Chapter 29: The Monetary System
Archived Posts
April 27
A Great Sentence
David Brooks writes that "The premise of the current financial regulatory reform is that the establishment missed the last bubble and, therefore, more power should be vested in the establishment to foresee and prevent the next one."
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
April 26
Swagel on the Dodd Bill
Phillip Swagel argues that the current financial reform proposal will make future bailouts even more likely.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
April 23
Contingent Convertible Bond Watch
Switzerland is considering requiring financial institutions to issue contingent convertible bonds. Such bonds convert to equity in the event of financial difficulties that call for recapitalization.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
April 18
Kocherlakota on the Recovery
The President of the Minneapolis Fed discusses the prospects for the U.S. economy. He expects 3 percent growth for the next two years and thinks significant inflation is unlikely.
Textbook References:
Pages 648-649 “The Federal Reserve System”
Pages 653-656 “The Fed's Tools of Monetary Control”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
April 17
The Latest from the CEA Chair
CEA Chair Christina Romer reports on what has been done to fight the current recession and discusses what else can be done.
Textbook References:
Pages 30-33 “The Economist as Policy Advisor”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 654-655 “The Financial Crisis of 2008”
Page 750 “The 2008 Fiscal Stimulus”
Chapter 34 “The Influence of Monetary and Fiscal Policy on Aggregate Demand”
Pages 830-832 “Monetary And Fiscal Policymakers Try To Stabilize The Economy”
Pages 842-843 “Dealing with Deficits”
April 11
Hear me Squawk
There is a six-and-a-half minute video of Mankiw discussing financial reform.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
April 2
Barro on the Great Depression
Robert Barro questions the Keynesian multiplier and suggests that Friedman and Schwartz had a better understanding of the Great Depression than Keynes.
Textbook References:
Page 657 “Bank Runs and the Money Supply”
Pages 767-766 “Two Big Shifts in Aggregate Demand: The Great Depression and World War II”
Page 770 “The Origins of Aggregate Demand and Aggregate Supply”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-797 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try to Stabilize the Economy?”
March 19
Comments on Alan Greenspan's "The Crisis"
Mankiw comments on Alan Greenspan's new paper, "The Crisis." Mankiw agrees with most of it, but takes issue with Greenspan's contention that there are limits to our ability to reduce leverage.
Textbook References:
Pages 649-658 “Banks and the Money Supply”
March 16
An Ec 10 Success Story
A Harvard undergraduate wrote her thesis on the meltdown of the market for CDOs. Michael Lewis calls it "more interesting than any single piece of Wall Street research on the subject."
Textbook References:
Pages 600-605 “Managing Risk”
Pages 606-610 “Asset Valuation”
Pages 654-655 “The Financial Crisis of 2008”
March 15
Shiller's Prognosis
Robert Shiller argues that economic crises are hard to predict because macroeconomic knowledge is so limited.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Page 657 “Bank Runs and the Money Supply”
Chapter 33 “Aggregate Demand and Aggregate Supply”
Chapter 34 “The Influence of Monetary and Fiscal Policy on Aggregate Demand”
March 3
Gorton on the Financial Crisis
Gary Gorton probes the root cause of the recent financial crisis.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Page 657 “Bank Runs and the Money Supply”
February 5
Reflections on the Housing Market
Karl Case describes the housing bubble and crash in verse.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
January 26
Cooley on the Bank Tax
Thomas Cooley argues that the bank tax should not be sold as a politically charged punitive measure. He also says that it should be more akin to insurance than a tax.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Page 657 “Bank Runs and the Money Supply”
January 20
Diamond and Kashyap on the Bank Tax
Douglas Diamond and Anil Kashyap offer a modified version of the bank tax where each bank would pay a tax proportionate to the size of its bailout.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Page 657 “Bank Runs and the Money Supply”
January 16
The Inflation Monster
Mankiw considers the chances of significant inflation in the coming years.
Textbook References:
Pages 13-14 “Principle 9: Prices Rise When the Government Prints Too Much Money”
Pages 645-647 “Money in the U.S. Economy”
Chapter 30 “Money Growth and Inflation”
January 15
The Bank Tax
Mankiw makes a case for Obama's proposed tax on banks. The tax would compensate for the implicit government promise to bailout large banks.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Page 657 “Bank Runs and the Money Supply”
December 28
The Monetary Base is Exploding. So What?
