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I gave the UCSD economic roundtable lecture Friday June 11 on inflation and the future of the Fed. It summarizes quickly a number of themes from previous Grumpy writings, and if you enjoy videos you might find it fun. Youtube link  in case the above embed does not work.  I happened on the New York Fed website , proclaiming on its landing page that it is now "...dedicated to understanding and finding solutions to the numerous forms of inequality that communities of color experience and working with communities in our District to address deep-seated inequities,"  in case you want documentation that the Federal Reserve is taking on inequality and racial issues.  Slides available here . 

  Banks to Companies: No More Deposits, Please , says the puzzling headline at WSJ.  Why would bankers not want to take any amount of deposits, park them in reserves at the Fed or short term Treasury bills, charge fees and a slight interest spread, and sign up for an early tee-time at the local golf club? Sure "net interest margin" or other metrics might not look good, but money is money and more money is more money.  The answer:  Top of mind for many big banks is a rule requiring them to hold [sic] capital equivalent to at least 3% of all assets. Worried about the rule’s impact during the pandemic, the Fed changed the calculation in 2020 to ignore deposits the banks held at the central bank, but ended that break this March. Since then, some banks have warned the growing deposits could force them to raise more capital, or say no to deposits. This is a fascinating little insight into the crazy world of our Fed's risk regulation.  Taking deposits and investing in ...

Senator Ted Cruz wrote a blistering Wall Street Journal Op-Ed decrying CEOs who pander to Democrats by making profoundly uninformed public statements. He announced that he will no longer take money from their corporate political action committees. And, he states This time, we won’t look the other way on Coca-Cola’s $12 billion in back taxes owed. This time, when Major League Baseball lobbies to preserve its multibillion-dollar antitrust exception, we’ll say no thank you. This time, when Boeing asks for billions in corporate welfare, we’ll simply let the Export-Import Bank expire. Cruz' statement is unintentionally devastating. So what about last time?   So there it is in front of us, in writing, from a major politician. Political support, and campaign cash bought $12 billion tax breaks, antitrust exemptions, and Ex-Im subsidies. From Republicans. So much for any public policy pretense. And if those CEOs just figured out who has the power to hand out goodies now, and the Democrat...

I learned something from the New York Times lead editorial on Sunday. Why are we not shipping mega quantities of vaccines to countries like India?  ... as the vaccines came to market, some vaccine makers insisted on sweeping liability protections that further imperiled access for poorer countries. The United States, for example, is prohibited from selling or donating its unused doses, as Vanity Fair has reported, because the strong liability protections that drugmakers enjoy here don’t extend to other countries... Pfizer has reportedly not only sought liability protection against all civil claims — even those that could result from the company’s own negligence — but has asked governments to put up sovereign assets, including their bank reserves, embassy buildings and military bases, as collateral against lawsuits.  Well, you can sort of see the problem. You're a drug company. You sell a billion units of a brand new drug -- still on emergency use authorization in the US -- to,...

Secretary of the Treasury, and ex Federal Reserve Chair Janet Yellen recently hosted an important meeting of the Financial Stability Oversight Council .  This is the highest level body overseeing financial regulation in the US. It matters.  Her remarks start smoothly but critically, as one expects of a habitually well-prepared pro. A lot went wrong last year, from the treasury markets to another mutual fund bailout, and so forth. Bravo, it is time to get past celebrating how another bailout blowout saved the world and see if we can avoid another one.  And then,  We must also look ahead, at emerging risks. [To the financial system, the FSOC's purview.] Climate change is obviously the big one. It is an existential threat to our environment, and it poses a tremendous risk to our country’s financial stability. We know that storms will hit us with more frequency, and more intensity. We know warming temperatures might disrupt food and water supplies, leading to unrest arou...

"San Francisco bans affordable housing," is the spot-on conclusion of a lovely post  by Vadim Graboys  (link to twitter).  The post is titled "54% of San Francisco homes are in buildings that would be illegal to build today" with an interactive graph of those homes.  Or, put another way, "To comply with today's [zoning] laws, 130,748 homes would have to be destroyed, evicting around 310,000 people." The latter statistic is fun, but actually severely understates the damage of San Francisco's (and Palo Alto's!) zoning laws. The only reason current homes are illegal is that they were built under slightly less restrictive zoning laws. So that measures how much zoning laws have gotten stricter over time. It does not measure the much larger number of homes and apartments that were never built. Now, how does San Francisco, ground zero of progressive governance, and a city whose politicians can't get out of bed in the morning, or sign permission to...

Update : An expanded and improved version of this post is at city journal , or here (pdf on my webpage )  I had the honor of testifying at the Senate Committee on Banking, Housing and Urban Affairs, on Protecting the Financial System from Risks Associated with Climate Change  Full video at the link, I start at 48:30 with slightly abridged version of these remarks.  Testimony of John H. Cochrane to US Senate Committee on Banking, Housing, and Urban Affairs  Chairman Brown, Ranking Member Toomey and Members of the Committee: Thank you for the opportunity to testify today.  I am John Cochrane. I am an economist, specializing in finance and monetary policy. My comments do not reflect the views of my employer or any institution with which I am affiliated.  Climate change is an important challenge. But climate change poses no measurable risk to the financial system. This emperor has no  clothes. “Risk” means unforeseen events. We know exactly where the clima...

Nicholas Kristof in Sunday's New York Times asks a pressing -- often quite pressing -- question. Why are there no public toilets in America? He is right. He calls for a federal infrastructure plan to fix the problem: "Sure, we need investments to rebuild bridges, highways and, yes, electrical grids, but perhaps America’s most disgraceful infrastructure failing is its lack of public toilets." Now, put on your economist hat. Or even put on your reporter hat. Ask the question why are there no public toilets in America?  ------------------------------- I hope that didn't take too long. Answer: Because it's illegal to charge for toilets. There were once abundant public toilets in America, as there are in many other countries. And you pay a small fee to use them. A small fee that everyone in Nicholas' stories would have been delighted to pay.  This answer is not hard to find, and indicative of the spirit at the New York Times that neither Kristof nor anyone else i...