Just as struggles over the true meaning of “liquidity support” for financial conglomerates recede to crisis post-mortems, the Greek rescue package has pushed the illiquidity-insolvency conundrum back to the center of the policy debate. If Greece is illiquid, it only needs a bit of EU/IMF emergency cash to tide it over until investors regain confidence … Read more
This week’s report from the Bureau of Labor Statistics shows no change in the seasonally adjusted U.S. consumer price index for April. Real average hourly earnings were also unchanged. On the face of it, those numbers should take inflation off the list of things people have to worry about, but they don’t. Instead, every time … Read more
Normally I don’t like to write about European prospects in the midst of a very rough patch in the market because in that case there isn’t much I can say that isn’t already being said. I find it more useful to wait for those recurring periods in which the markets recover and optimism rises. Still, … Read more
In Brazil, the purchase of foreign exchange reserves through sterilized interventions has been the object of several criticisms, including my own. The fiscal cost of maintaining reserves amounting to US$ 320 billion is more than R$ 50 billion, exceeding total budget savings promised by the government for this year. Moreover, under current circumstances, sterilized interventions … Read more
So I am researching the history of Glass Steagall for a new project, and I am continually amazed to learn the details how this law was slowly overturned. It is an informative lesson in tenacity of gradual erosion, how bank lobbyists can slowly sand away rules, with a healthy does of regulatory capture thrown in. … Read more
From Project Syndicate: The Greek euro tragedy is reaching its final act: it is clear that either this year or next, Greece is highly likely to default on its debt and exit the eurozone. Postponing the exit after the June election with a new government committed to a variant of the same failed policies (recessionary … Read more
Fiscal and external adjustment without a deep recession is possible in Greece, if we are willing to think outside of the box. Adjustment is not necessarily only a fiscal issue in a currency union for an individual member country: the solution can be monetary as well. Indeed, Greece and other European countries find themselves dealing … Read more
As a prelude to a broader analysis of China’s GDP, and the accuracy of its official GDP figures, I want to start by examining the national real estate statistics for the first four months of 2012. This discussion feeds into the broader GDP picture, but the property story that has been unfolding is important and … Read more
Back in 1996, Rudiger Dornbusch wrote a paper about the political economy of exchange rates in Latin America. He called it “The Latin Triangle”. It describes a cycle in which governments become trapped in inappropriate fixed-exchange rates that inevitably end unhappily. Latin America has put that particular form of economic instability behind it, but a … Read more
The debate about targeting a higher rate of growth for nominal gross domestic product (NGDP) keeps the blogosphere humming, but the discussion doesn’t mean much if Fed Chairman Ben Bernanke doesn’t embrace the idea. Don’t hold your breath. Last month he said the idea is “reckless.” That’s monetary-speak for: Don’t even think about it. But … Read more