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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 second half of 2011 opened with a boatload of bad economic news: rolling sovereign debt crises in Europe, a downgrade in the US credit rating, a sputtering economy, little growth in jobs, weak housing prices, and a plunging stock market. Can President Obama turn this picture around in time for the 2012 campaign? In [...]
On Wednesday afternoon, April 27, 2011, Federal Reserve Chairman Ben Bernanke gave the first scheduled press conference by a Federal Reserve chairman immediately following a meeting of the Federal Open Market Committee (FOMC). Chairman Bernanke was sure footed and appeared not to be surprised by any of the questions. He answered most of the questions [...]
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 [...]
In most societies it is traditional to be somewhat sneaky in squeezing your shareholders or the government. You might set up a complicated transfer pricing scheme or perhaps you arrange for a family-owned firm to acquire assets on the cheap from the publicly traded corporation that you control. Or you could always arrange for the [...]
There are two ways to think about inflation in today’s economy. The first, suggested by conventional macroeconomic frameworks for the United States, is that, with rising unemployment and actual output sinking further below “potential” output, inflation will stay low—and we could actually experience the dangers of falling wages and prices (think what happens to mortgage [...]
Here is Ben Bernanke’s problem: 1. The financial sector is busy setting up arrangements in which employees are guaranteed high levels of compensation if they stay on through the difficult days ahead. These retention-type payments allow firms to survive in their existing form, pursue business-as-usual, and gamble for resurrection, i.e., make further risky investments. 2. [...]
Some commentators have begun suggesting that the Federal Reserve should announce an inflation target now, with the idea that it will prevent inflation arising from the coming massive fiscal stimulus. In my opinion, it couldn’t hurt. As I argued with respect to Japan in 1998 [pdf], or as Ben S. Bernanke, Frederic S. Mishkin, and [...]
We know there is going to be a large fiscal surge in the United States (the latest estimate is a stimulus of $675 billion to $775 billion, which is a bit lower than numbers previously floated). This will likely arrive as the US recession deepens and fears of deflation take hold. The precise outcomes for [...]