Category Archives: Macroeconomic policy

Robert Reich Uses the R Word

Robert Reich’s latest post, “The Way to Prevent the Looming Recession.” argues that monetary policy won’t prevent the coming recession and therefore policy makers need to consider tax cuts: With the economy heading for recession, all eyes are on Ben Bernanke and the Fed, and the question everyone is asking is how much the Fed […]

"The Fed versus the financiers"

Below are some excerpts from a good piece by Kenneth Rogoff on the Guardian’s website, which discusses why Bernanke thinks the Fed has no business worrying about asset prices, but argues that the lousy quality of macroeconomic data means policy makers ought to consider the information embedded in market prices: A bit of intellectual history […]

Housing Remedy: Employer of the Last Resort?

Financial Times columnist Wolfgang Munchau, in “Prepare for the credit crisis to spread,” tells us that the credit crunch is likely to get worse, since credit problems will spread to credit card receivables and car loans, both of which are typically securitized, and collateralized loan obligations (read takeover debt) also look shaky. Munchau argues that […]

Nouriel Roubini on the Instability of Bretton Woods 2

The Bear Stearns/CDO drama has taken attention away from other worrisome conditions in the economy, and the biggest one is “global imbalances,” which is shorthand for the US running continuing, large current account deficits that are financed for the most part by foreign central banks, particularly those of China, Japan, and Saudi Arabia. We’ve lived […]

Confused About Inflation?

It turns out you have every reason to be confused. Even the data watchers can’t agree, which makes one wonder how the Fed can make sense of our situation. Barry Ritholtz at Seeking Alpha give us this recap: Over the years, we’ve looked at — and coined one or two — terms for the current […]

Martin Wolf on Savings Glut Vs. Money Glut Hypotheses

Martin Wolf, in a Financial Times comment, “Villains and victims of global capital flows,” looks at the two competing theories of the causes of global imbalances. One is the savings glut story, in which parsimonious Chinese and Japanese force the US to consume to keep the world from falling into recession. This view is favored […]

Central Bankers Taking More Interest in Money Supply

We have been muttering on this blog for some time that the powers that be should take more interest in money supply, and it appears that European central bankers are coming around to our point of view. David Altig in “Putting The Money Back In Monetary Policy” at Macroblog has a very useful, detailed without […]

Money Supply, Inflation, and the Emperor’s (i.e., Central Banker’s) Nakedness

The Financial Times on Monday had two stories on inflation, one a lengthy story, the other a a comment, “The problem with inflation indices,” by Gideon Munchau, triggered by the fact that the Bank of England missed its inflation targets of 2% by over a percentage point (their Consumer Price Index increased at an annualized […]

Inflation Targeting: The Fed’s Excuse to Ignore Asset Bubbles?

Kudos for an excellent post, “Inflation Targeting is Flawed,” by Michael Shedlock at Mish’s Global Economic Trend Analysis. Like many other observers, we’ve criticized the Fed’s failure to consider, or even acknowledge, asset price inflation in its monetary policy decisions. Instead, the Fed and other central bankers focus on traditional price inflation, and stick their […]

"It is time to pause on free trade"

A provocative article by Jeff Faux at the Economic Policy Institute argues that US trade deficits have become so large and so chronic that we need to put the brakes on further trade liberalization until we get our house in order. And getting our house in order means increasing our domestic savings rate. For those […]

Larry Summers’ Grim View of Housing and Its Impact on Markets

This story in today’s Financial Times, “As America falters, policymakers must look ahead,” is remarkable because, as far as I can tell, it is the first time a prominent economist has come out and said the unwinding of the housing bubble is likely to have nasty consequences (actually, take that back, Paul Krugman had a […]

It’s Official: Democratic Presidents Produce Better Growth

So says Washington Monthly in “Red and Blue Economies,” citing some work by Cactus at Angry Bear. In his five part series on ” God Punishes Us When We (Collectively) Vote Republican” (here is part five) Cactus uses as his measure real GDP growth (growth less the increase in national debt) and determines that this […]