Christina Romer: The Lessons of 1937

Économiste Monétaire

Link to her Economist Article (I don't think a subscription is required). Probing public opinion on the possibility of a second Obama 'stimulus' bill? Also, Romer's postulation that the Fed should have the authority to issue its own debt, previously made by the SF Fed president, is interesting.

silverharp

Économiste Monétaire wrote: »

Link to her Economist Article (I don't think a subscription is required). Probing public opinion on the possibility of a second Obama 'stimulus' bill? Also, Romer's postulation that the Fed should have the authority to issue its own debt, previously made by the SF Fed president, is interesting.

I hadnt heard that one about the Fed being allowed to borrow as a tool to withdraw liquidity, couldn't the Fed just increase reserve requirements for banks?
Raising taxes was one of the main reasons for the slump in 37 , its hard to see how Obama or the states will avoid raising taxes

Économiste Monétaire

It could, but, as Romer states in her piece, banks might be utilising the excess reserves as a 'just-in-case' liquidity buffer. The Fed could increase reserve requirements but it's not applicable on all types of deposits. Increasing the reserve requirement is a pretty blunt instrument and I'm not too sure if they could apply that kind of shock in the near future. Overnight money market rates might explode at a time when they're trying to remove banks' dependence on the administered funds. They could use their recently granted ability to pay interest on the reserves placed with the Fed, the required amounts and the marginal deposit facility, to keep some of it out of the system.

The big problem is the $1.25tn in agency-backed MBS, it's not exactly something they can sell back into the market with mortgage delinquencies still rising every quarter. Swapping this for Treasuries with the Treas. Dept. may get around this, and they can use regular OMOs and POMOs to soak up any excess left after the window programs are closed. I'm not sure if the idea of the Fed issuing its own debt would fly in a Congress currently looking to curtail the Fed's powers. A reserve requirement increase could be used in tandem with other action and I guess they could just increase it back to the 1980-92 level of 12%, which is probably what you meant.

I think the balanced budget requirement of individual states is wholesale stupid, it exacerbates the economic cycle. They may want to introduce a cyclically adjusted balanced budget approach.

Économiste Monétaire

Économiste Monétaire wrote: »

Probing public opinion on the possibility of a second Obama 'stimulus' bill?

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aStWHJXsvePA

silverharp

http://mises.org/story/3534

here is one critical response to the piece from the Mises site

eamonnm79

Économiste Monétaire wrote: »

It could, but, as Romer states in her piece, banks might be utilising the excess reserves as a 'just-in-case' liquidity buffer. The Fed could increase reserve requirements but it's not applicable on all types of deposits. Increasing the reserve requirement is a pretty blunt instrument and I'm not too sure if they could apply that kind of shock in the near future. Overnight money market rates might explode at a time when they're trying to remove banks' dependence on the administered funds. They could use their recently granted ability to pay interest on the reserves placed with the Fed, the required amounts and the marginal deposit facility, to keep some of it out of the system.

The big problem is the $1.25tn in agency-backed MBS, it's not exactly something they can sell back into the market with mortgage delinquencies still rising every quarter. Swapping this for Treasuries with the Treas. Dept. may get around this, and they can use regular OMOs and POMOs to soak up any excess left after the window programs are closed. I'm not sure if the idea of the Fed issuing its own debt would fly in a Congress currently looking to curtail the Fed's powers. A reserve requirement increase could be used in tandem with other action and I guess they could just increase it back to the 1980-92 level of 12%, which is probably what you meant.

I think the balanced budget requirement of individual states is wholesale stupid, it exacerbates the economic cycle. They may want to introduce a cyclically adjusted balanced budget approach.

EM I know you are making complete sense but for someone who just came from mars it would look like they are trying to cook the already over cooked books.
It all just seems like an elaborite ponsi scheme that would make madoff blush.

More stimulous equals more debt equals greater downward pressure on the dollar or inflation. It wouldnt get through congress anyhow.
The second stimulus was championed by paul krugman recently who said he thought they had not done enough.
The fed are able provide liquidity for financial institutions without even releasing the figures to congress Ron Paul has been demanding they release the numbers to no avail.
For another interesting uptake take a look at this from the sexiest economist I've ever seen. Nomi prins
I would let her take a look over my stimulous package any day.
http://www.democracynow.org/2009/6/22/report_goldman_sachs_on_pace_to

zod

https://www.youtube.com/watch?v=pGPt-reM8s4