Fiscal Policy
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Greek Government Junk Bonds
The Greek crisis rolls on. This week yields on Greek government bonds rose by almost 3/4 of a percentage point to 9.06 percent as Moody’s–a rating agency–downgraded its debt to junk bond status citing “substantial” risks in connection with the three-year Greek program for economic reform. Furthermore, being downgraded to junk bond status also means…
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“China May Have Dug a Financial Hole”
“In late 2008, with the financial crisis rippling through the global economy, China’s leaders embarked on a two-year, $586 billion spending program to try to stave off a recession and keep the Chinese economy growing. Unlike in the United States — where President Obama’s large stimulus plan became the subject of protracted congressional wrangling and…
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European Weakness Is Fuelling U.S. Profligacy
The European debt crisis has demonstrated the painful costs of fiscal profligacy and short-sighted Keynesian stimulus. In the words of financial historian Niall Ferguson, “there is no such thing as a Keynesian free lunch,” warning that a “greek crisis” could come to America. Washington Post columnist Robert J. Samuelson says the European crisis should be…
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“AIG Repayment Prospects Fade”
“Taxpayers have lent AIG $132.6 billion, but the probability that the government would recoup all of those funds fell even further this week after the insurer failed to complete a crucial asset sale. AIG had agreed in March to sell Asian life insurance unit AIA to Prudential PLC for $35.5 billion, but AIG terminated that…
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The Return of Financial Repression?
Financial repression was used extensively by governments in the post-war period and is still common today in emerging markets such as China. As Cato scholar James Dorn writes in a recently posted commentary, “Financial repression is a hallmark of China’s market socialism.” Given developments in the wake of the financial crisis, the big question is…
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The Euro – a Greek Drachma in Disguise
The Euro keeps tumbling as international investors are loosing faith in the Eurozone. The currency has so far fallen 14 percent against the dollar this year. There is fear that contagion could trigger “Greek” debt crises among other EU countries with weakening fiscal positions, and that European banks could realize substantial losses as a result.…
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Nouriel Roubini – Return to the Abyss
“If fiscal imbalances are not addressed through spending cuts and revenue increases, only two options remain: inflation for countries that borrow in their own currency and can monetize their deficits; or default for countries that borrow in a foreign currency or can’t print their own. Thus, the recent events in Greece, Portugal, Ireland, Italy, and…
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Roche – Not the way to solve the debt crisis
“the world is facing a major sovereign debt crisis that will squeeze economic growth and possibly deliver a series of debt default events down the road. Sovereign debt issuance is now sucking up 25 per cent of available world savings and that will squeeze the ability of the private sector to invest in productive opportunities.”…
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“The Relationship Between Inflation and the Budget Deficit in Turkey”
“For Turkey, Metin (1995) analyzed inflation using a general framework of sectoral relationships and found that fiscal expansion was a determining factor for inflation. The excess demand for money affected inflation positively, but only in the short run. On the other hand, imported inflation, the excess demand for goods, and the excess demand for assets…
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Carmen Reinhart on Debt Crises
University of Maryland economist Carmen Reinhart recently published a book with co-researcher Kennet Rogoff presenting several hundred years of data on financial crises. The title This Time Is Different alludes to the mentality that often develops during unsustainable booms–namely the belief that the old rules of valution does not apply anymore because of some technological…
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Greek Government Junk Bonds
The Greek crisis rolls on. This week yields on Greek government bonds rose by almost 3/4 of a percentage point to 9.06 percent as Moody’s–a rating agency–downgraded its debt to junk bond status citing “substantial” risks in connection with the three-year Greek program for economic reform. Furthermore, being downgraded to junk bond status also means…
-
“China May Have Dug a Financial Hole”
“In late 2008, with the financial crisis rippling through the global economy, China’s leaders embarked on a two-year, $586 billion spending program to try to stave off a recession and keep the Chinese economy growing. Unlike in the United States — where President Obama’s large stimulus plan became the subject of protracted congressional wrangling and…
-
European Weakness Is Fuelling U.S. Profligacy
The European debt crisis has demonstrated the painful costs of fiscal profligacy and short-sighted Keynesian stimulus. In the words of financial historian Niall Ferguson, “there is no such thing as a Keynesian free lunch,” warning that a “greek crisis” could come to America. Washington Post columnist Robert J. Samuelson says the European crisis should be…
-
“AIG Repayment Prospects Fade”
“Taxpayers have lent AIG $132.6 billion, but the probability that the government would recoup all of those funds fell even further this week after the insurer failed to complete a crucial asset sale. AIG had agreed in March to sell Asian life insurance unit AIA to Prudential PLC for $35.5 billion, but AIG terminated that…
-
The Return of Financial Repression?
Financial repression was used extensively by governments in the post-war period and is still common today in emerging markets such as China. As Cato scholar James Dorn writes in a recently posted commentary, “Financial repression is a hallmark of China’s market socialism.” Given developments in the wake of the financial crisis, the big question is…
-
The Euro – a Greek Drachma in Disguise
The Euro keeps tumbling as international investors are loosing faith in the Eurozone. The currency has so far fallen 14 percent against the dollar this year. There is fear that contagion could trigger “Greek” debt crises among other EU countries with weakening fiscal positions, and that European banks could realize substantial losses as a result.…
-
Nouriel Roubini – Return to the Abyss
“If fiscal imbalances are not addressed through spending cuts and revenue increases, only two options remain: inflation for countries that borrow in their own currency and can monetize their deficits; or default for countries that borrow in a foreign currency or can’t print their own. Thus, the recent events in Greece, Portugal, Ireland, Italy, and…
-
Roche – Not the way to solve the debt crisis
“the world is facing a major sovereign debt crisis that will squeeze economic growth and possibly deliver a series of debt default events down the road. Sovereign debt issuance is now sucking up 25 per cent of available world savings and that will squeeze the ability of the private sector to invest in productive opportunities.”…
-
“The Relationship Between Inflation and the Budget Deficit in Turkey”
“For Turkey, Metin (1995) analyzed inflation using a general framework of sectoral relationships and found that fiscal expansion was a determining factor for inflation. The excess demand for money affected inflation positively, but only in the short run. On the other hand, imported inflation, the excess demand for goods, and the excess demand for assets…
-
Carmen Reinhart on Debt Crises
University of Maryland economist Carmen Reinhart recently published a book with co-researcher Kennet Rogoff presenting several hundred years of data on financial crises. The title This Time Is Different alludes to the mentality that often develops during unsustainable booms–namely the belief that the old rules of valution does not apply anymore because of some technological…
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