time has come to start the process of moving back toward a more neutral stance in order to reduce the possibility of having to make very rapid adjustments later or risk having inflation pressures mount. Indeed, the Committee might view a 25 basis point rate hike as merely taking back a portion of the easing undertaken to support the economy in the aftermath of the terrorist attacks, and such a rate increase might be seen as justified since the economic fallout from the attacks has proven to be considerably smaller than had been feared.


07.05.2002 Meeting of the Federal Open Market Committee

Seite 50 ff., MR. HOENIG. With policy where it is today, I think we do have some risks of inflation and also some financial excess, which in my view we need to keep in mind. Let me give you my three reasons for saying this. First, monetary policy is currently quite stimulative. No matter how one measures it, the real fed funds rate is near zero or at zero. Second, monetary policy is likely to remain accommodative for an extended period. If we decide today to leave the fed funds rate at its current level, the real fed funds rate will remain near zero or at zero for another seven weeks. If rates follow the path suggested by futures markets, the real fed funds rate will likely remain below its equilibrium level for the rest of this year and perhaps through early next year. And using the Greenbook’s forecast, including its assumption of maintaining the funds rate at 1¾ percent through the third quarter before gradually raising it, the real funds rate is likely to remain below equilibrium for at least another year. Thus, according to the Greenbook, policy will still be accommodative in the middle of next year, even though real GDP will have risen for seven quarters and the unemployment rate will have fallen for perhaps three quarters, if those projections are correct. Third, while a funds rate below its equilibrium level is appropriate when the economy is in recession, we must consider the risk of maintaining such an accommodative policy during the economic recovery. With such a small output gap and a low real fed funds rate, we should not dismiss the risk of higher inflation longer term as we get into next year.

Seite 60 ff., MR. KOHN. That prospect suggested that you soon would need to consider starting the process of moving to a more sustainable policy stance. (…)

These uncertainties and revisions supporting the current stance of policy, however, do not alter the basic policy issue you are likely to face later this year—that is, the timing and trajectory of a rise in the funds rate from its current unsustainably low level. (…)

One such benchmark cited by some Committee members at recent meetings—and even more frequently by financial market commentators—is taking back the so-called insurance cuts made after the September 11 attacks as a first set of steps in the tightening process. (…)

Still, the real federal funds rate is far enough below a reasonable range of estimates of its equilibrium value to indicate that policy will have to be tightened at some point to forestall increasing inflation pressures. (…) With the funds rate well below any plausible notion of its equilibrium, as time passes and if data are reasonably close to expectations, the risk of rising inflation pressures should come closer and increase, while concerns about shortfalls in growth should recede and diminish.


24.09.2002 Meeting of the Federal Open Market Committee

Seite 63, MR. KOHN. Thank you, Mr. Chairman. In its public statements the Committee has been characterizing policy as accommodative since March, and real overnight interest rates have been around zero and well below equilibrium levels since late last year.

Anhang 2 – FOMC: niedrige Zinsen erhöhen die Gefahr einer Immobilienblase

19.03.2002, Meeting of the Federal Open Market Committee

Seite 74, MR. GRAMLICH. On the consumption side, consumption itself has been stronger than forecast. The stock market is coming back. Tax cuts have helped. (…) And now, like a fire truck arriving late at the scene after the fire is out and spraying water all over the place, the Congress has entered the fray with investment inducements, possibly magnifying the next boom. (…) We would not want to raise rates too quickly and risk snuffing out the turnaround, nor would we want to tarry too long with rates well below equilibrium and risk inflation down the road. That dilemma is still there. But with every day’s news I find myself worrying less about the first side of the dilemma, premature rate rises, and more about the second, tarrying too long.


17.04.2002 Testimony of Chairman Alan Greenspan Monetary policy and the economic outlook, Before the Joint Economic Committee, U.S. Congress[1]

In housing markets, low mortgage interest rates and favorable weather have provided considerable support to homebuilding in recent months. (…) The ongoing strength in the housing market has raised concerns about the possible emergence of a bubble in home prices. (…) A home in Portland, Oregon is not a close substitute for a home in Portland, Maine, and the "national" housing market is better understood as a collection of small, local housing markets. Even if a bubble were to develop in a local market, it would not necessarily have implications for the nation as a whole. These factors certainly do not mean that bubbles cannot develop in house markets and that home prices cannot decline: Indeed, home prices fell significantly in several parts of the country in the early 1990s. But because the turnover of homes is so much smaller than that of stocks and because the underlying demand for living space tends to be revised very gradually, the speed and magnitude of price rises and declines often observed in markets for securities are more difficult to create in markets for homes.

25.06.2002, Meeting of the Federal Open Market Committee

Seite 55, MR. OLINER The rapid appreciation in recent years has prompted talk of an emerging house price bubble, similar to the boom-bust cycle of the late 1980s and early 1990s. While we would not entirely dismiss these concerns, we believe they are overblown.


13.08.2002, Meeting of the Federal Open Market Committee

Seite 35, MS. MINEHAN. Residential real estate markets are vibrant. Indeed, some contacts fear a bubble is growing there and report price increases in some areas that border on those of the late 1980s.

Seite 71 CHAIRMAN GREENSPAN.There clearly is concern at this stage about a housing value bubble that is going to burst. But I think that most of those who look at this in some detail question whether that’s a valid notion. And while the second-quarter increase in home values is now significantly below the big rise of last year, I believe a 3 percent annual rate is the current estimate that’s being used for existing home sales. So overall the notion that we’re going to lose the home equity part of the current support for consumer expenditures does not seem reasonable at this stage. This does not mean, of course, that we could not get a decline in home prices. It’s the notion that there is an equivalency between equity bubbles and housing bubbles that I think is an illusion. Moreover, as I think I’ve indicated several times in the past, it strikes me that with transaction costs as high as they are in home sales and the necessity to move if the home is sold, the incentive to sell a house is nowhere near what it is to sell a stock to take advantage of a capital gain. As I indicated earlier, the impact of immigration superimposed upon the difficulty of finding viable land for homebuilding is keeping significant upside pressure on home prices over and above the construction productivity issue. So the likelihood of any really important contraction in the housing area would in my view require a very major contraction in the economy overall.