Mankiw argues that the recent increase in the monetary base need not lead to inflation.
Textbook References:
Pages 649-658 “Banks and the Money Supply”
Pages 664-676 “The Classical Theory of Inflation”
December 20
Readings on Financial Regulatory Reform
Mankiw provides a list of articles that discuss financial regulatory reform.
Textbook References:
Pages 576-580 “Financial Institutions in the U.S. Economy”
Chapter 27 “The Basic Tools of Finance”
Pages 654-655 “The Financial Crisis of 2008”
December 12
Fiscal Stimulus Revisited
Mankiw suggests that tax cuts would do more to stimulate the economy than government spending.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
December 9
The Transactions Tax
Burton Malkiel and George Sauter argue against taxing financial transactions.
Textbook References:
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments can Sometimes Improve Market Outcomes”
Pages 123-130 “Taxes”
Pages 654-655 “The Financial Crisis of 2008”
December 4
What Responsibilities Should the Fed Have?
Vincent Reinhart argues that the Fed may be asked to do too much.
Textbook References:
Pages Pages 54-57 “Comparative Advantage: The Driving Force of Specialization”
Pages 648-649 “Federal Reserve System”
December 3
Glaeser on Financial Regulation
Edward Glaeser suggests a way to extract better information from financial firms.
Textbook References:
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments can Sometimes Improve Market Outcomes”
Pages 654-655 “The Financial Crisis of 2008”
November 27
A Reading for the Pigou Club
John Cassidy prevents an overview of Pigou's ideas.
Textbook References:
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments can Sometimes Improve Market Outcomes”
Pages 210-212 “Market-Based Policy 1: Corrective Taxes”
Pages 654-655 “The Financial crisis of 2008”
October 28
Is the Efficient Markets Hypothesis Kaput?
Jeremy Siegal argues that the current financial crisis has not discredited the efficient market hypothesis.
Textbook References:
Pages 606-607 “The Efficient Market Hypothesis”
Pages 654-655 “The Financial Crisis of 2008”
October 22
From the CEA Chair
Christina Romer discusses the economic crisis, the policy response, and the outlook for the future.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Page 657 “Bank Runs and the Money Supply”
Pages 664-676 “The Classical Theory of Inflation”
Chapter 33 “Aggregate Demand and Aggregate Supply”
Chapter 34 “The Influence of Monetary and Fiscal Policy on Aggregate Demand”
Chapter 35 “The Short-Run Trade-off between Inflation and Unemployment”
Chapter 36 “Five Debates over Macroeconomic Policy”
October 14
Maskin on the Financial Crisis
Nobel laureate Eric Maskin discusses the financial crisis. He contends that economists did anticipate the crisis but that policymakers did not listen. He also provides a reading list on the subject.
Textbook References:
Pages 484-485 “Hidden Actions: Principals, Agents, and Moral Hazard”
Pages 601-603 “The Markets for Insurance”
Pages 642-643 “The Functions of Money”
Pages 649-658 “Banks and the Money Supply”
Pages 779-781 “The Theory of Liquidity Preference”
Pages 783-785 “Changes in the Money Supply”
September 25
Back from the Brink
Christina Romer, chair of the President’s Council of Economic Advisors, discusses the parallels between the crises of 1929 and 2008. She argues that the policy response to the current crisis has been much better than the response in 1929.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Page 657 “Bank Runs and the Money Supply”
Chapter 33 “Aggregate Demand and Aggregate Supply”
Chapter 34 “The Influence of Monetary and Fiscal Policy on Aggregate Demand”
Chapter 35 “The Short-Run Trade-off between Inflation and Unemployment”
Chapter 36 “Five Debates over Macroeconomic Policy”
September 15
Lehman and the Crisis
John Cochrane and Luigi Zingales blame Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke's TARP speeches for causing the current crisis. Assistant Secretary of the Treasury Phill Swagerl disagrees.
Textbook Reference:
Pages 654-655 “The Financial Crisis of 2008”
August 25
POTUS makes a wise choice
Mankiw congratulates President Obama on his choice to reappoint Ben Bernanke as chair of the Fed.
Textbook References:
Pages 648-649 “The Federal Reserve System”
Pages 654-655 “The Financial Crisis of 2008”
Page 821 “Bernanke’s Challenges”
August 19
Blanchard on the Outlook
Olivier Blanchard notes that in previous banking crises, output does not return to its previous growth path. It remains below it, though the average growth rate returns to what it was.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 550-554 “Economic Growth Around the World”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 740-742 “Three Key Facts About Economic Fluctuations”
August 7
The Recession in Nantucket
The amount of new construction in Nantucket has collapsed, as it has in most parts of the country.
