The Financial Crisis and Short-Run Stabilization Policy
“I've been wondering if the current crisis will change our attitude about paying for stabilization policy, i.e. if it will make us more willing to raise taxes and cut spending when times are good. One of the problems with the last two boom-bust cycles was unchecked exuberance. Any calls to raise taxes or interest rates were met with howls about how it would cut off the boom, and who would want to do that? But tempering the boom might have helped to reduce the size of the meltdown we are experiencing now and left us much better off.”
RW: If we don’t pay off government debt, the next bust will likely be worse than the current one (currently -42% loss in the DOW since 10/2007). Thanks, Mark, for a nice article.
The soaring yen
“There was a reason why Asian exports to Europe were growing so rapidly. The euro’s strength v most Asian currencies was the most obvious currency misalignment in the world for the past several years. It just took a long time to correct.”
A Yen for Yen
“It’s a weird world indeed when capital is fleeing into the Japanese yen instead of away from it. The Japanese currency has appreciated dramatically against other currencies in the last couple of weeks and hit a 13-year high against the dollar Friday, as the dollar fell to 90.87.”
With Rate Cuts, FOMC Returns to Scene of the Crime
“If, as widely expected by financial markets and Fed watchers, the Federal Open Market Committee lowers the target federal funds rate for interbank lending by 0.50 percentage point at the conclusion of its Tuesday-Wednesday meeting, it would leave the funds rate at just 1%.
Ironically that same ultra-low rate in 2003 and 2004, and the slow pace of tightening after, has been blamed in some circles for the housing bubble that led to the economic and financial storm gripping the world right now.”
Tips for savers, as another Fed rate cut looms
“But here’s some good news: Even as the Fed gets ready to cut its benchmark rate again this week, you still have time to lock in CD yields. Many banks haven’t been moving very fast recently, if at all, to reduce what they pay depositors.”
RW: Good advice, unless you’re money is in an online saving account that takes 3 business days to transfer.
(Update1) TARP: Troubled Automaker Relief Program?
“The Treasury Department confirmed this week that no money would be diverted from TARP funds; that money had been designated solely for capital infusions to banks and insurance companies only.”
RW: Come on guys, share and share alike…..
RW: A nice discussion of the yen carry trade: Carry Trade Carnage
Helicopter Ben makes good on nickname
A Poem, by yours truly:
Real estate was
The way to get rich.
Just buy a home
And give it a flip.
If you bought more house
Than you can afford,
Helicopter BenWill dump cash your door.
He's Helicopter, Helicopter,
The money-throwing man
Who works at the Fed.
Money from the clouds,
Money from the sky,
Manna from heaven,
Thank that helicopter guy.
RW: Very cute, James!
Led Zeppelin Will Tour Without Plant
“Led Zeppelin are planning to tour and record with a replacement for frontman Robert Plant. "We are trying out a couple of singers," said bassist John Paul Jones.”
RW: Just not seeing how that could work. Would U2 go on stage without Bono? I don’t think so..
Stars Turn Out for Paul Newman Benefit
RW: Yup, FOX actually thinks that is news. Duh, I love that movie: Butch Cassidy and the Sundance Kid, but not b/c Paul Newman is in it….oh yeah, the young days of Robert Redford.