24.09.2002, Meeting of the Federal Open Market Committee

Seite 33, MR. PARRY. I have to admit to being a bit uneasy about prospects for the economy. The reason is that most of the risks seem to be skewed to the downside: another terrorist attack, war with Iraq, declines in house or equity values, and fragile business confidence.

Seite 39, MR. GUYNN. My commercial real estate friends tell me that the commercial real estate oversupply is adjusting less rapidly than would be the case if carrying costs on marginal properties were not so low. And the now historically low borrowing rates on homes and autos may be encouraging various players in those sectors to develop unrealistic expectations about a sustainable level of activity. Although I would not yet characterize price developments in housing as a general housing bubble, I’m hearing more and more reports of what might be characterized as purely speculative housing and property deals, mostly in Florida. These deals are all driven by claims that sound as if the property can be resold in a few months or a few years at a nice profit so at current interest rates how can one pass up such an opportunity. Of course, there’s a bit of a Catch-22 in that these slow adjustments induced by low interest rates have served to sustain some measure of stability as the economy works through other adjustments. While I’m certainly not suggesting that we consider any policy tightening at this meeting, I do think we may already be in a bit of a policy trap. I recognize that some downside risks remain, including some potentially large and negative shocks, but I do not think we should exacerbate our long-term problem with still lower interest rates unless the downside risks loom larger or the negative shocks are realized.

Seite 48, MS. MINEHAN. Now, it’s possible that lower interest rates now could have unforeseen consequences—not just in terms of inflationary growth over the longer term but in the nature of the bets being taken in financial markets and perhaps in real estate markets as well

Seite 71, MS. BIES. Rising house prices have sustained the consumer’s wealth position against falling equity markets, and any decline in house prices could have significant impacts on consumer spending. However, since I still have a house in Memphis for sale, I’m less inclined to believe that there’s a widespread bubble. [Laughter]

MR. GRAMLICH. Is that house for sale?

MS. BIES. Oh yes.

VICE CHAIRMAN MCDONOUGH. Still.

CHAIRMAN GREENSPAN. Are you bidding?

MR. GRAMLICH. No, I’m just pointing out that there’s a bubble.

Seite 78, CHAIRMAN GREENSPAN. The long duration of the currently elevated level of home sales is a bit of a puzzle. At some point it has to drift down to a more normal range, but it’s not doing so thus far.


06.11.2002, Meeting of the Federal Open Market Committee

Seite 18,CHAIRMAN GREENSPAN. In recent months, housing starts have come in above expectations fairly persistently. Is there a possibility that we are underestimating the degree of immigration as we did in the previous decade? In other words, the boom of 1995 through 2000, which put the expansion of the U.S. economy well above that of other nations, explains the strength of our immigration. Our economy is still running ahead of them. Is it plausible that we’re miscalculating the strength of our population growth and hence the growth of households?

Seite 44, MR. SANTOMERO. One issue discussed at our last meeting was whether an easing of policy would exacerbate imbalances in the economy—in particular in the housing market—that would have to be worked out in the future. I myself shared that concern. But some recent work at our Bank suggests that relatively moderate growth in household investment during the preceding expansion leaves the potential for additional investment in that sector today, without fear of growing imbalances. As I’ve said at previous meetings, I have concerns about both trying to fine-tune the economy and the possibility of overshooting. I’ve argued for patience, saying that we should wait to see if the policy we had already applied was sufficient. But weak data have continued to come in, and positive signs in some sectors have begun to reverse themselves. I’m now losing patience. [Laughter] Perhaps it’s time to consider another dose of policy medicine.

Seite 52, MR. HOENIG. On a brighter note, housing activity continues to hold up despite increasing concerns that the boost to demand from low mortgage rates is nearing its end.

Seite 81, CHAIRMAN GREENSPAN. In any event, it’s hard to escape the conclusion that at some point our extraordinary housing boom and its carryover into very large extractions of equity, financed by very large increases in mortgage debt, cannot continue indefinitely into the future.


16. März 2004 FOMC Minutes

Reports from some contacts suggested that speculative forces might be boosting housing demand in some parts of the country, with concomitant effects on prices, suggesting the possibility that house prices might be moving into the high end of the range that could be consistent with fundamentals.


29.-30. Juni 2005 FOMC Minutes

At this meeting the Committee reviewed and discussed staff presentations on the topic of housing valuations and monetary policy. Prices of houses in the United States had risen sharply in recent years, especially in certain areas of the country, to very high levels relative to incomes or rents. In addition to local market factors, a wide range of influences appeared to be supporting home prices, including solid gains in disposable income, low mortgage rates, and financial innovation in the residential mortgage market. Prices might be somewhat above the levels consistent with these underlying factors, but measuring the extent of any overvaluation either nationally or in regional markets posed considerable conceptual and statistical difficulties. Meeting participants noted that the rise in house prices had been accompanied by a modest shift toward potentially riskier types of mortgages, including adjustable-rate and interest-only loans, which could pose challenges to both lenders and borrowers. Nonetheless, financial institutions generally remained in a comfortable capital position, such loans had performed well thus far, much of the associated risk had been transferred to other investors through securitization, and valuations had risen more rapidly than mortgage debt on average--so that loan-to-value ratios had fallen.