Textbook Reference:
Pages 654-655 “The Financial Crisis of 2008”
August 2
The Case for More Inflation
Tyler Cowen reports on Scott Sumner’s proposal that the Fed commit to an inflation rate of 2 to 3 percent.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
July 30
Buiter on the Next Fed Chair
Willem Buiter argues that by allowing the chair of the Fed to be reappointed, the Fed’s independence is compromised.
Textbook Reference:
Pages 648-649 “The Federal Reserve System”
July 27
The Latest from Merle Hazard
Merle Hazard presents a humorous song about the financial crisis.
Textbook Reference:
Pages 654-655 “The Financial Crisis of 2008”
July 21
The Fed’s Exit Strategy
Ben Bernanke explains how the Fed plans to prevent inflation when the recovery takes hold.
Textbook References:
Chapter 29 “The Monetary System”
Chapter 30 “Money Growth and Inflation”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
July 19
Anna Schwartz on the Bernanke Fed
Anna Schwartz thinks Bernanke has confused a crisis of confidence with a shortage of liquidity.
Textbook References:
Pages 576-580 “Financial Institutions in the U.S. Economy”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
July 11
More Fiscal Stimulus?
Paul Krugman makes the case for another stimulus package. Phil Levy makes the case against another package.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
July 10
Miron on Bailouts
Jeff Miron suggests that the government should not have subsidized home ownership to begin with, and should not have bailed out banks after the crash.
Textbook References:
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Makin on Homeownership
John Makin argues that the housing bubble was the result of government policy, especially the mortgage interest tax deduction.
Textbook References:
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
July 9
Lazear on Fiscal Stimulus
Edward Lazear notes that very little of the stimulus package has actually been spent. He claims that it is primarily an excuse to expand the size of government.
Textbook References:
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
July 02
Old Speeches, New Policies
Blogger Mark Thoma uses a speech Mankiw gave six years ago to defend Obama’s deficit spending. But Mankiw’s speech emphasizes that a deficit caused by spending may have a different long-term effect than a deficit caused by tax cuts.
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?”
Pages 838-841 “Should the Government Balance Its Budget?”
Pages 842-843 “Dealing with Deficits”
June 26
Was Keynes Really a Savvy Investor?
It’s easy to make money if one has unlimited funds.
Textbook References:
Pages 606-610 “Asset Valuation”
Pages 654-655 “The Financial Crisis of 2008”
June 25
Posner on Financial Reform
Richard Posner argues that the proposed financial reforms ignores the fact that existing regulators were asleep, so more regulators will not guarantee better performance.
Textbook References:
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
June 23
Financial Crisis Timeline
The New York Fed presents domestic and international timelines for the financial crisis.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 649-653 “Banks and the Money Supply”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 589-593 “Policy 3: Government Budget Deficits”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?”
Pages 838-841 “Should the Government Balance Its Budget?”
June 19
Kling on Financial Regulation
Arnold Kling points out that the tax deductibility of mortgage interest and government mortgage subsidies played a role in creating over-leveraged consumers.
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 654-655 “The Financial Crisis of 2008”
June 08
Randy and Phill
There is a video of former Fed governor Randy Kroszner and former assistant Secretary of the Treasury Phill Swagel as they discuss the policy actions taken during the financial crisis.
Textbook Reference:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 649-653 “Banks and the Money Supply”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?”
Pages 838-841 “Should the Government Balance Its Budget?”
May 30
Ferguson Takes on Krugman
Historian Niall Ferguson argues that the recent rise in interest rate on long-term Treasury bonds is evidence that Krugman is wrong that expansionary fiscal policy will not drive up interest rates.
Textbook Reference:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?”
Pages 838-841 “Should the Government Balance Its Budget?”
May 27
John Taylor is Worried
John Taylor is concerned that the U.S. federal debt is growing too large. Among other things, it jeopardizes the country’s credit rating.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
May 23
Crisis 101
Mankiw comments on how the current crisis will affect the introductory college economics course. He says that the fundamentals are still important, but that more attention will be given to the financial system, leverage, the limits of monetary policy and the difficulty of forecasting.
