Economics Roundtable
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
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
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
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The Classic Economic Models cover micro, macro, and financial markets.
DataPoints: The Dismal Scientist
"A free and open exchange on the economy, and other things.”
by Moody’s Economy.com, a division of Moody’s Analytics.
The stimulus debate is summoning the economic demons from the closet. Normally sober, two-handed Ph.D.s are revealing their inner Keynes or inner Hayek, and baring fangs over whether and how to spend the economy back to health. Here, for example, are two takes on the Obama Administration's proposal, now ...
Why are savings rates falling in many developed countries? The increasingly self-interested choices made by older folks, say Loretti I. Dobrescu, Laurence J. Kotlikoff and Alberto F. Motta:
National saving rates differ enormously across developed countries. But these differences obscure a common trend, namely a ...
Paul Krugman of Princeton...
Other things equal, public investment is a much better way to provide economic stimulus than tax cuts, for two reasons. First, if the government spends money, that money is spent, helping support demand, whereas tax cuts may be largely saved. ...
On VoxEU today, The Myth of the Riskometer (catchy title), by Jon Danielsson. Interesting througout; excerpt:
In physics, complexity is a virtue. It enables us to create supercomputers and iPods. In finance, complexity used to be a virtue. The more complex the instruments ...
From Sunday's Meet the Press:
MR. GREGORY: Is this a trillion-dollar stimulus, do you expect?
SEN. REID: It's whatever it takes to bring this country back on a fiscal footing that is decent.
You know, we don't want to do a little bit and say, "Well, we should ...
My favorite quote from a very quotable article:
The Madoff scandal echoes a deeper absence inside our financial system, which has been undermined not merely by bad behavior but by the lack of checks and balances to discourage it. “Greed” doesn’t cut it as a satisfying ...
Brad Setser crams in a year's worth of misery:
– The US experienced its worst financial crisis since the Depression. The Fed dramatically expanded its balance sheet, becoming the world’s lender of last resort and the United States’ lender of almost every resort.
– Capital flows ...
Rarely is a year rung out with as little nostalgia as 2008's impending exit will evoke. Is there anyone, financial journalists excluded, who will miss the past 12 months? You might think this would be easy for a place wth "dismal" in its ...
From the NYT:
"The book is very much a first draft of history. It doesn’t attempt historical sweep or dramatic narrative. But it is an impressively lucid guide to the big issues — akin ...
Fresh indications that efforts to mortgage-modify aren't cutting it. From the WSJ:
Despite an increase in loan modifications and a drop in foreclosure starts during the third quarter, delinquencies and foreclosures currently in process continued to rise amid fresh signs that mortgage servicers were struggling with ...