When I was in graduate school in the olden days (1960s), Professor Waller hired me as his grader in his money and banking and monetary policy classes. At first, he limited my chores to multiple-choice and true-false questions, but he gradually trusted me with essay questions-following his strict guidelines of course. "Are budget deficits inflationary?" [...]
The talks by our Secretary of State and Secretary of the Treasury with the Chinese about U.S. borrowing have once again created some mushy commentary by the talking heads. They speak in terms of how much U.S. debt China will be willing to buy in the short-term and in the long-term. No one has thought [...]
Last Friday's weak jobs report accelerated discussions of a possible second stimulus package. Will wonders never cease? I agreed that the first stimulus package should've been large and have come soon. We got large and we got soon, if soon is defined by the date of the legislation. Not soon as defined by when it [...]
With The Illusion of Saving as background let me explore a very counterintuitive proposition: That the growth in the budget deficit might indirectly strengthen the dollar. It might do so by requiring a larger capital inflow (and thus a larger current account deficit) to make up for the shrinkage in domestic saving relative to investment [...]
A substantial increase in the personal saving rate was announced last Friday to much fanfare. I hate to be a killjoy, but it was all an illusion. The national saving rate is composed of the personal saving rate, the business saving rate, and the government saving rate. The personal saving rate is disposable income minus [...]
In my opinion, the average watcher of financial cable TV and reader of the financial press can be forgiven some confusion. Experts are found at opposite extremes of many issues. For example, *We need more spending, but budget deficits are bad. *Debt is bad, but we are adding debt at a record pace. *Consumers and [...]
More Stimulus May Not Be Worth It In my last post I made a brief comparison of the TARP and a stimulus package. My principal point was that most TARP activities by the government represent investments that can be sold later under better circumstances and may even turn a profit for taxpayers. Another stimulus [...]