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Fed: QE Replacement - Last Used During World War II

The Fed is dusting off a QE replacement, last used during World War II


    Targeting yields on longer-term rates, used to keep down the costs of funding the war, gets renewed attention from top U.S. central bankers

    Federal Reserve Governor Lael Brainard on Wednesday became the second U.S. central banker to talk about the possibility of targeting longer-term interest rates as a "new" tool to combat the next recession.

    It's actually not so new. The last time the Fed conducted such a policy was during World War II to keep down the costs of funding the war.

    The concept is relatively simple. If the Fed's benchmark interest rate fell to zero and the two-year Treasury yield was at 2%, the Fed could announce it intends to use its balance sheet to peg the 2-year rate at 1%. The general idea is that lower long-term rates spur activity.

    Fed Vice Chairman Richard Clarida floated the idea in a speech earlier this year, (https://www.federalreserve.gov/ newsevents/speech/brainard20190508a.htm) and has done research on its use in Japan (https://sipa.columbia.edu/academics/ capstone-projects/bank-japan-japan-yield-curve-control-regime).

    In past downturns, the Fed was often able to slash short-term interest rates by an average 5 percentage points to combat recessions. But the Fed's benchmark federal funds rate now sits in a range of 2.25%-2.5%, limiting the firepower of its main policy rate.

    As a result, Fed officials are casting about for new strategies that could pull the economy out of a ditch if necessary.

    During the last recession, the Fed turned to so-called "quantitative easing," the buying of trillion of Treasurys and mortgage-related securities to lower long-term rates.

    QE was never popular and exposed the central bank to fierce criticism from congressional Republicans.

    And now, Ken Rogoff, a leading monetary policy expert at Harvard University, said academics have largely concluded that QE was not even a very effective tool to spur growth.

    Brainard said Wednesday she "would like to hear more" about targeting long-term rates.

    "Once the short-term interest rates we traditionally target have hit zero, we might turn to targeting slightly longer- term interest rates--initially one-year interest rates, for example, and if more stimulus is needed, perhaps moving out the curve to two-year rates," Brainard said.

    "Under this policy, the Fed would stand ready to use its balance sheet to hit the targeted interest rate, but unlike the asset purchases that were undertaken in the recent recession, there would be no specific commitments with regard to purchases of Treasury securities," she added.

    Under the program to target longer-term rates, the Fed might be able to achieve its objective without acquiring many securities at all, if its program is credible, said former Fed Chairman Ben Bernanke, in a blog post (https:// www.brookings.edu/blog/ben-bernanke/2016/03/24/what-tools-does-the-fed-have-left-part-2-targeting-longer-term-interest- rates/).

    Academics see some momentum building behind the idea.

    Loading Tweet ... (https://twitter.com/DavidBeckworth/status/1126112755365425153)

    Fed officials are set to meet with experts and academics to discuss new ways to fight recessions and also a possible change to the central bank's 2% inflation target framework, at a conference in Chicago in early June.

    -Greg Robb; 415-439-6400; AskNewswires@dowjones.com

    (END) Dow Jones Newswires 05-08-19 1330ET Copyright (c) 2019 Dow Jones & Company, Inc.

    Copyright © 2019 Dow Jones & Company, Inc. All Rights Reserved

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    The Number Of Fortune 500 Companies Owing No Taxes Jumps.


        [Business Taxes]

        As the national deficit and debt soars, more and more the nations corporate behemoth's accountants figure they owe no taxes. Republicans have made such a mess of the nations internal revenue that it will be hard for even the Democrats to fix, even if they do reclaim 2 of the 3 branches of government in 2020. That's just my opinion.


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        Phoney Businessman Who Scammed Internet Tech Companies Pleads Guilty.


            [Tech Business/Crime]

            By design it was a simple scam. Bill Google and Facebook for services rendered and they pay you. It worked. But implementing this simple scam was a bit more complicated than that. Evaldas Rimasausakas, of Lithuania, under the guise of Quanta Computer, a real company, submitted bills to Google and Facebook which they dutifully paid. His take? Over $100 Million.

            Full story here.

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            How To Choose The Online Computer Supply Store And Make A Smarter Decision?

            The layout of an office helps to determine the right kind of tools and equipment you should buy to make it even more efficient. A positive work environment is good for the growth and development of both the office and its employees. As the employees spend at least 7-8 hours in the office, having the right kind of adjustable computer desk is important to promote their well-being. The desk comes with a lever to adjust the height accordingly. The desks made from the good quality material can hold desktops up to 25lb.

            Buying the office supplies such as the server cabinet helps reduce the operating cost. Having a flexible and agile workspace requires less time and efforts to redesign it. Proper planning is required so that space can be utilized affectively without effecting the aesthetics. For instance- Your office should have enough space to accommodate the new employees in the future.

            The heavy duty metal shelving can be utilized individually as well as together. Before you make a decision, make sure the shelving is manufactured using welded steel that can offer at least 1,000 lb. capacity per shelf. There are a number of online websites that sell the heavy duty metal shelving that includes 12 shelves made from the gauge steel. It is vital to install high-quality furniture to build and maintain good relationships with your employees.for more details click here - buy computer rack

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            IRS: Why Up To 25% Of Tax Payers Expecting A Refund Will Not Get One


                [Tax Business]

                This is a follow up story to the one about middle class and conservative tax payers upset/shocked about having their refunds cut or finding they actually owe taxes. Owing taxes, and not being due a refund, is new to many. Most refunds, according to the IRS, will be smaller (8% on average), and many others who are used to receiving a refund will not be getting one (up to 25%).

                Linked is a report on the IRS reasons as to why that is true, but not totally true.

                They say that it is indeed true that due to the new tax reform law that about a quarter of tax payers who normally would have gotten a tax refund will not be getting a refund this year. But, tax payers should remember, says the IRS, that this new tax reform law also reduced what the income earners paid in advance to the IRS through payroll deductions. Therefore most income earners should understand that they have already received, as part of their take home pay, any tax savings due to them.

                John Q -- "But due to increased fees and health insurance premiums I didn't take home more!"

                This isn't going to sit well with people.

                Expect the number of stunned people to steadily grow as this new tax reality hits home.

                It's a new day at the IRS. It is Trump day!

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