stimulus-crisis

Buy American protectionism. The stimulus plan passed the house with the Buy American clause. It looks like political will is behind it. Obama's transparency plan - listing the spending on a web site - seems to me to strengthen these protectionist provisions. I think the American people would cringe at the site of Japanese or Chinese steel purchased with "their stimulus money" while steel plants in the US are going under. The demagogues in media and the parties would have a field-day with that just in time for midterm elections. What's more all the Americans I know have have never really caught on to international trade thing, most think the WTO has black helicopters.





White House reviewing Buy American measure: Gibbs | Reuters

The Obama administration is still mulling its position on Buy American steel provisions approved this week by the House of Representatives and that have caused concern among trading partners, a White House spokesman said on Friday.

"The administration is reviewing those provisions as part of the recovery plan, and that review is continuing," White House spokesman Robert Gibbs told reporters.

White House reviewing 'Buy American' plan - Forbes.com

Vice President Joe Biden told CNBC on Thursday he believed
it was legitimate to have some portions of "Buy American" in
the stimulus plan and disagreed with those who said it was a
harbinger of protectionism.

The article goes on to mention government procurement and WTO legislation. Call it steel two.

A Multi-Pronged Bank Plan - washingtonpost.com

But Geithner told lawmakers this month that to address the current crisis, a government "bad bank" would be "enormously complicated to get right," and he raised concerns about its cost.

The scope of the toxic asset problem has reached $2 trillion, by the conservative estimates of banking analysts. The Treasury Department, however, has only about $320 billion left in the rescue program.

Geithner and other senior members of Obama's economic team are unlikely to pin their hopes on a single solution such as the Resolution Trust Corp. to solve the worsening crisis, sources said. Instead they prefer a more nuanced approach so they can apply specific fixes tailored to the host of problems facing the financial system.

Why they won't create a bad bank or buy up the toxic assets as first suggested for TARP. There they go, oh so clever with their nuanced approach.
Some may argue that a nuanced approach to finance got us in this pickle.

why not a bad bank. Or toxic asset buy-up plan

class four

class four


The Federal Reserve in the new media, and other viral sensations.

February 17 2007

Ron Paul and Bernake. Ron Paul is very critical of the federal reserve. He is harshly critical of the the Fed's core functions and stated purpose, monetary policy. One has to wonder how useful such criticism in the regular meeting of the House committee on Financial Services.

Results:

It made Ron Paul very popular on YouTube and that's good for his campaign. (Often posted with poppy titles such as 'Ron Paul gives it to the Fed')

here is a viral version from YouTube you can find the full from CSpan



http://www.youtube.com/watch?v=A4kxTkhwR_Q&NR=1



below is the full clip from cspan, as the Ron Paul poster usually cut off the best part, Bernanke's response.

http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=196669-1&showVid=true


<<object width='365' height='340'><param name='movie' value='http://www.c-spanarchives.org/flash/cspanPlayer.swf?pid=196669-1&autoplay=0'></param><param name='allowFullScreen' value='true'></param><embed src='http://www.c-spanarchives.org/flash/cspanPlayer.swf?pid=196669-1&autoplay=0' type='application/x-shockwave-flash' allowfullscreen='true' width='365' height='340'></embed></object>>


U.S. Economic Outlook

Product ID:	196669-1
Format:	House Committee Financial Services
Last Airing:	02/17/2007
Event Date:	02/15/2007
Length:	3 hours, 48 minutes
Location:	Washington, District of Columbia

House Financial Services Committee holds a hearing on the state of the economy, the labor market, and the conduct of monetary policy. Chairman Bernanke testified about the state of the economy, inflationary pressures, and future of interest rates

---------------------

Here is Ron Paul on Mad Money. They talk about some issues. Do you think they are in agreement? What was Cramer asking for in his clip?-- cuts. Do you think Ron Paul wants the same thing

http://www.youtube.com/watch?v=Nq7Li1MOF2Y

<<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/Nq7Li1MOF2Y&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/Nq7Li1MOF2Y&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>>

