Ask MetaFilter questions tagged with macroeconomics

How can the Fed Destroy Money It Created?

Pastabagel — Thu, 19 Mar 2009 07:41:35 -0800

[MonetaryPolicyFilter] In relation to the Fed's huge injection of money yesterday, please explain to me how, if at all, the Federal Reserve can destroy money on its balance sheet in a way that offsets the inflation that normally would result. The Fed's announcement yesterday that is it going to flood the economy with dollars would, in normal circumstances, be horrifically inflationary. But these are not normal normal circumstances. My questions are:

1) Why isn't this inflationary? To what extent have deflationary factors stemming from the credit crisis not yet worked their way into the economy such that they will offset what inflation results?

2) Explain Federal Reserve accounting to me. I sort of understand that the Fed can create this $1 trillion from basically thin air, but can it destroy money just as easily as it creates it?

3) Because the Fed is buying debt and debt-related instruments, can the Fed take the principal and interest payments it receives from these debtors (e.g. the U.S Treasury), and destroy that money just as easily as it created that money? In other words, when Treasury makes interest payments to the Fed on the bonds the Fed bought, can the Fed simply take that money and strike or "disappear" it from it's balance sheet forever?

4) If the Fed can do what is described in (3), is that the mechanism the Fed intends to use to avoid inflation that would normally result from such a huge injection of money? Has the Fed said anything about what it intends to do with the interest payments it receives?

5) Any resources related to Federal Reserve accounting or explanations of how its balance sheet works would be greatly appreciated.

I'm looking for accurate financial answers here, not lunacy or chatfilter. Thanks in advance for your help.

Level-up, Economics.

dead_ — Fri, 14 Nov 2008 13:28:09 -0800

I'm looking for a good, intermediate economics textbook. I would like to get a few recommendations on intermediate/advanced economics textbooks that are well suited to self-study. I am particularly interested in macroeconomics and development economics. What are the standard books typically assigned in college courses? Which books have been particularly helpful in moving you from a beginner to intermediate understanding of macroeconomics? Also, books that have associated online content (quizzes, tests) are a plus.

The shortbook on macroeconomics

dead_ — Wed, 09 Jul 2008 09:23:17 -0800

What is the best primer on macroeconomics? I would like to buy a short (non-textbook) book on macroeconomics. I am comfortable with economics as a discipline but will be taking a macro placement test this fall and would like something to read as a refresher during the next month or so.

Monetary Policy and the Fed, when do we raise and lower rates and why?

idledebonair — Tue, 22 Apr 2008 13:38:21 -0800

Economics Filter: Monetary Policy and the Fed, when do we raise and lower rates and why? What are some possible reasons the Fed would raise or lower rates and why would they do so?

Economics filter: Can someone explain this article to me? How are capital accumulation, national savings, and consumption related?

idledebonair — Tue, 11 Mar 2008 09:51:21 -0800

Economics filter: Can someone explain this article to me? How are capital accumulation, national savings, and consumption related? I know this is from 3 years ago, but I still want to understand! In the article, http://money.cnn.com/2005/02/25/news/economy/savings_rate/index.htm, Roger Ferguson said, "If households, on net, take steps to return the saving rate closer to the middle of that range, which, I might add, would provide welcome support to capital accumulation, then a sustained period in which consumption grows more slowly than income would result." What? I don't understand. What does he mean?

And also, when Tom Schlesinger says "Obviously consumption would take a hit if people save at the historic rate," does he just mean that Consumption is the inverse of Savings? I mean, besides in a whatever we don't consume we save way, what is he talking about? Are they disagreeing or what?

Where can I find historical fed statements?

GregX3 — Wed, 31 Jan 2007 15:47:20 -0800

Every time the US federal reserve meets to decide on changing interest rates, the news articles say something like "in their statement the fed says ...". So my question is where can I find a listing of the statements for the past 10 or 20 years? I'd like to see how the words change over time. My ideal answer if a link to a webpage that has them somehow. But just knowing the official term for these statements or if they get published officially anywhere would be immensly useful.

Best resources to become literate in macroeconomics and financial markets?

shivohum — Mon, 04 Dec 2006 22:12:39 -0800

What are some good books and other resources that could help me understand, to the point of allowing me to engage in reasonably intelligent debate, macroeconomics and financial markets? I have a rough understanding of basic economic concepts like supply and demand, inflation, utility, diminishing returns, and so on. But I need more and better. When people talk about trends in currency markets, current account deficits, the appeal of asset securitization, the meaning and effects of foreign reserves, the potentially destabilizing effects of hedge funds on global markets, the implications of savings vs. consumption, some of the complexities around management of the money supply, protectionism vs. free trade, natural rates of unemployment, and on and on -- I have pretty vague ideas about many of these, but I need greater detail, without going into mathematical exactitude. Where can I go for an intelligent but not pedantic understanding? Thanks.

Money supply and banking

shannymara — Thu, 10 Nov 2005 15:25:58 -0800

Greenspanfilter. I've been trying hard to understand the basics of macroeconomics, and now I think I need serious help. I really want to know how money supply, inflation, and markets are all related. I bought a few textbooks on the subject, but they typically launch off into lengthy chapters about stocks and bonds, how to run a corporation, etc, and skimp on the large-scale mechanics.

I want to know things like how inflation and deflation starts. What the purpose is of lowering or increasing the "prime" lending rate. Who is financing all our national debt, and how. I find Wikipedia is one of the better resources for detailed pieces of the puzzle (especially for providing definitions and historical cases), but I don't seem to come away understanding how the pieces fit in the big picture of national economics.

Is there any resource, analogy, game, simulator, or anything that will help me get moving in the right direction, with a working understanding of a national economy: banks, money supply, and markets? I know there is no simple explanation, but there has to be a springboard. All the resources I've checked out are just not cutting it.