Textbook References:
Pages 576-580 “Financial Institutions in the U.S. Economy”
Pages 654-655 “The Financial Crisis of 2008”
Page 656 “Problems in Controlling the Money Supply”
May 18
The Fiscal Future
Robert Samuelson worries about the extraordinary amount of deficit spending.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
Pages 842-843 “Dealing with Deficits”
May 17
Accountability?
The actual unemployment rate in the past two months has been higher than the administration said it would be with the stimulus bill.
Textbook References:
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
May 15
The Personal Side of the Credit Crisis
An economics reporter for the New York Times explains how he became part of the mortgage crisis.
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 654-655 “The Financial Crisis of 2008”
May 14
Limited Purpose Banking
Laurence Kotlikoff and John Goodman make the case for limiting banks to their role as financial intermediaries.
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 578-580 “Financial Intermediaries”
Pages 649-658 “Banks and the Money Supply”
Page 821 “Bernanke’s Challenges”
May 5
An Overview of the Credit Crisis
There is an article that summarizes how the current crisis started, how it spread and the actions taken to counteract it. There are also links to a large number of articles and videos on the same topics. This should be an especially valuable resource for instructors.
Textbook References:
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economics Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Chapter 26 “Saving, Investment, and the Financial System”
Pages 654-655 “The Financial Crisis of 2008”
Chapter 33 “Aggregate Demand and Aggregate Supply”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?”
Pages 838-841 “Should the Government Balance Its Budget?”
May 4
Meltzer vs Krugman
Allan Meltzer is worried that the Fed’s easy money policy will lead to inflation. He is also worried that the Fed has lost its independence. Paul Krugman is worried about falling wages and the possibility of deflation.
Textbook References:
Pages 392-399 “The Demand for Labor”
Pages 399-400 “The Supply of Labor”
Pages 400-405 “Equilibrium in the Labor Market”
Pages 414-422 “Some Determinants of Equilibrium Wages”
Pages 648-649 “The Federal Reserve System”
Chapter 30 “Money Growth and Inflation”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?”
May 1
From the CEA Chair
Christina Romer discusses the causes of the current crisis, the policy actions taken to end the crisis, and the prospects for the future.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 649-653 “Banks and the Money Supply”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?”
Pages 838-841 “Should the Government Balance Its Budget?”
Apr. 29
Miron on the Financial Crisis
Jeff Miron argues the case for the government to do nothing in response to the financial crisis.
Textbook References:
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 740-742 “Three Key Facts About Economic Fluctuations”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
Apr. 24
The Ideal Financial System
Laurence Kotlikoff and Edward Lerner propose an overhaul of the financial system. The proposal includes an end to fractional reserve banking.
Textbook References:
Pages 576-580 “Financial Institutions in the U.S. Economy”
Chapter 29 “The Monetary System”
Apr. 21
Solow on Posner
Robert Solow reviews Richard Posner’s book, A Failure of Capitalism: The Crisis of ’08 and the Descent into Depression. Along the way he provides insightful observations, as one would expect from a Nobel laureate.
Textbook References:
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 484-489 “Asymmetric Information”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?”
Pages 838-841 “Should the Government Balance Its Budget?”
Apr. 19
A Quick Quiz
Take a quiz made up of questions from past AP tests.
Textbook References:
Pages 4-5 “Principle 1: People Face Trade-offs”
Chapter 12 “The Design of the Tax System”
Pages 589-593 “Policy 3: Government Budget Deficits”
Page 614-619 “How is Unemployment Measured?”
Pages 649-653 “Banks and the Money Supply”
Pages 653-656 “The Fed’s Tools of Monetary Control”
Chapter 30 “Money Growth and Inflation”
Pages 742-744 “The Assumptions of Classical Economics”
Pages 749-751 “Why the Aggregate–Demand Curve Might Shift”
Pages 753-755 “Why the Long–Run Aggregate–Supply Curve Might Shift”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-797 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Apr. 16
Meet the Cassandras
Salon lists the 14 biggest critics of Obama’s economic policy, along with a short synopsis of their criticisms.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 649-653 “Banks and the Money Supply”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?”
Pages 838-841 “Should the Government Balance Its Budget?”
Apr. 15
Yale Economists on the Financial Crisis
Robert Shiller, John Geanakoplos and Richard Levin discuss the financial crisis in a one-hour video. The roles of psychology and of leverage are emphasized.
