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612. Monetary Policy and Asset Prices Revisited
- Author:
- Donald L. Kohn
- Publication Date:
- 01-2009
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- We are in the midst of a global financial crisis that is now weighing heavily on economies around the world. Although the outlook remains extremely uncertain, both the fragility of the financial system and the weakness in real activity seem likely to persist for a while. To promote maximum sustainable economic growth and price stability, the Federal Reserve has responded to this crisis by easing monetary policy markedly, and we have greatly expanded our liquidity facilities to keep credit flowing when private lenders have become reluctant or unable to do so. Other central banks have also cut policy rates significantly and expanded their lending. In addition, the federal government and governments around the world have taken extraordinary actions to strengthen financial systems to preserve the ability of households and businesses to borrow and spend.
- Topic:
- Democratization, Economics, International Trade and Finance, Markets, and Privatization
- Political Geography:
- United States
613. Asset Prices and Monetary Policy
- Author:
- Otmar Issing
- Publication Date:
- 01-2009
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Beyond dealing with the immediate problems, any crisis raises questions of why and how we got there and what lessons should be drawn to avoid a repetition of past developments—without laying the ground for a new disaster. This line of inquiry also applies to the current crisis in financial markets. Even during the heaviest turbulence a discussion has started on obvious deficits in the system of regulation and supervision and on badly needed improvements. In this article, I concentrate on monetary policy but that does not mean regulatory measures are irrelevant in this context, quite the opposite.
- Topic:
- Democratization, Economics, International Trade and Finance, Markets, and Privatization
- Political Geography:
- United States
614. What Lessons Can We Learn from the Boom and Turmoil?
- Author:
- Jeffrey M. Lacker
- Publication Date:
- 01-2009
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The current financial crisis undoubtedly will inspire a great deal of research in the years ahead, and it may take some time before anything like a professional consensus emerges on causes and consequences. After all, it took several decades to document the causes of the Great Depression, and recent research continues to provide new perspectives. Nonetheless, I believe the central questions that are likely to occupy researchers are plainly in view, and some tentative lessons have emerged already. And in any event, legislators are not likely to await the fruits of future scholarship.
- Topic:
- Democratization, Economics, International Trade and Finance, Markets, Privatization, and Financial Crisis
- Political Geography:
- United States
615. Financial Innovation, Regulation, and Reform
- Author:
- Charles W. Calomiris
- Publication Date:
- 01-2009
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Financial innovations often respond to regulation by sidestepping regulatory restrictions that would otherwise limit activities in which people wish to engage. Securitization of loans (e.g., credit card receivables, or subprime residential mortgages) is often portrayed, correctly, as having arisen in part as a means of “arbitraging” regulatory capital requirements by booking assets off the balance sheets of regulated banks. Originators of the loans were able to maintain lower equity capital against those loans than they otherwise would have needed to maintain if the loans had been placed on their balance sheet.
- Topic:
- Democratization, Economics, International Trade and Finance, Markets, and Privatization
- Political Geography:
- United States
616. Bad Rules Produce Bad Outcomes: Underlying Public-Policy Causes of the U.S. Financial Crisis
- Author:
- Bert Ely
- Publication Date:
- 01-2009
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The current global financial crisis is the worst economic crisis since the Great Depression, with no end in sight. Already, much political finger pointing has occurred, with most of those fingers pointed at supposedly greedy bankers, investors, and hedge-fund managers as well as the financial deregulation of recent decades. Governments everywhere are rushing to enact new regulatory protections to pre- vent another crisis of this magnitude. Yet if history is any guide, these new regulations will set up the global economy for yet another financial crisis, perhaps worse than the present one, or create regulatory straitjackets that will greatly impede economic growth.
- Topic:
- Democratization, Economics, International Trade and Finance, Markets, and Privatization
- Political Geography:
- United States
617. Federal Reserve Policy and the Housing Bubble
- Author:
- Lawrence H. White
- Publication Date:
- 01-2009
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The U.S. housing bubble and the fallout from its bursting are not the results of a laissez-faire monetary and financial system. They happened in an unanchored government fiat monetary system with a restricted financial system.
- Topic:
- Democratization, Economics, International Trade and Finance, Markets, and Privatization
- Political Geography:
- United States
618. The Case for Policy Sustainability
- Author:
- Wolfgang Münchau
- Publication Date:
- 01-2009
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Should we worry about moral hazard while the house is burning? The discussion about economic policy is full of biblical metaphors, the language of water and floods, and of fire extinction during crises. Metaphors, even when not mixed, are often obstacles to the clarity of thought. That is clearly the case with the metaphor of moral hazard in trying to understand the current financial crisis. Instead of focusing on moral hazard, I prefer to use the concept of policy sustainability to argue that sustainable monetary, fiscal, and regulatory policies are essential for lasting prosperity.
- Topic:
- Democratization, Economics, International Trade and Finance, Markets, and Privatization
- Political Geography:
- United States
619. Moral Hazard in the Policy Response to the 2008 Financial Market Meltdown
- Author:
- Andrew A. Samwick
- Publication Date:
- 01-2009
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The Cato Institute is the ideal place to draw lessons from the sub- prime crisis. The organization's mission focuses on the interaction of public policies with free markets and limited government. Even the most ardent believer in free markets must fully understand that individual liberty implies neither the nonexistence nor the indifference of government to economic affairs. Individuals live in freedom and peace when public policies are crafted in accordance with well-established rules and implemented with an eye toward effectiveness, not expansion. In the halls of government, we need sobriety and vigilance rather than apathy or empire building.
- Topic:
- Democratization, Economics, International Trade and Finance, Markets, and Privatization
- Political Geography:
- United States
620. Moral Hazard and the Financial Crisis
- Author:
- Kevin Dowd
- Publication Date:
- 01-2009
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- There is no denying that the current financial crisis has delivered a major seismic shock to the policy landscape. In country after country, we see governments panicked into knee-jerk responses and throwing their policy manuals overboard: bailouts and nationalizations on an unprecedented scale, fiscal prudence thrown to the winds, and the return of no-holds-barred Keynesianism. Lurid stories of the excesses of “free” competition—of greedy bankers walking away with hundreds of millions whilst taxpayers bail their institutions out, of competitive pressure to pay stratospheric bonuses and the like—are grist to the mill of those who tell us that “free markets have failed” and that what we need now is bigger government. To quote just one writer out of many others saying much the same, “the pendulum will swing—and should swing—towards an enhanced role for government in saving the market system from its excesses and inadequacies” (Summers 2008). Free markets have been tried and failed, so the argument goes, now we need more regulation and more active macroeconomic management.
- Topic:
- Democratization, Economics, International Trade and Finance, Markets, and Privatization
- Political Geography:
- United States