Financial Services

02/17/2007 10:02:39	02/17/2007 13:35:34	C-SPAN 1
02/17/2007 01:03:17	02/17/2007 04:35:44	C-SPAN 2
02/15/2007 22:12:19	02/16/2007 01:45:39	C-SPAN 2
02/15/2007 10:00:20	02/15/2007 13:49:08	C-SPAN 3

indicates a live airing

indicates a future airing

Name	Title	Org.	Dept.	Party
Bernanke, Ben S.	Chairman	Federal Reserve	Board of Governors	-
Frank, Barney	U.S. Representative	-	-	D-MA

Product ID:	200536-1
Format:	Congressional News Conference
Last Airing:	08/23/2007
Event Date:	08/21/2007
Length:	20 minutes
Location:	Washington, District of Columbia

Senator Dodd spoke to the press following a meeting with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson to discuss the recent volatility in the financial markets and the broader implications for the U.S. economy.

http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=200536-1

Product ID:	201544-1
Format:	Forum
Last Airing:	10/17/2007
Event Date:	10/15/2007
Length:	1 hour
Location:	New York, New York

Chairman Bernanke spoke about U.S. economic policy and challenges facing the Federal Reserve. He warned that the instability in the housing and mortgage industries, lack of confidence caused by over-extension of sub prime loans, and the past summer’s credit crisis remained a “significant drag” on the economy.

http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=201544-1

SEPTEMBER 20, 2007 C-SPAN

http://www.youtube.com/watch?v=jgnfxtrAFJQ



Viral videos with Peter Schiff and his predictions.

http://finance.yahoo.com/tech-ticker/article/134633/%27Crisis-Only-Just-Beginning%27-Right-About-the-Crash-Peter-Schiff-Sees-More-Pain-Ahead?tickers=^dji,^gspc,^ixic,SPY,DIA,QQQQ,GLD

------------


Visual guide to the crisis.

http://blog.mint.com/blog/finance-core/a-visual-guide-to-the-financial-crisis/


the year we learned what a cdo is



If this was the year that many readers — not to mention financial reporters — learned what C.D.O., M.B.S. and SIV stood for, 2008 could be the year of C.D.S. and C.L.O. (For those who came in late, those abbreviations from 2007 are shorthand for collateralized debt obligations, mortgage-backed securities and structured investment vehicles. The new ones are credit default swaps and collateralized loan obligations — a special kind of C.D.O. backed by corporate loans.)



http://www.nytimes.com/2007/12/28/business/28norris.html?scp=3&sq=year%20we%20learned%20about%20cdo&st=cse



class four

http://www.nytimes.com/2008/04/27/magazine/27Credit-t.html?_r=2&hp=&pagewanted=all

Class 3

Class 3


Review of class 2

In the summer of 2007, it seemed that inflation was the Fed's primary concern.  The fed fund rate was at 5.25  and  the dollar was weak. We saw the Fed statements from June 28 and August 7 where no change was made to the Fed fund rate. We saw that wall street was starting to feel the impact of the credit crisis and a housing correction.  Defaults on mortgages were rising and  S and P ratings were being changed, the financial sector weakening. Banks were repricing risk and becoming less willing to lend.  We looked at commentary that suggested if Greenspan were Chairman the rate would have already been cut.  And we saw angry ranting from a popular TV host accusing the fed of inaction, in the face of a serious crisis.

Effects of a rate change,

In most books on finance you will read that rate cuts can lead to a
weaker dollar, rising inflation, yet stimulate the economy and
strengthen employment.

18 months later we have a stronger dollar,  deflation, and rising unemployment, yet the fed has made a series of  drastic rate cuts the leaving  fed fund to rest at 1% and perhaps heading lower.

Why is the dollar stronger?  (what is constraining volatility )

What are other factors of deflation/inflation?  how about Core inflation? what about oil?

Unemployment?

What are the other options of the  fed's standard monetary policy, or fiscal policy our only hope?

How did we get here?

