• Friday, January 23rd, 2009
A roundup of economic news from around the Web.
Stimulus Skepticism: On his Marginal Revolution blog, Tyler Cowen says we just don’t know how effective stimulus will be. “I fully admit that I don’t trust the oft-cited evidence that tax cuts are 4x better stimulus than government spending boosts; I think the result is a mirage from underspecified models. Overall we simply don’t know how well the proposed stimulus will work — if at all (is aggregate demand always the relevant war?). It’s a kind of Hail Mary pass, an enduring belief in aggregate demand macroeconomics at the theoretical level, even in light of broken banks, sectoral shifts, and nasty, failing expectations, all mixed in with hard to spend well, slow to come on line, monies. Yes it could work but our agnosticism should be strong rather than just perfunctory. “
Krugman Criticism: Writing for the New York Times, Paul Krugman has some criticism of Barack Obama’s inauguration speech. “But my real problem with the speech, on matters economic, was its conventionality. In response to an unprecedented economic crisis — or, more accurately, a crisis whose only real precedent is the Great Depression — Mr. Obama did what people in Washington do when they want to sound serious: he spoke, more or less in the abstract, of the need to make hard choices and stand up to special interests. That’s not enough. In fact, it’s not even right.â€
Soros on Banks: Writing for the Financial Times, George Soros gives his views on the best way to fix the banks. “The hard choice facing the Obama administration is between partially nationalising the banks, or leaving them in private hands but nationalising their toxic assets. Choosing the first course would inflict great pain on a broad segment of the population – not only on bank shareholders but also on the beneficiaries of pension funds. However, it would clear the air and restart the economy. The latter course would avoid recognising and coming to terms with the painful economic realities, but it would put the banking system into the same quandary that proved the undoing of the government sponsored enterprises (GSEs) – Fannie Mae and Freddie Mac. The public interest would dictate that the banks should resume lending on attractive terms. However, this lending would have to be enforced by government diktat because the self-interest of the banks would lead them to focus on preserving and rebuilding their own equity. Political realities are pushing the Obama administration towards the latter course.â€
Compiled by Phil Izzo
Category: Economy
|
Tags: aggregate demand, agnosticism, bank shareholders, barack obama, broken banks, financial times, george soros, government spending, great depression, hail mary, hard choices, inauguration speech, marginal revolution, new york times, paul krugman, pension funds, private hands, theoretical level, tyler cowen, unprecedented economic crisis |
Comments off
• Monday, January 19th, 2009
A roundup of economic news from around the Web.
Bank of America’s Deal: Writing on his Basline Scenario blog, Simon Johnson looks at the government’s deal to aid Bank of America and remains critical of the government’s approach. “This is more of the same incoherent Policy By Deal that has failed to stabilize the financial system, while also greatly annoying pretty much everyone on Capitol Hill. Hopefully, it is the last gasp of the Paulson strategy and the Obama team will shortly unveil a more systematic approach to bank recapitalization; it would be a major mistake to continue in the Citi II/BoA II vein.†Separately, the Journal’s David Wessel discusses how well TARP is working on NPR.
Tax Cuts and Stimulus: Writing for the Financial Times, Joseph Stiglitz says tax cuts shouldn’t be part of the stimulus. “We are in uncharted territory in this crisis. But household tax cuts, except for possibly the poorest, should have no place in the stimulus. Nor should business tax breaks, except when closely linked with additional investment. The one tax cut that should be included is a temporary incremental investment tax credit; it provides a big bang for the buck, encouraging companies to invest now when the economy needs the spending. Increased investments in infrastructure, education and technology, relief to states, and help to the unemployed need pride of place.â€
Compiled by Phil Izzo
Category: Economy
|
Tags: bank of america, big bang, business tax, david wessel, economic news, financial times, incremental investment, investment tax credit, izzo, joseph stiglitz, last gasp, pride of place, recapitalization, s david, secondary sources, simon johnson, stimulus, systematic approach, uncharted territory, web bank |
Comments off
• Wednesday, January 14th, 2009
A roundup of economic news from around the Web.
More Than Stimulus: Martin Wolf of the Financial Times writes that stimulus alone won’t save the U.S. economy. “First, there must be a credible program for what Americans call “deleveragingâ€. The U.S. cannot afford years of painful debt reduction in the private sector — a process that has still barely begun. The alternative is forced write-downs of bad assets in the financial sector and either more fiscal recapitalization or debt-for-equity swaps. It also means the mass bankruptcy of insolvent households and forced write-downs of mortgages. All this would also lead to big one-off increases in public debt. But those increases would probably be much smaller than those generated by a decade of huge fiscal deficits. The aim is to have a slimmer and better-capitalized financial system and a healthier non-financial private-sector balance sheet, sooner rather than later. The troubled asset relief program should be used for these purposes. It will need to be bigger. Second and most important, the structural current account deficit has to diminish. The US private sector is no longer in a position to run huge financial deficits as an offset to the demand-draining external deficits. The public sector can do so only for a few years. In the long run, the world economy must be sustainably and healthily rebalanced. This is a huge challenge for international economic diplomacy. It is also an essential element of sound domestic policy.â€
Fed Balance Sheet: Writing on the Econbrowser blog, James Hamilton looks a Fed Chairman Ben Bernanke’s speech yesterday and wonders about the risks the central bank is taking on. “That sounds to me like an exit strategy for how to get out of this if everything works out just right and the problems all go away. And what’s the exit strategy if it doesn’t work? I suppose more lending facilities.†Separately, on the Atlanta Fed’s macroblog, David Altig plays down the inflationary implications of the expansion of the Fed’s balance sheet.
Compiled by Phil Izzo
Category: Economy
|
Tags: atlanta fed, ben bernanke, current account deficit, davi, econbrowser, economic diplomacy, economic news, exit strategy, external deficits, fed chairman, financial sector, financial times, fiscal deficits, james hamilton, macroblog, martin wolf, public debt, recapitalization, stimulus, world economy |
Comments off
