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Begin New Search Political Geography United States Author John H. Makin

21. Tipping Point

Author:
John H. Makin
Publication Date:
08-2008
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The annual report of the Bank of International Settlements (BIS)—the central bankers' central bank—which appeared in late June, was somewhat schizophrenic. On the one hand, the BIS called for world interest rates to rise in order to deal with a “clear and present threat” from global inflation while, on the other hand, it warned that the global economy may be close to a “tipping point” into a “slowdown severe enough to transform the current period of rising inflation into a period of falling prices.” The simultaneous rise in oil prices and the fall in yields in government securities occurring as the BIS released this ambivalent statement captured well the tensions inherent in the stagflationary crosscurrents facing the global economy. Against this ominous background, the release of the BIS report coincided with the onset of a global bear market in equities.
Topic:
Economics, Markets, Oil, and Political Economy
Political Geography:
United States

22. More Panic

Author:
John H. Makin
Publication Date:
10-2008
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Over the past several months as central banks and treasuries have struggled to manage a financial panic and avoid or diminish its soon-to-appear devastating impact on the global economy, I have often thought about the efforts of two great economists to understand the lessons of the Great Depression. John Maynard Keynes's monumental General Theory of Employment, Interest and Money, published in 1936, showed how a failure to understand the nature of the demand for money contributed to the Great Depression. “The importance of money essentially flows from being a link between the present and the future,” Keynes said.
Topic:
Economics, Markets, and Political Economy
Political Geography:
United States

23. Print Money and Cut the Payroll Tax

Author:
John H. Makin
Publication Date:
12-2008
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
President-elect Barack Obama faces the most difficult economic challenge confronting an incoming American president since the election of Franklin Delano Roosevelt seventy-six years ago in 1932. When he assumes office on January 20, Obama will need to act decisively with heretofore unprecedented fiscal policy steps, in conjunction with measures by the Federal Reserve to increase the money supply and lower long-term interest rates. All of this must be done to help contain and reverse the accelerating global slowdown by halting the rapidly deepening American recession. We can only hope that other national leaders and central banks will follow suit.
Topic:
Economics, Markets, and Political Economy
Political Geography:
United States and America

24. Fine in 2009 (Not So Great in 2008)

Author:
John H. Makin
Publication Date:
01-2008
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The good news about the problems in the financial sector and the larger economy in the United States emanating from the persistent drop in house prices is that they will eventually end, and the underlying resiliency of the U.S. economy will reemerge. The bad news about these problems is that they are going to continue for some time and get worse before they improve. Efforts to address them so far have been ineffective because they have been aimed at containing a subprime credit crisis, not at containing a rapidly spreading primecredit, solvency crisis that is leading the U.S. economy into recession.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States

25. Why Do Financial Firms Take Too Much Risk?

Author:
John H. Makin
Publication Date:
12-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
It is important at the outset to define the terms “financial firms” and “too much risk.” By “financial firms,” I mean commercial banks, investment banks, brokerages, and insurance companies that solicit and manage funds for the public. By “too much risk,” I mean actions undertaken by managers of financial firms that result in substantial losses for the shareholders (owners) of such firms. On an aggregate level, I call “systemic risks” those that emerge when regulators and policymakers are forced to choose between either reinforcing (with bailouts) the venturesome investing that created the problem or allowing substantial damage to depositors and shareholders in financial firms, and possibly to the economy as a whole.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States

26. One Fix Too Many

Author:
John H. Makin
Publication Date:
11-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Just as Wall Street was celebrating the presumed end of the latest financial crisis by pushing stocks to record highs, proclaiming continued strong earnings growth, and continuing to recite the mantra “slowdown, but no recession,” Treasury Secretary Henry Paulson provided a vivid reminder that the housing and mortgage crisis is not over. On Monday, October 15, while Citibank was reporting that compared with last year's results its third-quarter earnings had fallen by 57 percent, the Treasury's “super-SIV” plan was revealed. It seems that the Goldman Sachs alumni at Treasury—Paulson and his under secretary for domestic finance, Robert Steel—had become concerned that the offbalance- sheet special investment vehicles (SIVs) held by commercial banks might not be financeable. That would mean that not enough investors could be found to provide the short-term financing necessary to sustain SIVs, the repositories of hardto- value securitized mortgages that continue to plague bank balance sheets.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States

27. Global Rebalancing

Author:
John H. Makin
Publication Date:
10-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The global economic and financial picture is changing rapidly. A review of some of the key elements is in order, as the U.S. economy has slowed rapidly and the Federal Reserve has responded aggressively with rate cuts, while the Bank of England's tough policies pushed one of the United Kingdom's largest mortgage lenders, Northern Rock, to the brink of collapse as a bank run on that suddenly beleaguered institution ensued. Meanwhile, Japan, still the world's second-largest economy—though perhaps the least dynamic of the major ones—slipped into negative growth at a 1.2 percent annual rate in the second quarter after having initially reported growth over 2 percent. The rate-boost-obsessed Bank of Japan finally decided to stop raising rates, and, to add to the complexity of the picture, Japan's relatively new prime minister Shinzo Abe resigned, unable to provide the leadership sorely needed in a nation lacking economic and political direction.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States, Japan, United Kingdom, and England

28. The Music Stops

Author:
John H. Makin
Publication Date:
09-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
During a 10:00 a.m. conference call on August 17, 2007, Federal Reserve vice chairman Donald Kohn and New York Federal Reserve president Timothy Geithner were urging Citicorp chief executive Chuck Prince and his fellow big bank CEOs to use the Fed's discount window, which is set up to alleviate liquidity pressures on individual banks or on the banking system as a whole. Prince, the head of the world's largest bank (Or is it the second largest? No one really knows since bank balance sheets are so full of securities that cannot be priced.) may have been wishing that he had not chosen to offer a chillingly clear characterization of the global financial system a little more than five weeks earlier in a Financial Times interview on July 9, three weeks before the global credit markets began to seize up.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States

29. The Band Plays On

Author:
John H. Makin
Publication Date:
08-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
In a July 9 interview in Tokyo with the Financial Times about the surging, liquidity-driven financial sector, Citigroup chief executive Chuck Prince characterized the situation in global financial markets more insightfully than some investors might have wished: “When the music stops, in terms of liquidity, things will get complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing.” Prince elaborated further, saying that (as the article paraphrased it) “the way big Wall Street banks and hedge funds had picked up troubled subprime mortgage lenders was an example of how 'liquidity rushes in' to fill the gap as others spot a buying opportunity.”
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States and Tokyo

30. Why Interest Rates Are Rising

Author:
John H. Makin
Publication Date:
07-2007
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The bond “conundrum” that Alan Greenspan spoke of toward the end of his tenure at the Federal Reserve is disappearing. Chairman Greenspan was drawing attention to unusually low longterm interest rates worldwide on bonds.1 More recently, however, in less than a month interest rates on U.S. ten-year notes have risen by 60 basis points with no change in expected inflation. The shift is all the more unusual because of its abruptness and relative magnitude: in statistical terms, it is a rise of three standard deviations in “real” (inflation-adjusted) rates in a market that has been quiet over the past five years. Moreover, the few “surprise” moves since the tech-stock bubble burst in 2000 have mostly been in a downward direction.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
United States