Benn Steil


A graphical take on geoeconomic issues, with links to the news and expert commentary.

Treasuries vs. GSEs

by Monday, August 31, 2009


This chart shows the yearly change in purchases of securities backed by U.S. government-sponsored enterprises (GSEs) and in securities issued by the U.S. Treasury. In late 2008 and early 2009, U.S. households and the rest of the world began selling GSE-backed securities, such as those issued by Fannie Mae and Freddie Mac, and began purchasing more Treasury securities, which are considered lower-risk. American banks, however, moved in the opposite direction, increasing their purchases of GSE-backed securities. This suggests a growing appetite for risk in the banking sector. Read more »


by Monday, August 24, 2009


This chart plots oil prices against Iran’s estimated import bill “break-even” oil price — the price below which Iran either had, or would have had, to find sources of hard currency other than oil exports, which constitute about 85% of its total exports, to finance its imports in a given period. From 1998 to mid-2008, rising oil revenues enabled Iran’s government to enact programs and subsidies aimed at consolidating popular support and preventing social unrest. But the steep decline in oil prices in the second half of 2008 significantly curtailed the regime’s ability to finance these programs. As the chart shows, oil prices dropped below Iran’s break-even point in late 2008, at which time President Ahmadinejad proposed that government energy subsidies be canceled, a move that met resistance in Iran’s parliament. However, oil prices have been rising in recent months, reducing the pressure on Iran’s government to make further unpopular subsidy cuts. Rising oil prices may be critical to President Ahmadinejad as he struggles to reconstruct a foundation of popular support. Read more »

Lender of Last Resort

by Thursday, August 6, 2009


The U.S. and IMF bailout of Mexico in 1994 is often cited as a textbook example of a successful financial rescue. The economy stabilized allowing Mexico to pay back most of its loans in less than 2 years. In response to the current crisis the Fed took on the role of global dollar lender of last resort by lending to foreign, primarily European, central banks. These loans were paid back more quickly than Mexico’s. Read more »

Commercial Paper

by Tuesday, August 4, 2009


The size of the market for commercial paper in the U.S. has fallen dramatically since its peak in July 2007. After the disruptions of the Asset-Backed Commercial Paper (ABCP) crisis in August 2007 and the Lehman bankruptcy, the Federal Reserve created a commercial paper funding facility to restore liquidity. However the market for commercial paper has continued to shrink in 2009 straining financial intermediaries who have relied on the market for funding. Read more »