9. August 2005 FOMC Minutes

Activity in the housing sector remained robust. In June, starts of single-family homes maintained the strong pace of earlier this year. Both new and existing home sales jumped. Mortgage rates remained low, and house prices apparently continued to rise briskly. (…) Housing sales and construction activity generally remained strong across the country, but meeting participants noted anecdotal evidence of some cooling in housing markets in certain areas. And at least some banks were reportedly beginning to apply somewhat tighter standards in real estate lending and becoming more cautious in their promotion of nontraditional mortgage products. Participants generally anticipated that the pace of home price appreciation would slow over time, though the timing and extent of that slowing, as well as its implications for consumer spending, were quite uncertain. (…)

A few participants voiced concerns that still-low interest rates and insufficient recognition by investors of the dependency of the Committee's policy expectations on economic data were continuing to foster an inappropriate degree of risk-taking in financial markets. Another participant mentioned, however, that recent sluggish growth of the monetary aggregates suggested that the stance of policy was not overly accommodative. Moreover, with a higher proportion of mortgages now tied to short-term rates, it was noted that increases in short-term rates could have a somewhat larger-than-usual effect on spending.


31. Januar 2006 FOMC Minutes

Activity in the housing market appeared to continue at high levels, although there were some indications of slowing. Single-family housing starts decreased markedly in December; however, this decline may have been due in part to unusually cold and wet weather in some areas of the country. Multifamily housing starts increased in December. Sales of new and existing homes remained at elevated levels but slowed somewhat toward the end of the year. Moreover, the stock of homes for sale increased to the upper end of ranges seen in recent years. Recent data on mortgage applications and survey measures of homebuying attitudes also pointed to some cooling in the housing market. (…)

Nevertheless, signs of slowing in the housing sector had become more evident, and the boost to construction from hurricane-related rebuilding now seemed likely to be spread over the next couple of years rather than being more concentrated in the near term. In some areas, home price appreciation reportedly had slowed noticeably, highlighting the risks to aggregate demand of a pullback in the housing sector. For instance, the effects of a leveling out of housing wealth on the saving rate were difficult to predict, but, in the view of some, potentially sizable. Rising debt service costs, owing in part to the repricing of variable-rate mortgages, were also mentioned as possibly restraining the discretionary spending of consumers. The most likely outlook, however, was for a gradual moderation in house price appreciation and in the growth of consumption, which would continue to be supported by increases in jobs and incomes.


28. März 2006 FOMC Minutes

Housing activity had moderated somewhat from the robust pace of the past summer. Although the level of single-family housing starts was unusually high in January and February, much of this strength was likely the result of mild winter weather; new permit issuance extended the downward trajectory that began in October. After an unusual spike in January, multifamily housing starts dropped back in February to a rate well within their historical range. Sales of new homes fell in the first two months of the year, while sales of existing homes turned up in February for the first time since last August; both measures were well below their peaks of mid-2005. The stock of homes for sale was elevated compared with its range of the last several years. Mortgage applications continued to decline in February, and survey measures of homebuying attitudes also maintained their recent downward trend. Housing demand was likely damped by rising mortgage rates, which moved up further in late 2005 and early 2006. House price appreciation appeared to have slowed from the rapid pace of the summer, but price increases for both new and existing homes remained well within the elevated range that has prevailed in recent years.


10. Mai 2006 FOMC Minutes

The underlying pace of residential activity seemed to moderate in the first quarter. After unseasonably warm weather allowed a high level of single-family housing starts in January and February, starts fell in March to their lowest level in a year. New permit issuance for single-family homes also fell in March, continuing its downward trend. Multifamily starts recovered a bit in March from their low rate in February but remained well within their historical range. Home sales also declined, on net, in recent months. Although sales of existing single-family homes edged up in February and March, the level of sales for the first quarter as a whole was notably below the record high in the second quarter of last year. Sales of new homes also moved up in March, but their average in the first quarter was down substantially from the peak in the third quarter of last year. House price appreciation appeared to have slowed from the elevated rates seen over the past summer. Growth in the average sales price of existing homes in March, versus a year earlier, decelerated sharply, and the average price for new homes in March fell compared to a year earlier. In addition, other indicators, such as months' supply of both new and existing homes for sale and the index of pending home sales, supported the view that housing markets had cooled in recent months.


29. Juni 2006 FOMC Minutes

The expansion of consumer spending softened, and activity in the housing market continued to cool.


29. Juni 2006 FOMC Press Release

Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.


8. August 2006 FOMC Minutes

Residential investment contracted as activity in the housing market continued to cool. (…)

Sales of both new and existing single-family homes slowed in June and were significantly below their peaks of the summer of 2005. Available measures of house prices indicated that price increases had moderated over the past four quarters.


8. August 2006 FOMC Press Release

Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.


20. September 2006 FOMC Minutes

Residential construction activity continued to contract in recent months. Single-family starts fell further in July and August to a level well below the peak in the third quarter of 2005. Construction in the multifamily sector also fell back. Sales of both new and existing single-family homes fell in July and were significantly below the peaks of last summer. A range of indicators suggested that housing market activity was likely to slow further in the near term. Pending home sales dropped noticeably in July, and mortgage rates had increased since the beginning of the year. Available measures suggested that prices of existing homes increased through the second quarter at a much lower rate than the one observed during the same period last year.


20. September 2006 FOMC Press Release

The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market.


25. Oktober 2006 FOMC Minutes

The information reviewed at the October meeting suggested that economic activity increased at a slow pace in the third quarter. The contraction in home construction remained a significant drag on economic activity, and steep reductions in motor vehicle assemblies further weighed on growth in the third quarter.

Residential construction activity remained weak. Single-family starts ticked up in September, but new permit issuance slid further to its lowest level in nearly five years. Construction in the multifamily sector continued to fluctuate within the range that has prevailed for several years. Sales of new single-family homes edged up in August, while sales of existing homes held steady. Pending home sales, which rose somewhat in August after a noticeable drop in July, and the decline in mortgage rates since July likely indicated some support for housing demand in the near term. Still, the overhang of unsold homes remained historically high, and price appreciation of existing homes continued to slow through the second quarter.


