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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.
In his 2010 book, Beyond the Crash: Overcoming the First Crisis of Globalization, former Chancellor of the Exchequer and Prime Minister Gordon Brown took great pride in his fiscal stimulus in early 2009. His intention, as that of all well-meaning Keynesians, was laudably to increase output. However, the United Kingdom has persistently underperformed in terms [...]
Note: The author thanks Jared Nolan for research assistance. In a recent policy brief, my colleague Joseph Gagnon (2012) argued that widespread currency manipulation by many countries in recent years has led to a reduction in the US current account balance by about 4 percent of GDP (about $600 billion annually). Subsequently C. Fred Bergsten [...]
The sense of despair enveloping American politics seems to be at an all-time high. But a lesson from the past, counseling that it really is possible to work together during a crisis, is being delivered this week, following the death of the most creative, resilient, and gutsy political leader I have ever known, former Governor [...]
If all goes according to plan, the Greek parliament’s approval of new austerity measures at the end of June, followed by the euro area’s disbursement of the fifth tranche of the current Greek Loan Facility, will then lead to approval of the latest rescue of Greece by the International Monetary Fund (IMF) Board, just in [...]
A deadline before a deadline before a deadline. The political brinkmanship in the euro area crisis has clearly reached new levels in recent weeks, culminating in the vote in Greece’s Parliament on June 29 to accept a tough austerity package in return for new loans to avert a default. The vote demonstrated that for all [...]
Have we not heard it all before? The bank stress tests are not sufficiently transparent, the conditions are too soft, and nobody knows who will put up the financing for necessary recapitalization of weak banks. But after the US bank stress tests were published on May 7, 2009, the Wall Street Journal announced: “Worst-Case Capital [...]
Austerity is back in fashion across the European Union, thanks to the Greek debt crisis—particularly among the vulnerable southern eurozone members. Faced with suddenly hostile financial markets and unwilling to refinance affected countries’ debts at anything other than unsustainably high interest rates, Europeans are adopting a slew of severe budget and regulatory measures throughout the [...]
After weeks of floundering, the European Commission on February 3 approved a fiscal austerity program proposed by Greece aimed at restoring sustainability to the country’s finances and bringing down the country’s budget deficit—and avoiding a sovereign default. Then on February 11, EU leaders themselves endorsed the same plan, while vaguely noting that “Euro area member [...]
Greece faces the most difficult situation that has ever confronted a eurozone country since the birth of the common currency in 1999. Without draconian measures by the Athens government the fiscal situation of the country will soon become unsustainable. A failure to pay off its debt, though remote, cannot be completely ruled out with risks [...]
A lively debate is under way between those who want more fiscal stimulus to create jobs and those who worry that our national debt is already too high. Both sides are ignoring the obvious alternative—one that would create jobs and lower the deficit. In a newly-posted Policy Brief [pdf], I present the argument for easier [...]