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
The Economics Roundtable is sponsored by EconModel.
The Classic Economic Models cover micro, macro, and financial markets.
Crisis Talk
"Policy ideas on the financial crisis”
The World Bank Group
Wounded perhaps, but the sacred cows of capitalism are alive and kicking, according to a new World Bank working paper by Asli Demirguc-Kunt and Luis Serven. The authors of Are All the Sacred Cows Dead? argue that "the 'sacred cows' of financial and macro policies are very much alive...the ...
Deposit insurance is an attractive tool for politicians, especially in crises such as this one. Announcing (unlimited) coverage of deposits in the banking system can prevent depositors from bank runs. And as long as the authorities do not have to make good on their promise, it is also a cheap ...
Simeon Djankov argues for the merits of tax cuts over increased government spending as a form of fiscal shock, particularly in some eastern European countries. (The two policies are of course not mutually exclusive, but each may have a different cost-benefit ratio.) A new paper from NBER on
Hot off the press, the IMF yesterday released a staff position note on Fiscal Policy for the Crisis. Although Dominique Strauss-Kahn, the IMF's Managing Director, has been calling for fiscal stimulus for some time, this note attempts to lay out some principles on how best to go about it. ...
That, at least, is the opinion of Yan Qifa and Tang Ping, two economists at the Export-Import Bank of China. They urge caution regarding financial opening in today's China Daily:
In recent years, Chinese banks' balance sheets have seen much improvement thanks to continual banking reforms. However, with ...
A lot has been said and written about the role of credit agencies in the current crisis. Almost everyone agrees that its role has been negative, understating the risk of many financial products and papers and misleading many investors. But how can the incentive structure of this industry be reformed? ...
Are we seeing the beginnings of an Asian crisis redux? James Seward, a senior financial sector specialist at the World Bank, reports that a recent bank nationalization in Indonesia was the first in the region since the 1997 financial crisis:
[A] small bank failed in Indonesia recently ...
Reflecting on the recent dramatic downturns of the Ukrainian hryvnia, rising unemployment, inflation, and loan repayment problems, I suddenly thought that it can’t be quite as bad as it seems. It’s probably true that this financial crisis has made life harder for many people, but there will also be ...
In a previous post, I wrote about the rapid decline in international trade. Today, Japan followed this trend and posted a 27% decline in exports in November relative to November 2007.
"Demand is rapidly cooling not only in the United States and Europe but also in Russia and the ...
Shortly after my arrival at Tilburg University, I was asked by the campus newspaper to comment on the current crisis. Among other questions, I was asked what I could see as the worst-case-scenario. Back in September, I responded that this would be the raising of tariff and non-tariff barriers, leading ...