The following is running as an op ed piece in today’s Dallas Morning News: A huge fiscal cliff looms at year-end when massive tax increases, equal to about 3 ½ percent of GDP, and large and arbitrary spending cuts take effect automatically if Congress doesn’t do something before then. You might say the question is [...]
Ye'gast! During the 1980s when I ran the Baltimore Branch of the Richmond Fed, I also taught a Money and Banking course in the graduate evening program of The Johns Hopkins University. As in all such courses, I showed the students how banks create money when they make new loans and how the Fed [...]
In my previous piece I focused on a simple trap that we all fall into when we count what happens (jobs) but forget to count what doesn't happen (other jobs). We forget to net it out. In this piece, also mercifully short, I hope, I would like to make the case that "job creation" is [...]
Not Necessarily the Same Thing Once again I'm going to be brave and state the obvious and run the risk of a "Duh" response. While my point is embarrassingly obvious, I haven't heard anyone make it during the debate on the recently passed stimulus package.
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 [...]
As if we are conducting a lab experiment, we suddenly have the sequels to the two major government programs to deal with the financial crisis and mitigate the real economic fallout. We still, however, don't know the devil in the details, but, while we await more information, let me make a couple of points about [...]
When recession becomes an issue, as it now is, the remedy involves increasing total spending, or aggregate demand, to match the capacity of the economy to produce goods and services at full employment. One way to view aggregate demand is by its spending components such as consumption, investment, and government spending. This "Keynesian approach facilitates [...]
The word "Keynesian" is usually used pejoratively in the crowd I hang around with, intellectually speaking. It connotes to them, too much reliance on the government to stabilize the economy, leading perhaps to too much government over time, and less individual liberty that goes with that territory.