Kroszner: Markets Have Fragilities That Nobody Expected

The video discusses the unintended consequences of quantitative easing (QE) and regulatory measures on market stability, highlighting issues like liquidity shortages and market fragilities. It examines the Fed's balance sheet expansion and the challenges of quantitative tightening, proposing potential strategies for future growth. The discussion also touches on market reactions to recent events and the implications of replacing Libor, emphasizing the need to reassess regulatory impacts and central banking practices.

What is one of the unintended consequences of regulations mentioned in the video?

• Flash crashes in treasury markets

• Decreased market volatility

• Stable interest rates

• Increased market liquidity

What is one proposed method for managing the Fed's balance sheet?

• Implementing a permanent program of small daily purchases

• Selling off all assets

• Reducing currency supply

• Increasing interest rates

How does the Fed's balance sheet typically grow?

• Through active currency withdrawal

• By passively supplying currency as demand increases

• By selling government bonds

• Through international loans

Why is it important to reassess the regulations implemented after the financial crisis?

• To eliminate all regulations

• To increase market volatility

• To reduce government intervention

• To understand their interactions and unintended consequences

What is a potential downside of the Libor rate mentioned in the video?

• It is highly volatile

• It is too stable

• It is not a real market rate

• It is influenced by foreign markets