Today, we are pleased to present a guest contribution written by Laurent Ferrara (Adjunct Professor of Economics, University Paris Nanterre, France). The views expressed here are those solely of the author.
From Politico’s Morning Trade:
RAPID PACE OF STEEL PROBE DISCONCERTING: Some Democratic lawmakers could soon press the administration over concerns that a potential Trump decision to restrict steel imports to protect national security could be challenged at the World Trade Organization if the Commerce Department does not provide a convincing basis for any action, Morning Trade has learned.
Wisconsin’s job growth over the past six years has been extraordinarily strong.
When last we met Mr. Reidl, he was explaining why fiscal policy could have no impact on GDP because, well, because. That does not augur well for his abilities an economic analysis, and indeed we can easily poke holes into the argument that Wisconsin’s doing just great!
Today the Federal Reserve announced that it is increasing its target for the fed funds rate to a new range of 1 to 1.25%, a development that surprised no one. But something that was not heralded in advance was the announcement that the Fed intends to “begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.” The Fed spelled out in detail exactly what that will entail. Sometime later this year, the Fed will begin limiting the amount of maturing Treasury securities and mortgage-backed securities that it reinvests, initially bringing its balance sheet down by $10 billion each month as its holdings are redeemed. Those amounts will gradually increase each month until after a year balance-sheet reduction reaches a pace of $50 billion per month. That compares with a net increase of $100B/month on the way up during QE1. Given current Fed security holdings of $4.2 trillion, this would reduce the Fed’s security holdings by about 14% per year once it gets into full swing.
How much does the U.S. government owe? The number that is subject to the recurrent debt-ceiling wrangling includes intra-government debts that the Treasury is imputed to owe to other Federal government operations. For example, Social Security taxes have historically exceeded benefits paid out. The surplus was used to pay for other government programs, and the Social Security Trust Fund was credited with corresponding holdings of U.S. Treasury securities representing the accumulated value of those surpluses. Many of us think of this as an I.O.U. that the government issued to itself. Economists usually subtract those intra-government debts when talking about the size of the federal debt, relying instead on the Treasury’s measure of debt held by the public. Although many of us have made use of the latter numbers in academic research, policy analysis, and lectures to our students, those data are also getting less reliable in recent years.
That’s the title of a one day conference at the margins of the IMF-World Bank Spring Meetings, organized by the International Banking Research Network (IBRN) and the Monetary and Capital Markets Department of the IMF, aimed at featuring research on the international transmission of macroprudential and monetary policies and to discuss policy implications from this research.