Category Archives: fiscal and monetary policy

Geithner’s Vagueness Explained

How could Geithner’s much-vaunted financial rescue plan have been so stunningly vague on arrival, given the amount of time he’d worked on it? The Washington Post reveals that in fact he’d only been working seriously on it for less than … Continue reading

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Why is the ECB Being so Gradualist?

Jim Surowiecki asks a good question today: if you know that you’re going to cut interest rates — and Jean-Claude Trichet has made it abundantly clear that he intends to cut interest rates in March — why not do so … Continue reading

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Annals of Central Bank Transparency, Federal Reserve Edition

John Lanchester reviews Liaquat Ahamed’s Lords of Finance: America’s first modern central bank was established in 1913, in the teeth of strong populist suspicion of bankers. The men who conceived it were worried about the perception that they were forming … Continue reading

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Phil Gramm’s U-Turn

Phil Gramm, November 2008: “There is this idea afloat that if you had more regulation you would have fewer mistakes,” he said. “I don’t see any evidence in our history or anybody else’s to substantiate it.” He added, “The markets … Continue reading

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The Behavioral Economics of the Stimulus

I knew that there was some serious behavioral economics behind the Obama team’s plans to structure a tax rebate by reducing withheld tax! Jim Surowiecki has chapter and verse: In the words of the behavioral economist Richard Thaler, people put … Continue reading

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Bernanke’s Unconvincing Confidence

Ben Bernanke’s speech in London this morning constitutes a clear overview of the various bullets that the Fed has fired into the onrushing crisis. But he starts off with a bold and puzzling claim: I believe that the Fed still … Continue reading

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When Stimulus Doesn’t Scale

Barack Obama wants ideas from Paul Krugman, who of course is happy to oblige — and to make the good point that "we don’t have many specifics from the Obama people themselves". But hidden in the respectful joshing is a … Continue reading

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Can We Really Guide the Economy?

Ryan Avent says that he thinks the "plausible range of economic outcomes is, at the moment, quite wide indeed", and wonders whether "the size of this conceivable range is actually reflective of potential outcomes, rather than simple ignorance": If it … Continue reading

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Obama’s Big Speech

I agree with pretty much everything in Barack Obama’s big speech today about his stimulus plan. And not (just) because I’m some kind of lefty: Alex Tabarrok feels much the same way, as does Evan Newmark. It’s necessarily vague, but … Continue reading

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In Favor of Arts Spending

Michael Kaiser makes some good arguments in favor of increased arts funding, but unfortunately he mixes them up with bad ones, and he glosses over the best ones. The result is that Tyler Cowen gets to take the moral high … Continue reading

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Alan Greenspan, Perennial Optimist

Alan Greenspan has a solution to the economic crisis: a rising stock market! What, then, will be the source of the new private capital that allows sovereign lending to be withdrawn? Eventually, the most credible source is a partial restoration … Continue reading

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When Monetary Policy Is Fiscal Policy

Martin Wolf is good at startling sentences. Today he preps us with this left hook: As Robert Mugabe has shown, anybody can run a printing press successfully. Only to follow up with this right jab: At the zero-rate boundary, fiscal … Continue reading

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Zirpish

It’s not 0%, but rather a "target range", which sounds like somewhere you go to fire a gun. I can kinda see what the Fed is driving at here: given the difficulty of using open-market operations to set the Fed … Continue reading

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The Diet Soda Paradox

John Gapper worries that taxing non-diet sodas would be regressive. I worry that it wouldn’t even do what it is designed to do, which is reduce obesity: all it would do is increase the amount of diet sodas consumed, and … Continue reading

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Madoff: The Tax Implications

Let’s say you’re a successful businessman who has managed to earn $10 million this year, but who also had $10 million invested with Bernie Madoff. Obviously, you’re not happy about seeing your savings wiped out — but if I’m reading … Continue reading

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Monopoly Money

Larry Doyle thinks he’s joking: That’s when the bankers and the C.E.O.s all disappeared into that underground paradise they’ve been building since the eighties; that’s when women’s skin started falling off; that’s when the Treasury Department, in a last-ditch effort … Continue reading

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A Smaller World

Lou Jiwei, the head of China’s CIC sovereign wealth fund, is saying some interesting things: “Right now we do not have the courage to invest in financial institutions because we do not know what problems they may have,” Mr. Lou … Continue reading

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When Stabilization Isn’t Stimulus

Quote of the day comes from Neel Kashkari: Treasury Assistant Secretary Neel Kashkari, who is heading up the government’s implementation of the rescue plan, defended the department’s actions, saying that no one should expect the plan to solve all of … Continue reading

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The Right Kind of Bailout

Today’s NYT has an article about the enormous obstacles facing any Detroit bailout bill between now and October, with Senator Richard Shelby of Alabama saying that "the financial situation facing the Big Three is not a national problem but their … Continue reading

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AIG Bailout 2: Why?

The WSJ has details of AIG Bailout II: Under the terms being finalized on Sunday night, the government would replace its original $85 billion loan with a two-year duration with a $60 billion loan with a five-year duration. Interest on … Continue reading

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Why Would Treasury Cut AIG’s Interest Payments?

The WSJ’s latest AIG story has set off Joe Wiesenthal’s bullshit detector — and mine, too. It’s headlined "U.S. Weighs Options to Ease Strain on AIG", and it seems to be an attempt to jawbone Treasury into reducing the punitive … Continue reading

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The Bank of England Capitulates

If there’s one advantage of being a little behind the curve when it comes to rate cuts, it’s that you can shock the markets with an absolutely monster out-of-the-blue 150bp cut even as most people were expecting just 50bp. Well … Continue reading

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The 50bp Lower Bound on Interest Rates

There’s been lots of talk in recent days of the "zero bound" on the Fed funds rate — which is exactly where the Taylor Rule would put it. But the real bound might be halfway between here and there, at … Continue reading

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Economic and Financial Bad News

If you’re one of those people who needs a negative GDP number to convince yourself that we’re in a recession, here you go. But the headline -0.3% figure isn’t the worst bit: that would be the 8.7% fall in disposable … Continue reading

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Adventures in Icelandic Monetary Policy

What does it mean that Iceland has just raised interest rates by 600bp, after cutting them by 350bp a couple of weeks ago? I’m not talking about monetary policy here, I’m talking about what it means in practice. Central bank … Continue reading

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