Archive for April 17th, 2011

Trust in Public Institutions over the Business Cycle

April 17, 2011

This  paper from Justin Wolfers and Betsey Stevenson shows just waht one would expect. The trust in public institutions moves along with the  business cycle. It is procyclical -trust increases in a boom and declines in the bust.

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Will Fed portfolio be under risk when it raises rates?

April 17, 2011

Glenn D. Rudebusch of FRBSF rules out the interest rate risk for Fed portfolio. As we know Fed has bought billions of  securities from the market via its QE (and credit easing)  programs. As  these have been bought at a time when interest rates were declining. If it raises rates, will it be under any risk? Will there be any loss on the portfolio? This is an important paper as few talk about this issue.

It looks at the portfolio and says rates will have to rise to above 7% for a loss. This probability is  far far- off:

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