One thing I have found troubling is the near-unanimity in the US that we must Do Something about the burgeoning economic crisis, and that Something is big time monetary and fiscal stimulus. Near unanimity is almost never a good thing in the political and policy realm, since conditions and options are sufficiently complicated so as […]
Read more...We have gotten so large to throwing large numbers around in the US thanks to the various Fed facilities that the significance of the Chinese move may not be as obvious as it would otherwise be. $586 billion is a massive number for an economy the size of China’s. Recall our first stimulus package here […]
Read more...Edmund Phelps, a Nobel Prize winner, casts doubts on Keynesian remedies because Keynes himself came to question them. This Financial Times piece provides no answers but raises some interesting questions. But sadly, there may be no answer for the first question he asks: What theory can we use to get us out of the impending […]
Read more...Ken Ohmae, former head of McKinsey’s Tokyo office (disclosure: I have a passing acquaintence with him and he was enormously well regarded in his day despite being a tireless self-promoter) says that the Paulson program is grossly inadequate and the magnitude of the US crisis is so large that a $5 trillion international facility is […]
Read more...Alan Blinder in today’s New York Times, argues for an ostensible stimulus package (hey, since more stimulus packages are probably in the offing, better register your preferences early) that will help the environment. But what I like about it is that it would cost so little that it barely rates in the “let’s goose the […]
Read more...The US has managed to get itself in a no-win situation on many fronts. Try the usual trick of fiscal stimulus to combat a downturn, and our friendly foreign funding sources are likely to take a dimmer view of Treasuries. Higher interest rates (in a worst case scenario, a dollar crisis) could easily counter any […]
Read more...Ambrose Evans-Pritchard in “Monetarists warn of crunch across Atlantic economies” in the Telegraph points to a troubling development: a fall over last few months in M1 and M2 in the US, UK and EU. Many have criticized the Fed for “printing money” of late. But the evidence suggests otherwise. First, all of the cash injections […]
Read more...Larry Summer’s latest comment at the Financial Times, “What we can do in this dangerous moment.” is troubling both for its analysis of our economic mess and its remedies. Start with his first paragraph: It is quite possible that we are now at the most dangerous moment since the American financial crisis began last August. […]
Read more...There is a nice little post at VoxEU, “(At least) Three simple reasons to fear inflation,” by Tommaso Monacelli, Associate Professor of Economics at Università Bocconi, Milan. While the entire article is worth reading, I thought his discussion of the interaction between growth and inflation was particulalry useful: In the plethora of comments on the […]
Read more...We have the specter of two CEOs, each heading a firm that is a leader in its businesses and a debt powerhouse, making close to polar opposite statements about the prospects for the credit markets. Lloyd Blankfein, Goldman’s chief, said today that the credit crisis was half to two thirds through its course. While there […]
Read more...A comment by Ricardo Hausmann in today’s Financial Times takes US policymakers to task for trying to prop up demand and stave off a recession. We’ve pointed out repeatedly, as have various economists quoted here, that consumption as a percentage of US GDP is unsustainably high and saving correspondingly too low. It can only continue […]
Read more...Although Robert Reich is a smart fellow (and I mean that sincerely), like a lot of Beltway types, he isn’t as well versed in the ways of the world of finance as he is in the workings of public policy and opinion. Thus I found his recent post, “The Politics of an Economic Nightmare,” intriguing […]
Read more...It wasn’t enough that the Administration’s fiscal stimulus plan announced last Friday was sufficiently off beam so as to precipitate a global stock market rout. The Fed then put its credibility and some of its remaining firepower on the line to try reverse the gap-downward stock market opening with the in-panic-mode pre-session 75 basis point […]
Read more...I have a great deal of respect for people who take the time to do real analysis, and Menzie Chinn is one of them. In his current post at Econbrowser, “Why One Percent of GDP? Opportunity Cost Illustrated (Part III),” Menzie looks into where that arbitrary-seeming figure came from. He first goes through the history […]
Read more...Although a good deal can happen between now and January 31, the date of the next Fed Open Markets Committee meeting, a 50 basis point rate cut looks more consistent with present economic conditions than do deeper cuts. Most important (and widely ignored) is that the seize-up the money markets is largely a thing of […]
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