25. Oktober 2006 FOMC Press Release

Economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market.


12. Dezember 2006 FOMC Minutes

In the household sector, mortgage debt increased at its lowest pace since the late 1990s, reflecting the continued deceleration in house prices. (…)

In their discussion of the major sectors of the economy, participants noted that developments in the housing market continued to weigh heavily on economic activity. Housing starts and permits for new construction had dropped sharply in October, and contacts in the building sector reported that construction firms were continuing to cancel options on land purchases. However, there were some indications that home sales might be starting to stabilize, aided by a marked slowing in the rate of increase of house prices and a decline in mortgage rates in recent months. Several participants also noted that a range of non-price incentives and concessions were being offered by construction firms to bolster sales. But even if home purchases had begun to level off, residential investment was likely to fall further in coming quarters as homebuilders sought to reduce their backlogs of unsold homes.

Thus far, the adjustment of activity and prices in the housing market did not appear to have spilled over significantly to consumer spending, which had expanded at a steady pace in recent months, buoyed by continued gains in employment and by a decline in energy prices. Retailers in most Districts expected good sales over the holiday season, although some contacts at package delivery and trucking firms reported that activity was less busy than usual for this time of year. Participants noted the downward revision to the BEA's estimate of personal income in the second quarter of this year, but nonetheless continued to anticipate consumer expenditures to expand at a steady pace going forward. Growth in consumer spending was expected to be supported by favorable financial conditions and solid gains in income from employment, outweighing any damping effect of sluggish increases in housing wealth. Still, considerable uncertainty regarding the ultimate extent of the housing market correction meant that spillovers to consumption could become more evident, especially if house prices were to decline significantly.


12. Dezember 2006 FOMC Press Release

Economic growth has slowed over the course of the year, partly reflecting a substantial cooling of the housing market.�


Anhang 3 – FOMC: Kriege und Terrorwarnungen lähmen die Wirtschaft

27.09.2001, FOMC „Greenbook“, Part 1: Current Economic and Financial Conditions: Summary and Outlook

Before the tragic events on September 11, we viewed the economy as having only a little forward momentum. The incoming data after publication of the August Greenbook pointed to a continuation of the patterns that emerged in the second quarter: an ongoing contraction in industrial production, sharp drawdowns in inventories, and only a little growth, on balance, in final sales. The layoffs in manufacturing and related industries and the slow pace of hiring elsewhere had finally shown through to a noticeable rise in the unemployment rate, and initial claims for unemployment insurance remained sufficiently elevated that additional cuts in jobs appeared to be in train. In the absence of the terrorist shock, we likely would have been forecasting only a small gain in real GDP, on balance, for the remainder of 2001.

From that baseline, we believe that direct and indirect effects on economic activity of the terrorist attacks will result in a mild contraction in real GDP in the second half of this year, leading to a further rise in the unemployment rate to 5-1/2 percent by year-end. To be sure, the size of the attacks' initial impact on production and spending is difficult to gauge, but we believe that it has been large enough to swing the change in real GDP in the third quarter from a small increase to a modest decline.


02.10.2001, Meeting of the Federal Open Market Committee

Seite 57, MR. BROADDUS. Against this background, the September 11th attacks, of course, have added to the anxiety and uncertainty that households, business firms, and investors were to some extent already experiencing before the attacks occurred. Those concerns showed up initially in asset markets. The negative impact on asset markets appears at least for the moment to be reasonably well contained under the circumstances, but obviously the level of anxiety in those markets is still very high. With a recession increasingly likely, consumers feel exposed to the risk of losing their jobs as well as to other risks and, therefore, are likely to spend less and save more out of current income in order to build their precautionary balances. And businesses, whose investment returns are now subject to a greater degree of risk than before the attacks, will probably cut back on their investment plans even further than they already have, at least for a time.

Seite 75, MR. KOHN. Thank you, Mr. Chairman. As noted in the Committee’s announcement of two weeks ago, the terrorist attacks subjected an already weak economy to a further downward shock. Just before September 11th aggregate demand apparently was still being impeded by an ongoing downdraft in investment, as firms corrected a previous over-expansion of capital equipment, and the resulting decline in employment and equity prices threatened to sap consumer spending. As noted in the Greenbook, firm evidence that the downdraft was beginning to abate had not emerged and the economic forecast probably would again have been marked down and the anticipated strengthening pushed further into the future. The attacks themselves disrupted business transactions for a time and apparently have heightened concerns about the future, likely restraining spending even more and further delaying the resumption of solid growth.


02.10.2001, FOMC Minutes

Subsequently, on September 17, the Committee reduced its target for the federal funds rate by a further 1/2 percentage point. This action was taken against the backdrop of heightened concerns and uncertainty created by the recent terrorist attacks and their potentially adverse effects on asset prices and the performance of the economy. In conjunction with this easing move, the Federal Reserve indicated that it would continue to supply unusually large volumes of liquidity, and the Committee recognized that the federal funds rate might fall below its new target until the normal functioning of financial markets was restored.


19.03.2002, Meeting of the Federal Open Market Committee

Seite 68, MR. OLSON. We had some discussion earlier about the effect of the lack of terrorist insurance on the commercial mortgage-backed market. As the Greenbook points out, the market seems to have identified and isolated the areas of risk. So I think that the Greenbook well pretty captures that particular exposure. We’ve talked about the stimulus package. The Greenbook also deals with the potentially explosive Middle East situation.


21.06.2002, FOMC „Bluebook“, Monetary Policy Alternatives

The mixed bag of subsequent economic data releases–along with heightened geopolitical tensions, warnings of terrorism, and further revelations of questionable corporate accounting practices–led investors to mark down their assessment of the strength of the economic expansion and to withdraw somewhat from taking on risk. As a result, market participants now see monetary policy on hold into the fall, with no change in the balance-of-risks assessment, and have lowered the expected path of the intended funds rate about 1/2 percentage point next year. (…) Indeed, the Committee may sense an increased risk of a severe deterioration in consumer and business confidence that could stem from terrorist attacks or international conflicts or from further news of accounting and corporate governance irregularities.