Textbook References:
Pages 494-500 “Behavioral Economics”
Pages 498-499 “This Is Your Brain on Economics”
Pages 576-578 “Financial Markets”
Pages 608-609 “Neurofinance”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Apr. 14
Hall and Woodward on Fed Policy
Robert Hall and Susan Woodward argue that the large increase in bank reserves need not lead to inflation if the Fed adjusts the interest rate paid on reserves properly.
Textbook References:
Chapter 29 “The Monetary System”
Chapter 30 “Money Growth and Inflation”
Apr. 7
More on the Treasury Plan
Ricardo Caballero believes the Treasury is on the correct track. Jeffrey Sachs thinks the Treasury’s plan will cost the taxpayers a bundle.
Textbook References:
Pages7-8 “Principle 4: People Respond to Incentives”
Pages 649-653 “Banks and the Money Supply”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Apr. 5
Bernanke’s Gamble
Simon Johnson and James Kwak argue that Ben Bernake has expanded the Fed’s role in the economy and has taken great risks.
Textbook References:
Pages 649-653 “Banks and the Money Supply”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Page 821 “Bernanke’s Challenges”
Cowen on Bailouts
Tyler Cowen argues that creditors have not shouldered their share of the burden in this crisis.
Textbook References:
Pages 576-580 “Financial Institutions in the U.S. Economy”
Pages 649-653 “Banks and the Money Supply”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Apr. 3
Boskin on the Obama Budget
Michael Boskin argues that the Federal budget deficit will be much larger than the administration claims.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
Apr. 2
My Whereabouts
Phillip Swagel describes the actions taken by the U.S. Treasury as the financial crisis unfolded. He emphasizes the legal constraints faced by the Treasury.
Textbook References:
Pages 8-10 “Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 649-653 “Banks and the Money Supply”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Apr. 1
Stiglitz on the Geithner Plan
Joseph Stiglitz argues that the plan to rescue the financial system lacks transparency, is excessively complex, depends on too much leverage and has poor incentives.
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 8-10 “Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 649-653 “Banks and the Money Supply”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Market-based Financial Regulation
Oliver Hart and Luigi Zingales argue that credit default swaps might be used as a market-based method to determine the health of large financial institutions.
Textbook References:
Pages 8-10 “Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 649-653 “Banks and the Money Supply”
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Mar. 29
Forecasting as Futuristic Fiction
Robert Shiller reports on how paying attention to peoples’ mind-sets can be useful in forecasting economic performance.
Textbook References:
Pages 498-499 “This Is Your Brain on Economics”
Pages 608-609 “Neurofinance”
Pages 654-655 “The Financial Crisis of 2008”
Mar. 25
Sachs on the Geithner-Summers Plan
Jeffrey Sachs thinks the plan to rid the banking system of toxic assets is little more than a transfer program for banks.
Textbook References:
Pages 649-658 “Banks and the Money Supply”
Page 821 “Bernanke’s Challenges"
Mar. 24
Toxic Assets versus Toxic Liabilities
Jeremy Bulow and Paul Klemperer argue that the current plan to fix the banking system is flawed and offer an alternative.
Textbook References:
Pages 649-658 “Banks and the Money Supply”
Page 821 “Bernanke’s Challenges”
Mar. 23
And I Did Not Even Get a Citation
The new Treasury plan to fix the financial system has some of the characteristics of what Mankiw suggested on his blog last October. But there are also important differences.
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 576-580 “Financial Institutions in the U.S. Economy”
Pages 654-655 “The Financial Crisis of 2008”
Mar. 20
Budget Deficits as a Fraction of GDP
The CBO projects the future of the budget deficit. There’s lots of red ink in our future.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
The Direction of Policy
Alan Blinder argues that Obama is not a socialist. Gary Becker and Kevin Murphy think that Obama’s plan may kill capitalism.
Textbook References:
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 740-742 “Three Key Facts About Economic Fluctuations”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
Mar. 19
Reloading the Weapons of Monetary Policy
A Harvard graduate student offers a way to break the zero interest rate floor.
Textbook References:
Pages 649-658 “Banks and the Money Supply”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
A Primer on Quantitative Easing
The Financial Times offers an explanation of Quantitative Easing.
Textbook References:
Pages 649-658 “Banks and the Money Supply”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Mar. 14
Reading the Tea Leaves on the Budget
Mankiw comments on Obama’s budget proposal, He finds that Obama is serious about climate change but not concerned about budget deficits.
