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In RealTime posts, PIIE senior staff and colleagues discuss the fast-moving economic news, financial developments, and public policy choices confronting the United States and the world.
The British economy is lacking productive investment, but not for want of investment opportunities. Banks and large corporations are sitting on cash, households are holding back on large purchases (including of housing), and the public sector is slashing its investment flow. This shortfall reflects the deficiencies of the British domestic financial system, some of them [...]
Throughout modern economic history, every major financial crisis has been followed by premature abandonment—if not reversal—of the very stimulus policies necessary for sustained recovery. If the world is not to repeat that mistake, the Federal Reserve and the European Central Bank (ECB) must engage in further monetary stimulus, which today means purchasing additional government securities [...]
The following was posted this week by David Leonhardt on the website of The New York Times. Mr. Leonhardt, a New York Times columnist, asked Mr. Posen to elaborate on his speech “The Case for Doing More,” delivered to the Hull and Humber Chamber of Commerce, Industry, and Shipping on Sept. 28, saying it was [...]
With all the current attention to the reappointment vote on Fed Chairman Bernanke, we would direct people to our recent paper, "Do Markets Care Who Chairs the Central Bank?", forthcoming in next month’s issue of the Journal of Money, Credit, and Banking. In it, we make the first ever assessment of the effects of central [...]
A colleague unlucky enough to have to attend reminded me that the potentially last G7 finance ministers’ meeting, or at least the last one that may matter at all, is scheduled for Iqaluit, Canada. In February. Iqaluit, which means a place of many fish in the local Inuktitut language, is according to Bloomberg home to [...]
German Chancellor Angela Merkel will meet with President Obama today, June 26, in Washington to deepen US-German cooperation on economic, security, and climate-change issues. An unfortunate quote of mine to a German paper from some months back has been trotted out in the press to exemplify informed American skepticism on the German governing coalition’s economic [...]
Who could be against innovation? That is the argument used by industries that wish to avoid regulation, that excessive government oversight will diminish incentives to innovate, or erode property rights to innovations, and we all will be worse off for it. And in the broad, this is a valid concern. We are all better off [...]
In school, usually one cannot postpone exams, and only real grubbers try to negotiate with their examining professors for better grades. In medicine, if one puts off one’s diagnostic tests, problems usually get worse. Whichever analogy the Treasury tries to use for explaining their stress tests, the drawing out of the process and the release [...]
I hope it works. The financial stability plan presented on March 23 by Treasury Secretary Timothy Geithner could be a part of the solution because it would remove some of the bad assets from the banks’ balance sheets and put some capital into the banks. The Treasury is clearly trying clever tactics to avoid going [...]
The US Treasury reportedly will begin strict examinations of the 20 biggest American banks’ balance sheets starting this week. If anything close to current asset values are used to evaluate those books, and they should be, many of these banks will need public capital injections or closure. The reluctance to pull the trigger appears to [...]