25.06.2002, Meeting of the Federal Open Market Committee

Seite 74, MR. MOSKOW. Also, the list of factors weighing on business and consumer confidence seems to be getting longer and longer. Accounting irregularities, corporate nongovernance, the war on terrorism, unrest in the Middle East, and threats of nuclear war and dirty bombs are all keeping people awake at night. And yesterday’s WorldCom announcement is another one of these factors.


25.-26.06.2002 FOMC Minutes

Subsequently, investors became more risk averse in reaction to a mixture of economic data releases, growing geopolitical tensions, further warnings about terrorism, and additional revelations regarding questionable corporate accounting practices. (…) Moreover, forecasts of even moderate growth in spending were subject to downside risks emanating, for example, from possible further shocks to confidence and household wealth should weakness in stock prices persist, and from political turmoil overseas and threats of terrorism at home.


05.07.2002, Meeting of the Federal Open Market Committee

Seite 71 ff., CHAIRMAN GREENSPAN: (…) One issue that has not been raised today, and I think we have to keep it in mind because it can happen, is Terrorist Act Two. (…). I would have said, and I think I probably did say at our meetings shortly after September 11, that it would take a terrorist attack of a greater order of magnitude than that of September 11—either a nuclear or biological or chemical type of attack—to scare people to the extent that our economy would not be able to function. (…)

In my judgment, that is the biggest risk in the outlook in the sense that if the nation were continuing to factor in another attack, then the economy could absorb it to some extent. But when it is not being factored in, I would say that its risk-adjusted level, if I can create a new level of elevated concern, would be at the top of the list. That does not mean that the probability of another terrorist attack has not been going down; indeed it probably is still going down. But we have no idea what that probability is. None of us has knowledge of that from our day-by-day reading of the daily newspapers, and our intelligence agencies do not at this stage have that knowledge. They know a lot about the terrorist structures but very little about pending events.

So there’s a lot of uncertainty, understandably. And I am certain that when we all read our transcripts five years from now we probably will look back on this period and say that we were unduly concerned—that in fact the underlying economy was really improving and that the productivity increases were reflective of developments that we had not really understood. We are likely to see that the economy was much better than we thought and that its flexibility was greater. To be sure, pricing power was nonexistent, but nobody cared because unit costs were in check and everything was basically fine and we shouldn’t have worried. But I’m still worried. My recommendation, which I suspect is pretty much what everyone has in mind at this stage, is that we stay at 1¾ percent on the funds rate and retain the statement that we view the risks as balanced.


13.08.2002, Meeting of the Federal Open Market Committee

Seite 34, MR. MCTEER (…) plus continued concerns over war and terrorism have made consumers more reticent, and that is likely to continue for some time.

Seite 43, MR. BROADDUS. (…) The problem, of course—and I know the staff is well aware of this—is that there are currently an unusually large number of significant downside risks in the outlook that are very difficult to quantify and to incorporate in a forecast. Those risks include, for example, the possibility of a renewed and perhaps sharper drop in stock prices than we’ve already seen, a war in the Middle East, financial collapse in Brazil, or another terrorist attack in the United States. (…)

Seite 63, MR. JORDAN. (…) Regarding the national economy, as always it’s a contest between the strength of forces generated by the inherent resiliency of market mechanisms versus the frequency and the strength of various adverse impulses. When asked what is causing so much caution in the business sector as well as the declared nervousness of households—an attitude not necessarily reflected in their spending—people point to three major uncertainties. And here “uncertainties” is the right word, not “risks.” Somebody else mentioned—I think it may have been Cathy—the word “fear.” I heard the word “fear” much more than the word “risk” during this recent period. There are uncertainties about where, when, and how bad the next terror attack will be, about the startling loss of confidence in the quality of balance sheet and income statements of businesses, and about when and how the violence of the Middle East can be brought to an end. None of these sources of uncertainty has a clear, easy, or near-term solution. There will not be a VT day—victory over terrorism day—that we will mark on our calendars to celebrate in the future.


24.09.2002, Meeting of the Federal Open Market Committee

Seite 29, MR. MOSKOW. Turning to the national outlook, the economy still seems to be on a bumpy road. We have absorbed an extraordinary number of shocks over the past year: September 11, the war on terrorism, international trade disputes, the failures in corporate governance, and now the prospect of war with Iraq. To date the economy has shown a good deal of resiliency, but these shocks have taken a toll on confidence and have substantially raised uncertainty, as David mentioned.

Seite 33, MR. PARRY. I have to admit to being a bit uneasy about prospects for the economy. The reason is that most of the risks seem to be skewed to the downside: another terrorist attack, war with Iraq, declines in house or equity values, and fragile business confidence. Based on our outlook and risk assessment, at this point I would see no reason to change the current stance of policy.

Seite 42, MR. SANTOMERO. Today, we face the lingering effects of September 11 on the national psyche, the aftermath of the bursting tech bubble, the negative reaction and added uncertainty centering around corporate accounting scandals, and increasing anxiety over the possibility of war with Iraq. These are just some of the headwinds that our economy must fight through. Nonetheless, there are offsets to the headwinds, not the least of which are accommodative monetary and fiscal policies. Low interest rates are sustaining consumer spending on housing and durables, which is an essential part of the outlook.

Seite 77, MR. REINHART. Indeed, markets remain skittish, the potential for military action in Iraq seems significant, and the threat of terrorist attack at home was raised to “high” since you last met.