Textbook References:
Chapter 10 “Externalities”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
Mar. 13
The Obama Program
Larry Summers describes the causes of the current crisis, the administration’s response and long-term implications.
Textbook References:
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economics Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
Mar. 11
Did the Fed Cause the Crisis?
Alan Greenspan says no.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Page 821 “Bernanke’s Challenges”
Mar. 9
From the CEA Chair
CEA Chair Christina Romer discusses the lessons from the Great Depression that should guide policy today.
Textbook References:
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Mar. 6
How is the President Doing?
Michael Boskin thinks Obama is too radical. Paul Krugman thinks Obama is dithering. And the Economist thinks Obama has not explained how he is going to pay for everything.
Textbook References:
Pages 4-5 “Principle 1: People Face Trade-Offs”
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Government Can Sometimes Improve Market Outcomes”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Mar. 5
The Latest Mortgage Plan
John Geanakoplos and Susan Koniak argue that the plan to reduce interest payments for troubled mortgages won’t stop the foreclosures.
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 654-655 “The Financial Crisis of 2008”
Mar. 4
4. P(Depression) = .2
Robert Barro argues that there is a 20% chance of a depression.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Mar. 3
CBO on the Stimulus
The Congressional Budget Office estimates that the stimulus plan will have a positive short-run effect but not much long-run effect.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
Feb. 28
What is a Deficit Hawk to do?
Obama’s budget document is titled “A New Era of Responsibility.” Mankiw argues that the budget does not seem to live up to its name.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
Feb. 27
A Speech From the CEA Chair
CEA Chair Christina Romer Defends the Stimulus Bill.
Textbook References:
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
Feb. 26
Which Budget Deficit?
The CBO and the U.S.Treasury have different measures of the cost of TARP, and therefore different measures of the budget deficit.
Textbook References:
Pages 243-248 “The Federal Government”
Pages 654-655 “The Financial Crisis of 2008”
Pages 838-841 “Should the Government Balance Its Budget?”
Feb. 25
Gleaser on the Mortgage Interest Deduction
Ed Gleaser argues that the tax deduction on mortgage interest payments should be limited to loans up to $300,000.
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”
Chapter 12 “The Design of the Tax System”
Pages 609-610 “Market Irrationality”
Pages 654-655 “The Financial Crisis of 2008”
Page 821 “Bernanke’s Challenges”
Feb. 24
The Spending Stimulus Debate
Brad DeLong and Michele Boldrin are on opposite sides of the debate over the stimulus.
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
Banking Fixes
Ricardo Caballero and Jeffrey Sachs offer their views on fixing the banking crisis. Caballero wants the government to promise to buy bank shares five years from now at twice their current price. Sachs wants taxpayers to take over the bad assets in exchange for an amount of equity to be determined later.
Textbook References:
Pages 649-658 “Banks and the Money Supply”
Page 821 “Bernanke’s Challenges”
Feb. 23
Is Macro Policy Overreacting?
Jeffrey Sachs argues that the current macroeconomic policy is courting disaster in the long run.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 581-582 “Some Important Identities”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Pages 838-841 “Should the Government Balance Its Budget?”
Feb. 22
Good Banks Inside of Bad Banks
Susan Woodward and Robert Hall argue that we should create good banks inside of bad banks.
Textbook References:
Pages 649-658 “Banks and the Money Supply”
Page 821 “Bernanke’s Challenges”
Feb. 21
Buiter’s Solution
Willem Buiter argues that we should capitalize new banks rather than help banks with toxic assets.
Textbook References:
Pages 649-658 “Banks and the Money Supply”
Page 821 “Bernanke’s Challenges”
Feb. 20
Loose Money and Politicized Mortgages
Phil Gramm argues that the financial crisis was caused by loose monetary policy and politicians interfering in the mortgage market.
Textbook References:
Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economics Activity”
Pages 654-655 “The Financial Crisis of 2008”
Page 821 “Bernanke’s Challenges”
Feb. 19
Banks vs Holding Companies
John Coates and David Scharfstein argue that TARP money should be sent to banks, not to their holding companies.
Textbook References:
Pages 649-658 “Banks and the Money Supply”
Page 821 “Bernanke’s Challenges”
Feb. 16
Nationalization, or Pre-Privatization?
Is the government nationalizing the financial system?
