Archive for the ‘Blog posts’ Category
For once, a positive parallel to the 1930s
The original blog post is linked here.
IN THE prelude to the G20 meeting, many commenters, including this newspaper, worried of a repeat of the London Conference of 1933. Franklin Roosevelt is often accused of wrecking it with his refusal to return to the gold standard. The resulting disarray, it is said, deepened the Depression.
Yet one could argue that in its failure to return the world to gold, the 1933 conference was a success. Markets greeted Roosevelt’s July bombshell “enthusiastically”, notes economic historian Allan Meltzer. They correctly anticipated “reflation, rising output, and a vigorous policy of domestic expansion.” As Barry Eichengreen has demonstrated, the gold standard was a monetary straitjacket that transmitted deflation between countries; each country’s recovery is highly correlated with when it abandoned gold.
On this front, I see a parallel (though perhaps a tortured one) with the G20’s decision to boost the IMF’s lending resources from $250 billion to $1 trillion. Read the rest of this entry »
Is America repeating Japanese history?
The original post is linked here.
EARLY in his tenure, Tim Geithner, the treasury secretary, promised that American policymakers would not make the same mistakes Japan did in tackling its financial crisis. But as politics threaten to upend his efforts, Mr Geithner should take a second to consider why Japan made its mistakes.
Japanese officials took too long to commit substantial public money to recapitalising their banks. But it was not because they were ignorant of the dangers or Andrew Mellon acolytes hell-bent on liquidating speculators. Like Mr Geithner, they feared being shot down by voters and politicians furious that taxpayers might bail out overpaid bankers. Read the rest of this entry »
Greenspan had the power: should he have used it?
The original post is linked here.
ALAN GREENSPAN’s defence of the Federal Reserve in the formation of the housing bubble restates a familiar argument—it raised short-term interest rates but long-term interest rates did not follow, and housing is most sensitive to long-term rates. His proof includes the fact that long-term rates were low worldwide, and that many countries had bigger housing bubbles than America. The housing bubble’s source must therefore be global.
I agree with this analysis but I don’t agree that it exonerates the Fed. Read the rest of this entry »
