Maxwell Qian

7 Posts
The Great Moderation: Why Monetary Policy Matters

The Great Moderation: Why Monetary Policy Matters

During the 1970s, the United States suffered from double-digit inflation, rising unemployment, and bleak economic prospects.  Declining domestic industry and increasing global competition sowed the seeds of doubt in American minds and the OPEC oil embargo shook the economy to its core.  The crisis culminated in a period of stagflation, a stagnant economy ill with both high unemployment and inflation.  Monetary policy and the Federal Reserve had failed in both of their mandates: full employment and price stability.  The global monetary order created by the Bretton-Woods agreement collapsed and the US found itself forced to detach the dollar from the…
Read More
Why Does the Fed Target 2% Inflation?

Why Does the Fed Target 2% Inflation?

Since January 2012, the Federal Reserve has maintained a target of 2 percent inflation for the US economy.  The target allows the Fed to perform its congressionally mandated jobs of maintaining price stability and maximum employment.  Before the 1970s, economists believed inflation and unemployment had a permanent negative correlation so that low inflation and low unemployment could not be achieved at the same time.   However, the 1970s oil shock brought on a period of high inflation and unemployment known as stagflation.  With the high rates of the 1970s, the Fed needed a new way to control inflation.  At the time,…
Read More
Dry Powder: Economic Threats in the Post-Pandemic Era

Dry Powder: Economic Threats in the Post-Pandemic Era

As part of the historic 2nd quarter contraction in the US gross domestic product, investment spending decreased by a massive 49% under the duress precipitated by the COVID-19 pandemic.  Poor general economic conditions translated to uncertainty in the minds of investors.  Meanwhile, investors received government relief aid that they did not use to invest.  As a result, there is now an estimated $1.5 trillion in unused capital in private equity funds alone that could be invested as soon as negative economic conditions recede. This massive glut of capital could create an explosion of investment and is therefore referred to as…
Read More
Emissions Bounce Back as Economies Reopen

Emissions Bounce Back as Economies Reopen

As people around the world faced forced confinements caused by the COVID-19 pandemic, global greenhouse gas emissions fell as a result.  A study led by climate scientist Corinne Le Quéré of the University of East Anglia published in the journal Nature estimated that emissions fell by 8% compared with 2019 levels.  That drop brought emissions in line with their 2006 level.  The researchers estimated that total 2020 emissions would fall by between 4 and 7% compared to last year.  However, with communities reopening around the world, carbon emissions have begun to return, ticking back up to just 5% below 2019…
Read More
European Central Bank Ramps Up Asset Purchases in Light of Pandemic

European Central Bank Ramps Up Asset Purchases in Light of Pandemic

On June 4, 2020, the European Central Bank (ECB) announced it would increase its envelope of asset purchases by €600 billion to a total of €1.35 trillion. The increased purchases will further the central bank's policy of monetary easing in order to help households and businesses deal with the economic effects of the COVID-19 pandemic. The increase comes in response to disinflation and fears of a possible deflationary spiral. The ECB plans to continue asset purchases until it believes the coronavirus crisis is over and plans to reinvest any payments from maturing assets into further purchases. European interest rates will…
Read More
Negative Interest Rates: A Novel Solution or a Novelty Item?

Negative Interest Rates: A Novel Solution or a Novelty Item?

In the wake of the economic downturn caused by the COVID-19 pandemic, some in the United States, including president Donald Trump, have called on the Federal Reserve to push interest rates below zero.  Negative interest rates would be unprecedented in the US but they have become established monetary policy in Europe and Japan.  Such rates represent a logical extension of expansionary monetary policy while also breaking key economic laws.  This counterintuitive policy raises more questions than it appears to answer.  How do negative interest rates work? could we really be paid to borrow money? and most importantly, can negative interest…
Read More

The Federal Reserve September Meeting

On Wednesday, the Federal Reserve concluded its September meeting in which it lowered the target range for the federal funds rate from 2 percent to 2¼  percent to 1¾ percent to 2 percent. In its statement regarding the decision, the Federal Reserve indicated that a weakening global economic outlook combined with low inflation motivated its decision.   The Fed had been targeting 2 percent objective for inflation, but it remains below that level.  Despite unemployment remaining low, the Fed decided to lower rates, which represents a stimulation of the economy, due to the lack of inflation.  In addition, the Fed indicated…
Read More
No widgets found. Go to Widget page and add the widget in Offcanvas Sidebar Widget Area.