Textbook References:
Pages 8-10 “Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 654-655 “The Financial Crisis of 2008”
Feb. 13
Irving Fisher
There is a link to a story from The Economist about Irving Fisher. It suggests that Fisher’s ideas, especially about debt deflation, are relevant today.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Pages 674-676 “The Fisher Effect”
Page 821 “Bernanke’s Challenges”
Feb. 9
The Causes of the Crisis
John Taylor explains how the government and the Fed caused the financial crisis.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Pages 657-658 “The Federal Funds Rate”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Feb.8
Christy Romer on Face the Nation
There is a link to a video of Christy’s Romer’s appearance on Face the Nation. She discusses the stimulus plan.
Textbook References:
Pages 649-657 “Banks and the Money Supply”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Feb. 6
Out with the Old, In with the New
Paul Romer argues that we should create new banks with clean balance sheets.
Textbook References:
Pages 649-653 “Banks and the Money Supply”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Feb. 5
The GOP mortgage plan, Con and Pro
Ed Glaeser and John Cochrane discuss the possibility of the government providing low-interest mortgages.
Textbook References:
Pages 576-580 “Financial Institutions in the U.S. Economy”
Pages 654-655 “The Financial Crisis of 2008”
Feb. 3
Lessons from Past Crises
There is a link to an Op-ed for the Wall Street Journal written by Carmen Reinhart and Kenneth Rogoff. They compare the current crisis to previous ones around the world.
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Page 657 “Bank Runs and the Money Supply”
Pages 740-742 “Three Key Facts About Economic Fluctuations”
Jan. 26
Cochrane on Fiscal Stimulus
John Cochrane makes the case against fiscal stimulus. Brad DeLong accuses him of making a “freshman mistake.”
Textbook References:
Pages 654-655 “The Financial Crisis of 2008”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Listen to me Squawk
There is a link to a video of an interview with Mankiw about the current efforts to revive the economy.
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 230-232 “The Difficult Job of Cost-Benefit Analysis”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Jan. 21
Questions for Tim Geithner
There is a link to a New York Times story where seven prominent people ask questions for the nominee for Treasury Secretary.
Textbook References:
Chapter 12 “The Design of the Tax System”
Pages 648-649 “The Federal Reserve System”
Pages 654-655 “The Financial Crisis of 2008”
Jan. 15
A Defense of TARP
There is a link to an editorial by two former chairs of the Council of Economic Advisors. They respond to critics of how the first $350 billion have been spent.
Textbook References:
Page 656 “Problems in Controlling the Money Supply”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Page 821 “Bernanke’s Challenges”
Jan. 13
There is a link to a report by Glen Rudebusch about the unconventional monetary policy that the Fed has employed. It is necessary because the conventional method of cutting interest rates is no longer possible.
Textbook References:
Pages 653-656 “The Fed’s Tools of Monetary Control”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Jan. 8
There is a link to a blog by Eugene Fama and Ken French. Fama discusses the problem of how government injections of equity capital into troubled financial institutions can easily become nothing more than subsidies to debt holders.
Textbook References:
Pages 576-578 “Financial Markets”
Pages 601-603 “The Markets for Insurance”
Page 657 “Bank Runs and the Money Supply”
s
Pages 778-785 “How Monetary Policy Influences Aggregate Demand”
Jan. 5
The Disappearing Money Multiplier
Mankiw presents a graph showing that the money multiplier has fallen below one. That reflects the huge increase in excess reserves that banks hold.
Textbook References:
Pages 651-653 “The Money Multiplier”
Page 656 “Problems in Controlling the Money Supply”
Pages 778-785 “How Monetary Policy Influences Aggregate Demand”
Dec. 31
Open Market Operations in Equities
Roger Farmer suggests that the Fed should buy some stock to stabilize the equities markets in a manner akin to its open market operations in the bond market.
Textbook References:
Pages 576-578 “Financial Markets”
Pages 653-658 “The Fed’s Tools of Monetary Control”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Dec. 31
Open Market Operations in Equities
Roger Farmer suggests that the Fed should buy some stock to stabilize the equities markets in a manner akin to its open market operations in the bond market.
Textbook References:
Pages 576-578 “Financial Markets”
Pages 653-658 “The Fed’s Tools of Monetary Control”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
Dec. 23
A Primer on Quantitative Easing
There is a video that does an excellent job of explaining the Fed’s current strategy.
Textbook References:
Pages 649-658 “Banks and the Money Supply”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Page 821 “Bernanke’s Challenges”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?
