Showing posts for "Macroeconomics"
The most recent Pew Survey on European attitudes (summary table below) shows that support for the European integration project is dropping. My colleagues at CFR are far more able than I am to address the broader political ramifications of this shift. A few points though on the link between economic growth, public opinion, and support for the European reform agenda.
Jaret Seiberg has an excellent summary of Ben Bernanke’s speech and Q&A today on financial sector regulation and reform. This follows on Dan Tarullo’s speech Friday that highlighted the need for additional capital aginst short-term wholesale funding, an earlier Jeremy Stein discussion on liquidity regulation and the value of price-based regulation (rather than quantitiative limits on bank size favored by some in Congress), and similar comments by the OCC. We now have as clear a signal as possible that U.S. regulators are ready, in Seiberg’s words, “to go beyond Basel 3 to impose to additional capital requirements on the biggest banks…[using]…a combination of a more restrictive leverage limit, a capital surcharge based on reliance on short-term debt, and a long-term debt requirement.” It also underscores the divergent approaches toward reform in the U.S. and Europe, where, against the backdrop of weak growth and credit constraints, the pressures appear to be leading to a slower, more bank-friendly path.
House Republicans want to tie an increase in the debt ceiling due in September/October to a concrete process for corporate tax reform, as reported here and here. One idea is to couple a short-term debt limit increase to a mandate for the House to pass a tax-reform plan. The debt limit would increase further when the House passes its plan, and again when the Senate passes a plan.
Ken Rogoff and Carmen Reinhart (R&R) have a good piece in the Financial Times today, “Austerity is not the only answer to a debt problem.” This, along with other pieces (for example, here and here), is moving the debate over their work in the right direction. On the one hand, recognition that debt still matters, and too much debt (whether the result of or the cause of low growth) is damaging to our politics and our economics. On the other hand, rejection of the idea that there is a universal growth “cliff” when debt exceeds 90 percent of GDP that is at work across countries (an idea their earlier work promoted, unfortunately). R&R go on to argue that while fixing our debt problem is a central challenge, that doesn’t mean we need aggressive austerity today (though additional stimulus needs to be carefully decided on).
The reasons why employment has lagged in the recovery remains a central challenge for macro policymakers, influencing the fiscal debate as well as figuring prominently in Federal Reserve justification for its current unorthodox policies. My colleague Dinah Walker points out a growing body of evidence that the problem of long-term unemployment is at the heart of the puzzle.
Last week, I wrote on the ECB’s meeting and the case for easing credit conditions in the periphery (a recommendation that they didn’t heed, though pressure to act is building). I ignored the upcoming Bank of Japan (BoJ) meeting. My wife’s comment the next day summed it up well: “you blogged on the wrong central bank.”
Cypriots protest the plan to seize money from depositors as a part of a bailout package. (Yorgos Karahalis/Reuters)
It now appears that the Cypriot Parliament will reject the government’s amended plan for haircutting deposits. The revised proposal, which reportedly exempted depositors under €20,ooo, satisfies almost no one–Cypriot depositors, the Russians, nor European creditors (including their increasingly agitated banking regulators). The government looks ready to try and renegotiate the bailout, but no creditors have stepped up to fill the hole left by the failure of the tax. There may be pressure on Cyprus for additional fiscal measures, but it’s hard to see that as confidence boosting given the damaging growth effects we have seen in the periphery following aggressive fiscal cutting.
The lawyers who understand the issues much better than me are excited (here and here) by the latest order from the NY Court of Appeals in Argentina’s long-running battle with holdout creditors. After a hearing last Wednesday that by most accounts went extremely badly for Argentina (it’s probably not the best strategy to ask a court to overturn a ruling because you plan to ignore it, making it ineffectual), the Court issued an order giving Argentina a chance to propose alternative terms to its creditors. By March 29, Argentina is ordered to provide “the precise terms of any alternative payment formula and schedule to which it is prepared to commit.”
Does today feel different? Did the earth shake? Packing your lunch rather than buy out?
Welcome to the sequester.
Chris Krueger of Guggenheim Securities today has an excellent piece on how the sequester might be resolved. A few takeaways:
Macro and Markets examines the forces influencing the global economy, macroeconomic policies, and financial markets.
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