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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 Securities and Exchange Commission (SEC) under Mary Shapiro is trying to escape a difficult legacy. Over the past two decades, the once proud agency was effectively captured by the very Wall Street firms it was supposed to regulate. The SEC’s case against Goldman Sachs may mark a return to a more effective role; certainly [...]
The argument is widely heard in Europe and elsewhere: If only Greece and other struggling eurozone countries could let their currency depreciate, as other collapsing economies have done when hit by debt crises—in Asia and Latin America, for example. Such a step would in theory boost demand for these countries’ exports, limit their imports, and [...]
If nothing else, the financial crisis of 2007–10 has reinforced the general proposition that unbridled capital flows can pose a potential problem for the global financial system. The seriousness of that problem depends on economic and financial circumstances, including the strength and quality of macroeconomic and prudential institutions and policy tools. Therefore, a respectable case [...]
The frantic spectacle of European leaders struggling to avert a financial crisis caused by Greece has seemed unsettling and at times amateurish. It is certainly easy to point fingers at policymakers patching solutions together—solutions that immediately unravel under pressure from the markets—and to do so again and again over the last several weeks. But if [...]
In Politico, I question whether the president should really be seen as “centrist” or “moderate” with regard to financial reform. His staff goes to great lengths to make this claim, including both the specific quotes and general tone in the Financial Times on Tuesday (May 18, p. 7). Treasury Secretary Tim Geithner: “I would say [...]
Recent market volatility seems to reflect severe doubts that the Greek rescue package can work and, by extension, that serious contagion to other larger European debtors can be avoided. Yet a close look at the numbers in the IMF program for Greece suggests that although the fiscal adjustment needed to secure debt sustainability is daunting, [...]
The European Union faces an existential crisis that results from three simultaneous challenges. The most visible one is fiscal. Several member states have poorly managed their finances, and the eurozone policy framework has been toothless in getting them to address their complacency. The second is about competitiveness. Property bubbles and a benign international environment have [...]
The $1 trillion rescue of the eurozone, aimed at averting a spread of contagion from Greece, did nothing to help the Greeks address their underlying and unsustainable fiscal situation. Greece is insolvent and needs to lower its total debt burden before 2012. As I wrote earlier, the IMF has published its detailed economic analysis [pdf] [...]
Look forward. The holy grail of any serious financial market player must now be: Become too big to fail. You can do it is as a megabank—this part is obvious. But you can also do it as a hedge fund or some other lightly regulated pool of capital—this, after all, is the lesson of long-term [...]
It did not take long for the trillion dollar rescue in Europe to stir second thoughts in global financial markets. Late Sunday night in Brussels Europe assembled its “BIG package” to fight its sovereign debt crisis and any contagion from Greece. On Monday global markets rallied. Yet since Tuesday, the euro has weakened again. Evidently [...]