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Payroll Employment

The December figure for U.S. payroll employment comes out Friday. The November figure was down over 500,000 jobs. Is a loss of 1,000,000 jobs possible for December?

Charts to watch:
2004-2009
1988-2009

U.S. Excess Reserves

12/31/08 -- The growth in excess reserves has slowed, at least for the past two weeks. Excess reserves have grown to $798 billion, which is an increase of only $24 billion.

12/18/08 -- Excess reserves increased from $590 billion to $774 billion over the past two weeks. Required reserves are now $53 billion. Total reserves equal about 52% of M1.

12/4/08 -- Excess reserves decreased from $605 billion to $590 billion over the past two weeks.

11/20/08 -- Reserves with the Fed increased by $237 billion over the past two weeks. Required reserves are now $48 billion, and total reserves are $653 billion, leaving excess reserves of $605 billion. Reserves are now equal to about 44% of the money stock M1.

August, 2008 -- Excess reserves are $2 billion, a figure that is typical of recent years.

Monetary Policy in Three Steps

Step 1: Buy private assets from banks while selling Treasuries, effectively trading private assets for Treasuries, leaving reserves with the Fed unchanged.

Step 2: Buy private assets from banks, paying with deposits with the Fed (new money) because the portfolio of Treasuries is shrinking. Banks make little attempt to convert deposits with the Fed into loans. Nothing much happens to loans and the money supply, but excess reserves explode.

Step 3: Banks start to expand loans on the basis of massive excess reserves. The Fed has to drain hundreds of billions in excess reserves to regain control of the money supply. The Fed does this by selling private assets back to the banks.

We are now well into Step 2. Step 3 should be interesting.

Why AIG was in the CDS Business

Felix Salmon explains how taxpayers get to pay the claims after AIG collected the premiums. It is really very simple.

VoxEU -- Free Online Book

Rescuing our jobs and savings: What G7/8 leaders can do to solve the global credit crisis -- Contents Page

Richard Baldwin, Barry Eichengreen

"Without rapid and coordinated action by G7/8 leaders, this financial crisis could turn into a jobs crisis, a pension crisis and much more. This column introduces a collection of essays by leading economists on what the G7/8 leaders should do this weekend. The dozen essays present a remarkable consensus on a few points: we need immediate, coordinated global action that includes recapitalisation of the banks."

Economic Principals

Congratulations to David Warsh on the occasion of the 25th anniversary of EP.

The First Global Financial Crisis
of the 21st Century

A VoxEU.org Publication

Edited by Andrew Felton and Carmen Reinhart

Download the book.

Read the announcement
and/or download selected chapters.

Review: the topic itself is important, but this book also marks a new direction for online discussion.

Great Articles by Famous Economists

The Library of Economics and Liberty includes The Concise Encyclopeida of Economics. To see how many well-known economists have contributed browse by category .

EconModel

The Economics Roundtable is sponsored by EconModel.

The Classic Economic Models cover micro, macro, and financial markets.

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