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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 [...]
The familiar tools of economic stimulation have run out of gas. Fiscal policy will contract when a political compromise is reached to raise the debt ceiling (probably by $2 trillion) and simultaneously cut spending (again by $2 trillion, spread over 10 years). The Fed can’t lower short term interest rate below zero, and if it [...]
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 [...]
Over the past year, the international financial community has revisited the complex issues raised by international capital flows and policies affecting them. Collective attention is appropriate because the flows, and actual or possible tightening of controls on them, create externalities for many countries. While not all of the attention to this topic over the past [...]
Despite the budget deal to keep the government running for the rest of the fiscal year, the United States remains at a profound impasse over its long-term public finances, with fiscal deficits lingering around 10 percent of the gross domestic product. Early in the financial crisis, presidential chief of staff Rahm Emanuel made the much-quoted [...]
The US Federal Reserve is preparing what could turn out to be one of its greatest follies since its defense of the gold standard during the Great Depression. Ben Bernanke, the Fed chairman, has signaled that next month the central bank could begin the process of printing hundreds of billions of dollars to buy US [...]
Ben Bernanke will be nominated for a second term as chairman of the Federal Reserve. But which Bernanke are we getting? There are at least three. The Bernanke who led the charge to rescue the US (and world’s) financial system after the Lehman-AIG collapse. If you accept that the choice from late September was “Collapse [...]
Matt Taibbi has rightly directed our attention towards the talent, organization, and power that together produce damaging (for us) yet profitable (for a few) bubbles. Most of Taibbi’s best points are about market microstructure—not the technological variety usually studied in mainstream finance, but more the politics of how you construct a multi-billion dollar opportunity so [...]