Economics & Global Affairs

994 Items

Blog Post - Views on the Economy and the World

Let’s Forget about 2% Inflation

| July 29, 2019

The Fed has some reasons for cutting interest rates at its meeting July 31, or subsequently if the US economy weakens. (And there are some good arguments on the other side as well, if growth remains as strong as it has been over the last year.)  But I find less persuasive one argument for easing: a perceived imperative to get inflation up to 2.0% or higher.

Federal Reserve Chairman Ben Bernanke set a 2% target for the US inflation rate in January 2012.  Some other countries had already done the same.  Japan followed suit a year later. Indeed Shinzo Abe’s successful accession to prime minister in late 2012 was predicated on the promise that monetary policy would raise inflation (Japan having previously suffered from negative inflation).

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Analysis & Opinions - Globe and Mail

Central banks should forget about achieving 2 per cent inflation

| July 28, 2019

The United States Federal Reserve has some reasons to cut interest rates at its July 31 meeting, or subsequently if the U.S. economy weakens. (There is also a case for holding rates steady, if growth remains as strong as it has been over the past year.) But one argument for easing is less persuasive: a perceived imperative to get U.S. inflation up to or above 2 per cent.

Massachusetts senator Elizabeth Warren on a campaign stop

AP Photo/Charles Krupa

Analysis & Opinions - The Washington Post

Be Very Skeptical About How Much Revenue Elizabeth Warren’s Wealth Tax Could Generate

| June 28, 2019

Sen. Elizabeth Warren (D-Mass.) has made her proposed 2 percent wealth tax on those worth more than $50 million a central part of her presidential campaign. Emmanuel Saez and Gabriel Zucman, two economists at the University of California at Berkeley, who helped developed the proposal, estimated that it it would rake in $187 billion a year.

Federal Reserve Chairman Jerome Powell (L) speaks at a conference about the Fed's planned interest-rate strategy, June 4, 2019.

Kiichiro Sato (AP)

Analysis & Opinions - The Washington Post

It's Tempting for the Fed to Move Slowly. That Would Be a Grave Error.

| June 04, 2019

The Federal Reserve will over the next several months make monetary policy decisions that are as consequential as any it has made since the financial crisis and Great Recession of 2007-2008. The temptation in a highly uncertain and politicized environment will be to move cautiously. Yet this would be a grave error in the current context, where a recession could be catastrophic and the odds of one beginning in the next year, while still less than 50-50, now appear significant and increasing.

Sen. Marco Rubio, R-Florida, speaks at a Senate Intelligence Committee hearing, January 29, 2019.

Jose Luis Magana

Analysis & Opinions - The Washington Post

What Marco Rubio Gets Wrong - And Right - About the Decline of American Investment

| May 31, 2019

Senator Marco Rubio, R-Florida, has recently claimed that the worrying decline of private investment in the American economy can be attributed to "shareholder capitalism" and "short-termism". In this co-authored op-ed, economic specialists Lawrence H. Summers and Anna Stansbury share their thoughts on whether and why this is the case.

A traditional Iranian bazaar in the city of Kashan

Wikicommons

Analysis & Opinions - The Hill

Can Iran Weather the Trump Storm?

| May 03, 2019

In the past 10 years, oil exports have averaged about $67 billion in Iran. Last year, they dropped by two-thirds, and they are expected to drop below $30 billion this year.  There are reasons to believe that, with appropriate policies, the country can live with this level of oil exports, albeit at a reduced standard of living, and even do itself some good in the long run by reducing its dependence on oil.

Iran has been there before. In 2012, when President Obama ratcheted up U.S. sanctions against Iran, oil exports dropped by 27.5 percent, and GDP fell by 6.2 percent. In 2015, sanctions and the collapse of oil prices further reduced oil exports to $32 billion, a decade-long low, and GDP declined by 1.6 percent. If Iran’s leadership is to successfully resist U.S. demands, it must do more than find ways to evade sanctions. A lot depends on its ability to adopt a plan that reduces the economy’s dependence on oil, while distributing the burden of restructuring equitably across social groups.