Seite 100, VICE CHAIRMAN MCDONOUGH. I think there’s a little confusion about what we mean when we’re talking about the importance of geopolitical events. It’s not as if we mean that a geopolitical event is, say, that we start bombing Iraq three or four weeks from now. Maybe we will, and maybe we won’t. Rather, the point is what the geopolitical environment does to the level of uncertainty and the effects of that on the real economy.


06.11.2002, Meeting of the Federal Open Market Committee

Seite 33, MS. MINEHAN. (…) First, it’s not clear when uncertainty will ease or what role a conflict with Iraq might play. (…) Frankly, further easing in monetary policy might not trigger spending either, though it probably wouldn’t hurt. (…) Clearly these two forecasts, one for business investment and one for consumption, feed on one another. If one is gaining strength, the other comes along. But the reverse is true as well. Businesses won’t invest if consumers won’t buy, and consumers won’t buy if they don’t have jobs. The key question here is, What starts the process? Given the situation in the rest of world, help is not on its way from the external sector. That leaves only two major exogenous drivers of the forecast outside of an increase exogenously in animal spirits—accommodative fiscal and money policy. At their current levels, are these enough?

Seite 43 , MR. SANTOMERO. (…) Uncertainty over geopolitical issues will have to ebb and businesses will have to gain confidence in the recovery before they begin to make the commitments implicit in renewed investment and hiring.

Seite 43, MR. HOENIG. (…) Perhaps more important are the forces of uncertainty. There is the risk of a war with Iraq; its timing, duration, and so forth are an uncertainty. Terrorism is an uncertainty.

Seite 59, MR. KOHN. (…) It does seem likely that the geopolitical risks we have cited—concern about terrorism, war, and oil prices— have made people more cautious, especially businesses in their investment decisions.

Seite 82, CHAIRMAN GREENSPAN. (…) I know for sure, it means that cash flows will be improving and that stronger capital investment will eventually materialize provided the overhang of uncertainty, very specifically the uncertainty relating to geopolitical risks, dissipates. This is a Gulf War scenario all over again. You may recall that when Iraq invaded Kuwait in the summer of 1990, oil prices initially took off. But as the buildup to the fighting with American forces took place, we experienced a progressively more debilitating degree of uncertainty. It took a very significant toll on consumer expenditures and indeed was probably an important, if not the primary, cause of the 1990 recession. We now have the same problem to work through. It’s difficult to know when, or even if, there will be another Middle East War.


29.01.2003 FOMC Press Release

Oil price premiums and other aspects of geopolitical risks have reportedly fostered continued restraint on spending and hiring by businesses.


18.03.2003 FOMC Press Release

However, the hesitancy of the economic expansion appears to owe importantly to oil price premiums and other aspects of geopolitical uncertainties.


06.05.2003 FOMC Minutes

When the Committee met on March 18, 2003, the nation appeared to be on the brink of war. At the end of that meeting, the Committee adopted a directive that called for maintaining conditions in reserve markets consistent with keeping the federal funds rate around 1-1/4 percent. The Committee agreed to indicate in its announcement that in light of the unusually large uncertainties clouding the geopolitical situation in the short run and their apparent effects on economic decisionmaking, it could not at that time usefully characterize the current balance of risks with respect to the prospects for its long-run goals of price stability and sustainable economic growth. The Committee also agreed that heightened surveillance would be particularly informative. It was noted that while the recent economic data were mixed, the hesitancy of the economic expansion appeared to owe significantly to oil price premiums and other aspects of geopolitical uncertainties. The Committee believed that as those uncertainties lifted, the accommodative stance of monetary policy, coupled with the ongoing growth in productivity, would provide vital support toward fostering improving economic performance over time.


06.05.2003 FOMC Press Release

Recent readings on production and employment, though mostly reflecting decisions made before the conclusion of hostilities, have proven disappointing. However, the ebbing of geopolitical tensions has rolled back oil prices, bolstered consumer confidence, and strengthened debt and equity markets. These developments, along with the accommodative stance of monetary policy and ongoing growth in productivity, should foster an improving economic climate over time.

Although the timing and extent of that improvement remain uncertain, the Committee perceives that over the next few quarters the upside and downside risks to the attainment of sustainable growth are roughly equal.


16.03.2004 FOMC Minutes

Financial markets also seemed a little less positive about the outlook, with stock prices lower and some risk spreads wider than at the time of the last meeting. The reasons for the reduced optimism were not entirely clear but may have included higher energy and commodity prices as well as renewed concerns about terrorism.


29.-30.06.2004 FOMC Minutes

Members acknowledged that their favorable outlook for economic activity was based on the assumption that major terrorist disruptions would be averted.


10.08.2004 FOMC Minutes

Indeed, some members suggested that heightened uncertainty, reflecting the effects of higher energy prices and increased concerns about geopolitical risks, might have contributed to greater business caution of late.

Anhang 4 – FOMC: Immobilienboom als Motor der Wirtschaft

25.06.2002, Meeting of the Federal Open Market Committee

Seite 122 ff., CHAIRMAN GREENSPAN.The demand for housing is pressing up against land shortages and the like, and we are getting fairly dramatic increases in a lot of areas in the market value of homes and hence in the total housing equity, from which there has been a consistent degree of extractions. One source of the extractions is the very high level of existing home sales. The sellers pay off significantly less mortgage debt than the buyers take on, and the net change in those two mortgage numbers equals the extraction of equity from the sale of existing homes. The funds made available from home sales plus the funds obtained from the very large increase in home equity lending, which stems from “unrealized gains” that are not the consequence of a sale of a home, are being employed to a significant extent for consumer expenditures. Of course, a further source of such funds comes from cash-outs from home refinancings, which as I recall are an increasing proportion of the aggregate amounts being refinanced. (…)

It’s fairly evident that there is a secular increase in the value of homes relative to the value of other assets. The consequence is that the extraction of funds from home equity values is a much more important source of consumption expenditures than earlier. Previously, consumers were not able to extract cash easily out of the rising value of their homes, but they can now, and that source of funds has been a strong sustaining force for spending through the recession. Unless immigration slows down as a consequence of September 11, it’s hard to imagine that anything really major is going to change in this regard. And unless we get a significant decline in home prices, and that’s a very questionable prospect at this stage, it’s hard to imagine that there will not be very considerable ongoing support for consumption expenditures coming out of the housing equity markets. (…)


13.08.2002, Meeting of the Federal Open Market Committee

Seite 67 MR. REINHART. With a real federal funds rate close to zero, policy has provided forward thrust to the real estate sector and has facilitated the ongoing extraction of owners’ equity, evidenced in part by another wave of refinancing that seems not yet to have crested.

