A recent FT article encapsulates everything I don’t like about how the press is covering monetary policy.  Or perhaps it is actually showing what I don’t like about monetary policy itself.  You decide:

The US Federal Reserve is roughly halfway through completing its planned purchases of mortgage and Treasury debt, which constitutes its quantitative easing programme, writes Michael Mackenzie.

.  .  .
The Fed’s buying has not prevented either Treasury yields or mortgage rates from rising, complicating efforts to provide relief for homeowners and other long-term borrowers.

.  .  .

The recent rise in rates, which accelerated in early June, sparked expectations among some bond traders that the Fed would increase its planned purchases of US Treasuries.

In March the Fed announced its target of buying $300bn in Treasuries and also raised its planned purchases of mortgages from $500bn to $1,250bn and doubled its planned agency buying to $200bn.

The scope of the Fed’s QE programme has aroused concerns it will nurture higher inflation and debase the currency. At its June policy meeting, the Fed stuck to its QE targets and said it would “continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets”.

With long-term rates having eased back and recent Treasury auctions attracting strong foreign buying, the central bank has some breathing room for now, say analysts. Should credit conditions deteriorate later this year or the economy’s recovery falter, the Fed may step up its purchases of Treasury debt.

One problem is that the FT doesn’t really seem all that interested in whether the Fed is actually engaged in QE.  I recently mentioned that in the first half of 2009 the monetary base declined at near record rates.  A few commenters pointed out, probably correctly, that the Fed wasn’t actually engaged in QE, but rather was trying to influence mortgage rates.  That’s fine, but the press can’t have it both ways.  If it’s not QE, don’t say it is.  And if you’re telling your readers the Fed is engaged in QE, at least check the monetary base numbers to see if it actually has done any QE in the first half of 2009.

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One of the things that is so depressing about the current crisis is the way that so many people rely on outmoded cliches.  One of those cliches is that the Fed is “monetizing the debt.”  But is it really?  Isn’t monetizing the debt a policy of printing non-interest-bearing currency, and then using that currency to buy back interest-bearing government debt?  If so, then the Fed is not monetizing the debt, rather they are exchanging one type of interest-bearing government debt (reserves) for another (T-bonds.)

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Nothing new today, just some facts about Sweden:

1.  The Riksbank, which is Sweden’s central bank, sponsors and funds the Nobel Prize in economics.

2.  According to Claes Berg and Lars Jonung, in the 1930s economists were held in higher esteem in Sweden than in any other country in the world.

3.  During the interwar years, the best economists in the world tended to favor price level targeting.  These included Fisher, Keynes, Wicksell, Cassel, and many other names that I can’t recall.

4.  In 1931 Sweden became the first country to officially adopt a stable price level target for monetary policy.  Berg and Jonung claim that the Riksbank remains the only central bank to have ever explicitly targeted the price level.

5.  In late 2008 I began advocating a policy of negative interest rates on bank reserves.

6.  A few days ago the Riksbank adopted a policy of negative interest rates on bank reserves.

7.  In the spring of 2009, Gregory Mankiw and Willem Buiter discussed the idea of negative interest rates on all currency, not just bank reserves.

8.  As this article in the distinguished newsmagazine The New Republic indicates, Mankiw and Buiter are being widely credited with the idea of negative rates on reserves.  And this is despite the fact that I tried to sell Mankiw on my reserves-only idea, and (as far as I know) failed.

9.  Am I bitter?  Just the opposite.  The TNR article mentions four economists;  Krugman, Mankiw, Buiter and yours truly.  And the context is the most important issue of our time, how to spring the liquidity trap.  Just as the basketball team from my alma mater (Wisconsin) must have felt on reaching the Final Four in 2000, I’m just happy to be there.

10.  Commenters should also feel happy.  Your comments advance this blog by constantly forcing me to amend and revise my views when they are clearly inadequate.  It’s a collaborative effort.  So let’s all enjoy a moment in the sun.

PS.  No snide remarks on my use of the adjective “distinguished” before TNR.  Any magazine that quotes me is distinguished.  If they were to give me a favorable plug, you’d hear me refer to “the august National Enquirer, newspaper of record.”  (Well who would you trust on the John Edwards story?)

Paul Krugman has a good post describing the Captain Queeg-like Wall Street Journal showing their usual paranoia about the left.

All of this follows on yesterday’s editorial asserting that the Minnesota senatorial election was stolen.

All of this is par for the course; the WSJ editorial page has been like this for 35 years. Nonetheless, it got me wondering: what do these people really believe?

He concludes that they don’t really believe this nonsense.  I slightly disagree with Krugman; I think the WSJ really is this paranoid.  This seems to me to be a perfect example of what Richard Hofstadter called “The Paranoid Style of American Politics” way back in the 1960s.”

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A cute title to a deadly serious post.  This is the one that should have been entitled “J’accuse.”  Let’s start with a Harper’s Index-style list of interesting facts.

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