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3851. What Is Tight Money?

Author:
John H. Makin
Publication Date:
03-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Concerns over deflation have dominated monetary policy during the past several years in Japan, and also in the United States as recently as 2003. As a result, the Bank of Japan and the Federal Reserve have been highly accommodative. In Japan, this took the form of a zero interest rate. In the U.S. context, it was manifest in rates at well below normal yardsticks, such as nominal GDP growth that would call for U.S. policy interest rates close to 6 percent rather than at current levels below 5 percent. Unusually accommodative monetary policies and the substantial liquidity flows they have entailed have boosted asset values and compressed risk spreads. Consequently, demand growth has persisted at high levels for long enough to cause modestly higher inflation. The time has come for tighter monetary policy, and central banks in the United States, Europe, and Japan have all begun to apply it.
Topic:
Economics and International Trade and Finance
Political Geography:
United States, Japan, Europe, Israel, and East Asia

3852. Japan Gingerly Exits Deflation

Author:
John H. Makin
Publication Date:
02-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
In August 2000, with the Japanese growth rate holding above 2 percent, the Bank of Japan decided to initiate an end to the zero interest rate policy that it had initiated in March 1999. This step was taken despite the existence of modest deflation, indicated by readings of minus 0.2 to minus 0.5 percent on various measures of inflation. At that time, no central bank had thought seriously about deflation as a threat since the depression of the 1930s.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
Japan, Israel, and East Asia

3853. Bond Market Bubble?

Author:
John H. Makin
Publication Date:
01-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
On Tuesday, January 18, the yield on fifty-year inflation-protected U.K. government bonds (what the British call "indexed-linked gilts") dropped to 0.38 percent, about one-seventh the historical average of just over 2.6 percent for such debt instruments. Just a few months earlier, that yield had been over 1 percent, still extraordinarily low by historical standards, and especially low in an economy that has experienced fifty-three consecutive quarters of positive growth. A yield drop from 1 percent to 0.38 percent on a fifty-year bond corresponds to a 30 percent rise in its price over a period of just three months. That is an annual return of over 100 percent, much higher than the 13 percent annual increase in U.S. house prices at midyear and the 20 to 30 percent gains seen in the stock market before the March 2000 crash. The asset bubble has spread to long-term government bonds, especially those with inflation protection. What is going on here?
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
United States, United Kingdom, and Europe

3854. Where Preparation Meets Opportunity: The Future of Freedom

Author:
Charles Murray
Publication Date:
12-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The twenty-fifth anniversary of the Atlas Foundation provided Charles Murray with an occasion to consider the influence of classical liberal ideas on policy and also to speculate on what lies ahead.
Topic:
Development, Economics, and Government

3855. An Appreciation: Milton Friedman, 1912-2006

Author:
Allan H. Meltzer
Publication Date:
11-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
On November 16, eminent economist Milton Friedman passed away. Friedman made unparalleled contributions to free-market economics, demonstrating in Capitalism and Freedom the close relationship of free enterprise to political liberty. His philosophy has been extraordinarily influential regarding social and economic policies in governments around the world.
Topic:
Development, Economics, Markets, and Politics

3856. Why Poverty Doesn't Rate

Author:
Nicholas Eberstadt
Publication Date:
09-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Without a clearer understanding of the serious flaws in the government's official measure of poverty, most initiatives aimed at reducing poverty in the United States will be needlessly ineffective. New measures that take into account contemporary lifestyles and the dynamic U.S. economy will be more useful in helping the poor.
Topic:
Economics, Government, and Poverty
Political Geography:
United States

3857. Two Cheers for Welfare Reform

Author:
Douglas J. Besharov
Publication Date:
08-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
It has been nearly ten years since President Bill Clinton signed the landmark 1996 welfare reform law. The anniversary has been the occasion for various news stories and opinion pieces, most of them praising the law's success in reducing welfare dependency. And it is true: welfare caseloads have fallen an astounding 60 percent since reform efforts began. But even as a strong supporter of welfare reform, I find it difficult to muster unqualified enthusiasm for the law and how it has been implemented.
Topic:
Civil Society, Development, Economics, and Human Welfare

3858. XBRL and U.S. Financial Market Leadership

Author:
Peter J. Wallison
Publication Date:
03-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
In December, the London Stock Exchange celebrated a record year for foreign company new issues, with 129 new listings by companies from twenty-nine different countries. In contrast, the New York Stock Exchange registered a net gain of six foreign listings (a gain of nineteen and a loss of thirteen) in 2005, and NASDAQ gained a net of fourteen. According to a press report by the London Stock Exchange on its success, “about 38 per cent of the international companies surveyed said they had considered floating in the United States. Of those, 90 per cent said the onerous demands of the new Sarbanes-Oxley corporate governance law had made London listing more attractive.” By now, it is well-known what harm Sarbanes-Oxley has done to the attractiveness of the U.S. securities markets, but what is not well- known is that the lack of resources available to a relatively obscure accounting group—engaged in the development of a technical-sounding disclosure system called XBRL—may also threaten not only the current primacy of the U.S. financial markets, but also the future competitiveness of U.S. companies.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
United States, New York, and London

3859. Striking a Balance: Drug Labeling and the FDA

Author:
John E. Calfee
Publication Date:
02-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
With the fourth Vioxx lawsuit currently under way, a fourth jury is in the thick of trying to determine whether Merck is indeed liable for any injuries that may or may not have arisen from the use of its blockbuster arthritis drug. The trials have highlighted bad tort bar science in all its dubious glory—from questionable pathology reports to seriously exaggerated claims about the dangers of Vioxx—but they also raise a deeper issue. Every drug presents patients and doctors with a trade-off between benefits and risks. But how can physicians and drug companies strike a balance in the age of a hyperactive litigation? Last week, the Food and Drug Administration (FDA) weighed in on that question when it published a long-awaited rule to simplify drug labels. Up to now, extensive, cringe-inducing lists of every imaginable side effect of a medicine were a drug company's best hope of immunizing itself from lawsuits down the road. The FDA wants to simplify those impenetrable reams of fine print by preempting state-court lawsuits claiming that an FDA-approved label failed to warn patients of a potential danger.
Topic:
Economics, Government, Health, and Human Welfare

3860. A Plan to Replace the Welfare State

Author:
Charles Murray
Publication Date:
04-2006
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
This much is certain: the welfare state as we know it cannot survive. No serious student of entitlements thinks that we can let federal spending on Social Security, Medicare, and Medicaid rise from its current 9 percent of GDP to the 28 percent of GDP that it will consume in 2050 if past growth rates continue. The problems facing transfer programs for the poor are less dramatic but, in the long term, no less daunting; the falling value of a strong back and the rising value of brains will eventually create a class society making a mockery of America's ideals unless we come up with some- thing more creative than anything that the cur- rent welfare system has to offer. So major change is inevitable—and Congress seems utterly unwilling to face up to it. Witness the Social Security debate of last year, a case study in political timidity. Like it or not, we have several years to think before Congress can no longer postpone action. Let's use this time to start thinking outside the narrow proposals for benefit cuts and tax increases that will be Congress's path of least resistance.
Topic:
Civil Society, Economics, Health, and Human Welfare
Political Geography:
America