Seite 71 CHAIRMAN GREENSPAN. The turnover of homes of necessity engenders realized capital gains, and those gains tend to be the element in the housing market that extracts the most home equity. Indeed, what we always observe is that the mortgage loan taken out by the buyer is significantly larger than the mortgage cancelled by the seller. And the spread between the two, which is the net increase in mortgage debt on that existing home, is very close in general to the realized capital gain. To be sure, a very significant amount of equity extraction occurs without realized gains, and it occurs largely because of the cash-outs from refinancings. Those cash-outs are becoming quite large. An internal estimate by Freddie Mac for last year indicates that it was a little over $100 billion. The total is down somewhat this year because the refinancings are not as large, and I believe the ratio of cash-outs to refinancings usually comes down a bit when refinancings to total originations go up.

All in all, there have been very large extractions from home equity. They do not seem to be impaired or enhanced by fluctuations in stock prices. The result has been a very major addition to personal consumption expenditures and to home modernization outlays, which, of course, are part of GDP. What we have observed here is a major offset to the quite extensive decline in wealth from equities. And what is also interesting is that we are looking at two different segments of household incomes. A very substantial part of the wealth creation and destruction through equity stock prices occurs in the upper-income quintile, while a very substantial part of the home equity extraction occurs in the lower four quintiles. And the evidence is that on average the impact on personal consumption expenditures from changes in equity wealth according to the FRB/US model is about the same overall as the extraction of equity from housing. In my view, however, the available evidence suggests that that may be in error in the sense that we may find after the fact that the marginal propensity to consume out of capital gains in homes, especially those that are realized, is very significantly above the marginal propensity to consume out of either realized or unrealized gains in equities. Only in recent years have unrealized gains in equities become a very prominent factor in both personal consumption expenditures and home modernization outlays.


24.09.2002, Meeting of the Federal Open Market Committee

Seite 71, MS. BIES. Rising house prices have sustained the consumer’s wealth position against falling equity markets, and any decline in house prices could have significant impacts on consumer spending.

Seite 78, CHAIRMAN GREENSPAN. First, I think it’s fairly evident that unprecedented levels of equity extraction from homes have exerted a strong impetus on household spending. We see this in the incoming aggregate data on such spending, though not in measures that reflect consumer attitudes and psychology. We know, for example, that the level of existing home turnover is quite brisk and that the average extraction of equity per sale of an existing home is well over $50,000. A substantial part of the equity extraction related to home sales, which is running at an annual rate close to $200 billion, is expended on personal consumption and home modernization, two components, of course, of the GDP.

The long duration of the currently elevated level of home sales is a bit of a puzzle. At some point it has to drift down to a more normal range, but it’s not doing so thus far. Similarly, the historically high level of refinancings in the third quarter, as reflected in the data on applications reported by the Mortgage Bankers Association, is creating a very large increase in cash-outs. We estimate that they, too, are running in the $200 billion range at an annual rate, up very significantly from where they were a year or eighteen months ago. Perhaps more importantly, there is no evidence of a slowing in refinancing activity. The average rate on new thirty-year fixed-rate mortgages is well below the average rate on outstanding mortgages. This differential plays an important role in models of refinancing activity constructed here at the Board. The models, which fit the historical data very well, suggest that refinancing activity should continue quite strong in the months immediately ahead. Accordingly, we are likely to see fairly high levels of actual cash flows, the monies made available from the cash-outs, until the end of the year and perhaps beyond.

The impact of this development is not easy to isolate from the rest of what is going on in the economy, but there is no question that a goodly part of the robustness of household expenditures stems from this source. Cars and light trucks, which have been quite strong, are examples of the types of large ticket items that are disproportionately purchased when equity is extracted from the sale of a home. It seems likely that increases in the average size of cash-outs will persist, and one would expect these monies to have an impact on purchases of motor vehicles and other big-ticket items. Indeed, I suspect that’s what we are seeing.


06.11.2002, Meeting of the Federal Open Market Committee

Seite 43, MR. SANTOMERO. Enabled by accommodative monetary policy, consumers have buoyed the recovery. Low interest rates have sustained consumer spending on housing and durables. Refinancings have put money in consumers’ pockets, and research by the Philadelphia staff suggests that this refinancing activity has had a significant impact on expenditures for consumer durables. In addition, the increase in house prices has raised the value of collateral used to support home equity lending, and that has enabled homeowners to bring forward some of their consumption. The consumer continues to be the essential part of the outlook. However, there is some danger that, if refinancing or home-price appreciation slows, the strength of consumer spending will subside.

Seite 66, MR. FERGUSON. Second, mortgage refinancings, while still high, do show a tendency to be inversely related to changes in mortgage rates and not just to the level of rates. So if mortgage rates do not continue to come down, then there might not be the support for a continuing wave of refinancings at the recent high level.

