Summary: And the “Beigie” Award goes to…. the Boston Fed!! The Beige Book provides a snapshot of economic activity in the different Federal Reserve Districts every six weeks. Importantly, it does in a very qualitatively, often featuring anecdotes or observations from regional businesses. The Indicator’s favorite entry for this edition describes the scramble for seasonal workers as Cape Cod hospitality businesses ramp up for the summer We describe how you can set-up your own Beigie Award activity in class!
Summary: First Republic Bank has folded and the Fed has a new “unflinching” report on the regulatory and supervisory failures leading to the SVB failure. SVB’s own mismanagement, the 2018 relaxation to Dodd-Frank plus lax and lethargic supervision are to blame. Our student application exercise gets into some of the specifics here (CAMELS ratings anyone?) while also discussing broad trade-offs that regulators face.
Summary: Big Bank of Japan coming up!! As world markets brace for more news, The Indicator describes how changes to Japan’s yield curve control could create ripples throughout financial markets. Our accompanying exercise works through a graphical exercise to strengthen students’ understanding of the yield curve, especially when “kinks” appear…
Summary: The bond market is “risky and frisky” and the inverted yield curve is flashing red! The Indicator chats with Campbell Harvey who suspects the yield curve may not be right this time or that “it is so right, that it may be wrong.” Students will visit FRED and examine whether Campbell Harvey’s suspicion is true…
Summary: The Fed raised interest rates by 25bp yesterday. How does that affect you? This episode aired almost exactly year ago– when the Fed was just embarking on its rate hikes– delves into the implications for mortgage rates. The accompanying teaching idea prompts students to put themselves in the shoes of a homebuyer.
Summary: The latest Intergovernmental Panel on Climate Change (IPCC) report is out, and the scientists have delivered their “final” warning, calling for aggressive actions to reduce carbon emissions. This episode of The Indicator which aired during last fall’s COP27 climate summit explores a radical but intriguing idea– the “Carbon Coin,” which leverages the power of monetary (and fiscal) policy to bring about large-scale carbon reduction. The accompanying exercise explores the carbon coin and how it compares to currency that we know and use today?
Summary: February inflation numbers are out and the bottom line is that inflation remains stubbornly high. However, the Fed’s job, laser focused on price stability till now, gets complicated in the aftermath of the SVB collapse. Today’s exercise asks students to debate whether the Fed should pause interest rate hikes as it weighs the tradeoffs between fighting inflation and stressing bank balance sheets.
Prices are still rising even though corporate profits are at a 40-year high. However, the rising inflation is not thought to be due to corporate greed but likely to other causes such as lingering pandemic issues and decreased competition in the markets. The Federal Reserve Bank has tried to fight this inflation by raising interest rates which will hopefully lead to less pressure on businesses to raise their prices.
On this episode from Planet Money, they discuss the events and people that led the creation of the Fed, relevant in 2022 in light of the pressure the Fed is facing in as inflation continues to rise. A quick guide to J.P. Morgan’ s influence and help with founding the Fed so big bailouts no longer had to fall on his pockets.
$1.86 trillion in relief spending has been authorized by congress, which will be financed by the sale of government bonds and other debt instruments. The Federal Reserve Bank will purchase many of these bonds which will cause an inflow of money into the economy. This podcast also elaborates on the inflationary implications of the stimulus checks entering the economy.
There is also discussion of Google’s market power and vaccination progress.
Discussion Prompt: What is the intended goal of the stimulus checks and what unintended consequences can arise as a result?
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