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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.
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 [...]
As the recovery stalls in advanced countries, central banks are leaning more and more toward quantitative easing, a form of monetary stimulus that could provide a tool to help the economy as public opinion turns against more government spending. Japan implemented its plan in early October, and in the United Kingdom Adam Posen, senior fellow [...]
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 [...]
In his testimony [pdf] to the Congress this week, Fed Chairman Ben Bernanke left the door open to further monetary stimulus but made it clear that such action is not imminent. This reluctance to act may seem puzzling given the widespread view that the economic recovery is too weak. In response to a senator’s question, [...]
When China decided last weekend to “relax” its dollar exchange rate policy, at least rhetorically, much drama-seeking media attention instead shifted to the next likeliest flashpoint at the coming G-20 Summit, namely the alleged transatlantic crisis over fiscal policies. On this side, as expressed in his letter to the G-20 leaders, President Obama is “concerned [...]
The recent turn toward fiscal austerity in Europe in the wake of the Greek crisis has raised serious concerns that it will threaten economic growth and revive global trade imbalances. While fiscal consolidation is unavoidable for the high-deficit, high-debt countries, the cuts made by Germany, whose government deficit is comparatively moderate, have attracted particular criticism. [...]
Six months ago I wrote a policy brief [pdf] in which I argued for large additional purchases of long-term bonds by the central banks of the four largest advanced economies—the United States, the euro area, Japan, and the United Kingdom—to reduce long-term interest rates. That advice remains relevant today for three of these economies. In [...]
For more than two years, financial turmoil has forced an ever wider scope of government intervention in many countries. It is natural that public authorities extend their reach in emergencies, and in many cases there was no other reasonable option. Moreover, in spite of the market rebound, many economies remain disrupted and fragile, making new [...]
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 [...]
“American taxpayer dollars should not be used to finance those Chinese jobs.“ Who could disagree with Senator Schumer’s statement, which accompanied his recent call for cancellation of $450 million in federal stimulus funds for a new $1.5 billion wind park in Texas—on the grounds that it would utilize 240 wind turbines made in China? As [...]