Seite 80, CHAIRMAN GREENSPAN. I mention that even though a good deal of the econometrics does suggest that it is the level of the mortgage interest rate and not its decline as such that determines the rate of new and existing home sales. Remember, the sales of existing homes engender a fairly significant extraction of equity directly as a consequence of housing turnover. And clearly cash-out refinancings are also a function of the level of the current mortgage rate in relation to the average rate on outstanding residential mortgages. What this suggests is that there is still considerable momentum in the housing industry because mortgage rates remain low. Moreover, there is unquestionably still very strong cash-out availability as we go into December because applications have gone up very dramatically and there is usually a six-week lag between mortgage applications and originations. Of course, it’s the timing of originations that creates the cash-out monies, which as you may recall I said at the last meeting were running at an annual rate of around $200 billion. And indeed that explains a very big part of the rise in mortgage debt during the last couple of years.


Anhang 5 – FOMC: Geldmenge

30.01.2002, Meeting of the Federal Open Market Committee

Seite 17, MR. GOODFRIEND. I will spend most of my time explaining how what I think is the best option—expanding the monetary base—could work to stimulate the economy at the zero bound. (…)

Usually, open market operations are constrained to accommodate the demand for the monetary base at the opportunity cost spread between the intended federal funds rate and zero. There is a need to defend an interest rate spread when the federal funds rate is positive, and as a result, the monetary base is not an independent instrument available for policy in those normal circumstances. But once the federal funds rate is zero, there is no need to defend an interest rate spread, and policymakers are free to expand the monetary base further to stimulate the economy.

(…)

There are three avenues that could be pursued to increase broad liquidity by expanding the Federal Reserve’s balance sheet. One would be to buy from the public relatively illiquid assets such as long-term government bonds, which would provide the public with base money that would then be deposited in banks. The banking system would expand, deposits would grow, and the banks would hold reserves against these additional deposits. It’s important to understand that even if banks do not use these reserves to expand lending—and thus there is no secondary expansion of bank deposits—the Fed has increased broad monetary liquidity in the economy as a result of its purchase of relatively illiquid long-term bonds on the open market. Alternatively, the Fed could buy assets other than long-term government bonds— anything one can imagine that is relatively illiquid—and in that way also increase broad liquidity. The third way would be to monetize a government budget deficit. That would involve the government’s issuing new short-term securities, say, which the Fed would buy. We would thereby be providing the government with a monetary base, which in turn it would transfer to the public through a tax cut or in some other way. The funds placed in the hands of the public would be deposited in the banking system and deposits would increase, as would broad liquidity.

(…)

After an injection of broad liquidity that drives down its implicit yield, people will feel compelled to hold assets that are less liquid but have a higher explicit rate of return. Portfolio balance would require a similar fall in the explicit yield on nonmonetary assets. Equilibrium prices of nonmonetary assets would be bid up to restore the required return differential.

Turning to page 8, higher asset prices raise desired consumption out of current income. And higher asset prices relative to their cost of production would revive investment. The increased investment would raise employment, and higher utilization rates and profits would raise asset prices further. That is the essence of the portfolio rebalancing channel.

Let me talk for a minute about the credit channel (page 9). Because asset prices are higher, collateral values would be higher, net worth would be higher, and bank capital would be higher. As a result of the higher valuations available to back loans, the external finance premium would come down. Credit spreads would narrow, bank lending would revive, and spending would rise as the cost of borrowing against future income prospects falls. Those developments would occur along with the portfolio rebalancing channel, but I call them the credit channel because they are distinct in that they operate in the credit markets.

(…)

Injections of monetary base can provide an impulse to get the recovery going, but for the recovery to be self-sustaining the public must be confident that base money will be expanded by as much and for as long as needed. That is, monetary policy must be supportive until the economy expands enough to support asset prices on its own. To acquire such credibility, the central bank must overcome the perception that it is excessively concerned about the inflationary risk of potentially very high growth in the monetary base. The monetary authority must be prepared to overshoot—perhaps by a wide margin—base money that will be demanded at stable prices after the economy recovers.

There is a second related, but distinct, implementation problem that would make gaining credibility for quantitative policy difficult. Ordinarily, relatively small changes in bank reserves suffice to support interest rate policy. We hardly have to move the System’s balance sheet at all to support even large changes in the intended federal funds rate. At the zero bound, however, policy will have to exert its effect through broad liquidity rather than very narrow reserves liquidity. What we’re talking about is operating on a monetary aggregate like M3—which is roughly around 8 trillion dollars—plus the stock of short-term Treasury securities, which involves another $1 trillion to $2 trillion. The order of magnitude of that aggregate is about that of GDP. That will require large-scale injections of monetary base, substantially increasing the size of the Federal Reserve’s balance sheet, I believe, in order to have the desired effect through the two broad liquidity channels of monetary transmission.

If all this is true, the Federal Reserve will need more fiscal support for quantitative policy at the zero bound than we usually are granted by the fiscal authorities. For one, there might not be enough long-term bonds to buy in order to expand the monetary base. Of course, we could buy other assets. But either way the Federal Reserve would be exposed to capital losses that might leave it with insufficient assets to reverse the huge expansion of its balance sheet that is being contemplated. In other words, to be willing to use quantitative monetary policy at the zero bound, the central bank must be able to inject large quantities of base money into the economy and be confident that it will have the assets to drain this money after the economy has recovered. In particular, we’d need to be able to drain money that threatens to become inflationary, or we would be reluctant to embark on this process in the first place.

(…)

the fiscal authorities could agree to run a budget deficit at the central bank’s request to help us inject broad liquidity into the economy. The central bank could monetize short-term debt issued to finance the deficit and then withdraw excess base money later by selling that debt to the public.

Seite 23, GREENSPAN.We could go ahead as a central bank and just print money and buy assets—we could buy baseball teams for all we need—and we can generate as much currency as we want.

Seite 41, MR. JORDAN. How would you as a central bank expand the monetary base if you didn’t have the opportunity to go out and buy government securities or something like that? My answer is that you should simply run a positive sum lottery. There’s no question that you could sell an awful lot of tickets [laughter] if you have a positive sum lottery offering to credit the winner’s account. You can blow up the monetary base as much as you want, and you can sterilize it as much as you want.

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