It's Time to Reinvent the Federal Reserve

In the endless swirl of noise and controversy emanating from Washington these days, it is easy to overlook a more mundane but significant challenge facing the US government: its institutions are getting old. With the exception of the Department of Homeland Security, most substantial agencies are at least decades old and many date back much longer.

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Take Advantage of Shift From Bonds to Stocks

For several years, investors have anticipated a “great rotation” from bonds into equities, and for several years, they were dead wrong. In fact, even as equities were quietly rising for the past years, both domestic and international money has continued to surge into bonds. At long last, that is beginning to reverse, which demands a reconsideration of strategies that seemingly have worked so well and so easily for so long. As long as bond prices were rising, pouring money into assets that had a certain return looked like a slam dunk. No longer.

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Market Stresses in 2015 Can Have Good Outcome

For the past few months, financial markets have been positioning for a change in Federal Reserve policy to move from “very easy and accommodative” to “easy and accommodative.” The decision of the Fed, finally, to raise short-term lending rates by 25 basis points was met with relief that months of will-they won’t-they were finally over. At the same time, the energy and commodity complex has continued to melt down as prices plummet. The result has been both an unusual amount of turmoil in fixed income markets and a rising chorus of voices anxiously drawing parallels to 2008-2009.

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Hey, Donald: Washington Is Working!

The view of Washington as a dysfunctional system is deeply entrenched—and of course it’s the most popular meme on the GOP campaign trail. “Nothing works in our country,” Donald Trump said again at Tuesday night’s debate, repeating his favorite (and seemingly most effective) appeal to a base that’s disgusted with politics as usual. Yet the past week has been a blow to cynics everywhere, because lo and behold, Congress, the White House, and the Federal Reserve all acted on vital economic policy and did so with minimal drama.

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The Uberization of Money

Imagine that you want to buy a home. You might find a real-estate agent to show you around, which is a very 20th-century way of doing things. Or you might go 21st century and use the Web to research prices and available properties and to take a few virtual tours.

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Ben Bernanke, the Grown-Up in the Room

Ben Bernanke’s new memoir, The Courage to Act, is neither easy nor scintillating reading. But clunky and dry as it is, the 600-page tome serves as a provocative reminder that not all high officials in our largely dysfunctional government are motivated by partisanship or the desire to protect bureaucratic turf. It offers proof that Bernanke and the Fed were the grown-ups in the room during a period of crises unprecedented since the Great Depression, regardless of whether you believe they have conducted themselves brilliantly or poorly.

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Don’t Turn America Into Europe

The Europeans—some of them, anyway—are finally beginning to concede that austerity has gone awry. There’s less growth, more structural unemployment, little bank lending and economic contraction. And now, of course, we have a political backlash in the person of Alexis Tsipras, the leader of Greece’s Syriza party, who upon winning the prime ministership last Sunday declared grandly (and probably over-optimistically) that Greece will now “leave behind the austerity that ruined it.”

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What Should Investors Expect in 2015?

‘Tis the season for looks back and looks forward. The financial world will be replete with such missives in the weeks to come, and that is actually all for the best. Given the fluid nature of money and planning and investing, regular assessments of what worked and what didn’t, how the year played out versus expectations, and what might lie just ahead, are vital. While it is true that forecasts about the future usually say more about present sentiment, thinking ahead does provide a framework for assessing likely risks and potential opportunities.

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The Fed Is Not As Powerful As We Think

This past week marked the annual gathering of bankers, financial officials, and other economic experts hosted by the Kansas City Federal Reserve Bank in Jackson Hole, Wyoming. On Friday, Fed Chair Janet Yellen and European Central Bank head Mario Draghi both spoke; in a slow week for the markets, these speeches received the bulk of the econ media’s attention, and Yellen’s remarks were heralded for days as the week’s major financial event.

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Don't Fear Risky Assets

We live in a world that emphasizes risk. That is true in general, but is especially so in the financial world. Since the financial crisis of 2008–2009, financial professionals have been acutely attuned to risk—and for good reason. Too many felt they were caught off-guard and unprepared by the near-implosion of five years ago. That in turn followed volatile periods from the Internet bubble of 1999 into early 2000, through the events of 9/11, and then a sharp market contraction until October 2002. After nearly 15 years of drama, it is hardly surprising that the financial world is primed for risk.

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Deflating Expectations

n a Reuters poll out this week, most economists say they are expecting more robust inflation this year, to the tune of 2 percent. The poll accurately reflects the plethora of emails from research firms in my inbox—a slowly building chorus predicting rising prices along with an uptick in overall economic activity.

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Right Said Fed

Last week, Federal Reserve Chair Janet Yellen held her first press conference, where just a few brief words managed to upend the financial markets. When asked about the possible timing of raising short-term interest rates, she explained that there would be a “considerable period” between the end of the bond buying program—currently being wound down at a rate of $10 billion a month—and an increase in rates. What’s “a considerable period”? Nothing too specific, maybe “about six months.”

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