Now we will look at these issues starting with the fed's first moves on August 10 and August 17 2007

Summer crunch 2007:  the feds first move, keep the fed funds rate and cut the discount rate

August 10 2007  Fed to provide liquidity ,  Not lowering the Federal funds rate but just trying to get people to trade more closely to it.  (how?) Open market operations, the same way they make the target rate. 

http://www.federalreserve.gov/newsevents/press/monetary/20070810a.htm

Great analysis from PBS   (Audio, video and print)

http://www.pbs.org/newshour/bb/business/july-dec07/markets_08-10.html

 
(What is the difference discount rate, federal funds rate)

Discount rate Statement August 17 2007

http://www.federalreserve.gov/newsevents/press/monetary/20070817a.htm

 Discount rate and you
http://www.washingtonpost.com/wp-dyn/content/article/2007/08/17/AR2007081702067_pf.html

Euro shares and the discount rate

http://www.forbes.com/markets/feeds/afx/2007/08/17/afx4031047.html


Fed cuts rates to unexpectedly to restore markets

http://www.iht.com/articles/ap/2007/08/17/business/NA-FIN-ECO-US-Fed-Interest-Rates.php

Analysis

http://www.washingtonpost.com/wp-dyn/content/article/2007/08/17/AR2007081701503_pf.html



Some news form august 17th


pbs news  hour 

http://www.youtube.com/watch?v=g5711Ixr4PM

reuters

http://www.youtube.com/watch?v=OjwyGuLtyCY

futures market 

http://www.youtube.com/watch?v=aRDoDtY4qGc

Class 2: Lets call it, summer crunch 2007

• an investigation of the impact of the credit crunch on Fed monetary policy and the media's reaction
  

Primary sources

FOMC Statements from

• June 28 2007

  For immediate release

  The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.

  Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector. The economy seems likely to continue to expand at a moderate pace over coming quarters.

  Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.

  In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

  Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Cathy E. Minehan; Frederic S. Mishkin; Michael H. Moskow; William Poole; and Kevin M. Warsh.

• August 7 2007

  For immediate release

  The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.

  Economic growth was moderate during the first half of the year. Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy.

  Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.

  Although the downside risks to growth have increased somewhat, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the outlook for both inflation and economic growth, as implied by incoming information.

  Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Michael H. Moskow; William Poole; Eric Rosengren; and Kevin M. Warsh.

August 17 2007 A FOMC Statment

August 17 2007 B Discount rate action


Secondary Sources

What's A Fed Chairman to do? New York Times, August 5th 2007. (2 days before Fed meeting)

http://mobile.nytimes.com/2007/08/05/weekinreview/05berenson.xml

Jim Cramer's "freak out" on Stop Trading , August 5th 2007 (2 days before Fed meeting)
(This has become a viral video. What is really going on? Can monetary policy really be this exciting? Or is this the a page book from professional wrestling? Is the Fed being cast as a villain, or just tight monetary policy.)





Jim Cramer's explanation on TheSteeet.com August 7

Class 1

This blog is a companion to the course, Topics in contemporary, international finance. Financial topics will be investigated through case studies of actual events and economic policy. Policy and events will be studied from primary and secondary sources. We will use primary sources such United States Federal Reserve reports and United States Department of Labor statistics. We will also read secondary sources such as newspaper articles with a view to analyze how accurately the policy is reported and interpreted. Links to the sources will be posted on this blog.


The first class

Introduction



What is Money?

Evaluate each item below as to how well it would perform the functions of money. In your evaluation, discuss how
well the item would serve as a medium of exchange, a store of value and a standard of value. As you make your evaluations, be sure to consider portability, uniformity, acceptability, durability, and stability in value.
1. Salt
2. Large stone wheels
3. Cattle
4. Gold
5. Copper coins
6. Pieces of paper printed by a government
7. A personal check

Why were roman coins minted with the faces of emperors?

Money and sovereignty. What about the Euro?



The Simple Picture of the International Financial System


Country A's Financial System

Banks

Savers Spenders


Inflation and Unemployment are kept in check by central banks monetary policy such as adjustment of interest rates

The connections between Banks, Savers and Spenders are quite complicated and vary according to national laws and regulation, financial services offered, regional economic conditions.

International- other groupings of Savers and Spenders mediated by banks of other sovereign countries.

B

Save Spend B

Save Spend



B

Save Spend

The connections between banks become complicated and have changed over time, e.g. Bretton Woods, they require currency exchange.

The connections between savers and spenders are quite complicated and vary according to national laws and regulation, financial services offered, regional economic conditions.


Case Study 1999 -Currency Stabilization and Crisis

Two years into the Asian Economic Crisis



http://www.washingtonpost.com/wp-srv/business/longterm/feb99/currency/baby7.htm



http://www.washingtonpost.com/wp-srv/business/longterm/feb99 /currency /currency7.htm