Tuesday, November 19, 2013

Roubini : 10 basic and key questions that the Senators failed to ask Janet Yellen at her confirmation hearing

 10 basic and key questions Senators were too naive to ask Yellen:

1. You wrote about optimal control (OC) ie allow inflation above target. Do you support OC?
2. You wrote a few times that inflation may have to go above target for a while to reduce labor slack. Do you support this optimal control?
3. Do you agree with Governor Stein that macro-pru will not be sufficient to control bubbles? Would you raise rates sooner to prick bubbles?
 4. While you say no bubble today what is the risk that slow QE exit & policy rate normalization (4 yrs) will cause bubbles down the line?
5 . If the current approach to too-big-to-fail will not work would you down the line support breaking up big banks to deal with TBTF?
6. What will be Fed losses of paying interest on excess reserves of $3 trillion+ when you will normalize policy rates to 4%? 120bn a year?
7. Fed criteria for taper is a cumulative improvement in labor mkt outlook. Aren't we there now given fall in Un Rate & 180K jobs per month?
8. After ZIRP, QE, CE, FG growth is still weak & mon pol ineffective? Wouldn't a better policy mix be more fiscal stimulus & less monetary?
9. What is risk of fiscal dominance as Fed is effectively monetizing public debt? Should mon pol be used to nudge congress to cut deficit?
 10. What is risk of debt dominance, ie Fed unable to raise rates fast enough as high public/household debt requires low debt service ratio?  - via twitter

 Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics