Marius Gustavson
Articles
The Perils of Monetary Management
Recently the Chinese authorities announced an end to the dollar peg and a move towards a more flexible exchange rate, as commented upon in a previous post. However, there are fears among Chinese officials that this could lead to a wide range of problems, including speculation and hot money inflows, as well as undermining the…
Sound Money Insights from Fed President
Kansas City Fed President Thomas Hoenig is a lone dissenter at the Federal Open Market Committee (FOMC)–the central bank’s main policymaking body. At the June FOMC meeting, for the fourth time in a row, he dissented to the Fed’s statement that economic conditions “are likely to warrant exceptionally low levels of the federal funds rate…
Chinese Currency Reform
The Chinese government announced this weekend that they would move towards a greater degree of flexibility in the exchange rate. As stated by by the People’s Bank of China: “In view of the recent economic situation and financial market developments at home and abroad, and the balance of payments (BOP) situation in China, the People’s…
Greenspan Warns of Fiscal Profligacy
In a Wall Street Journal op-ed, former Fed Chairman Alan Greenspan warns of U.S. fiscal profligacy, in part fuelled by the current low borrowing costs of the government: “Despite the surge in federal debt to the public during the past 18 months—to $8.6 trillion from $5.5 trillion—inflation and long-term interest rates, the typical symptoms of…
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…
A Spanish Banking Crisis in the Making
Spain was hit hard by the financial crisis. Like the U.S. and the UK, Spain experienced high capital inflows and rapidly rising housing prices in the years leading up to the crisis. And like the U.S. and the UK it is now stuck with a struggling banking sector and bloated public finances. Spanish banks have…
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…
Chile Starts Monetary Tightening
Chile has rebounded strongly from the global recession, in spite of the devastating earth quake that hit early in 2010. In response to the financial crisis, the monetary authorities cut its key lending rate from 8.25 per cent in September 2008 all the way down to 0.5 percent in July 2009 where it has stayed…
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 Fed’s Balance Sheet
The Wall Street Journal has created a good graphic illustration displaying the development of the Fed’s balance sheet during the financial crisis. Assets on the balance sheet are currently $2.333 trillion, of which the main part consists of mortgage-backed securities, Fannie and Freddie debt and government securities. Some noteworthy developments: During the first phase of…