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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.
Just as suddenly as it arose, the Cyprus financial crisis has passed by. The banks have opened and so has the stock market without undue panic. A few steps remain in the euro crisis, but this crisis is abating, and however messily Europe has handled it. Today, the questions are what we have learned, and [...]
Safe assets—often called information insensitive assets—are those debt securities that do not suffer from financial frictions characteristic of other financial assets. They play a major role in the strategies of institutional investors. But as we have learned recently, they can quickly lose their safety status at times of financial crises. In the past few months, [...]
The common refrain echoing through American politics, especially from Republicans, is that the United States must avoid, at all costs, becoming another Europe. How ironic, then, that thanks to Republicans, American and European politics have come to rely on the same sort of budget, borrowing, and fiscal brinkmanship. On the US side, the system is [...]
Despite its remarkable success in promoting US exports, the US Export-Import Bank (Ex-Im) is never far from controversy. Earlier this year, its authorization was renewed by Congress, but only after lawmakers overrode a barrage of criticism from the Tea Party and others opposed to government involvement in the economy. The reauthorization was a wise and [...]
Within the space of two days, the Indian government, spearheaded it appears by the Finance Minister, P. Chidambaram, has taken a series of policy steps to get India out of the funk it had been sliding into. First, it enacted measures to reduce fuel subsidies on diesel and limit the subsidy on cooking gas. Second, [...]
In his recent speech at the Federal Reserve’s annual Jackson Hole conference, Professor Michael Woodford of Columbia University attempted to pour cold water on the idea that the Fed’s purchases of long-term bonds (also known as quantitative easing) could lower bond yields.1 His contention was that the portfolio balance effect of such purchases would be [...]
The euro area continues to struggle with its crisis. In the eastern part of the European Union, however, an illustrative contrast has arisen that tells us a lot about how to act and not to act in a financial crisis. The contrast between successful Estonia and Latvia on the one hand, and struggling Hungary and [...]
Note: This essay was also posted on Mr. Johnson’s blog Baseline Scenario. Two diametrically opposed views of Wall Street and the dangers posed by global megabanks came more clearly into focus last week. On the one hand, William B. Harrison, Jr.—former chairman of JP Morgan Chase—argued in the New York Times that today’s massive banks [...]
I recently left a comment on Paul Krugman’s blog post on financial repression in China. Krugman wrote: I have no idea whether this John Hempton piece on China is at all right, but it’s a terrific read, and provides food for thought. Hempton basically argues that China has turned financial repression—controlled interest rates on deposits, [...]
As Europe’s growth prospects take a beating, critics of austerity seem to be riding high. In France, the Socialist Francois Hollande seems poised to be elected president on a wave of protest over record high unemployment in the euro area. Meanwhile, the fiscally hawkish Dutch government has fallen victim to its own rhetoric, after failing [...]