How you think we might get out of our current economic problems has something to do with how you think we got into them in the first place.
Category Archives: financial markets
TIPS yields
Greg Mankiw notes some odd behavior this week in the values reported by the U.S. Treasury for the yields on constant-maturity Treasury Inflation Protected Securities.
The Progress of the Financial Crisis in One Picture: Mortgages, Flight to Safety, Credit Lock
Markus Brunnermeier provides an excellent summary graph of the financial crisis, told in “spreads”.
The anomalous fed funds market
Some further thoughts on the bizarre behavior of the interest rate that used to be the core instrument of U.S. monetary policy.
Investment advice for a wild market
Your retirement nest egg might have lost 40% of its value since this summer and 10% the last 2 weeks. What should you do? Here’s the advice I’ve been giving to friends who ask, as well as what I’ve been doing with my own portfolio.
The Federal Reserve’s balance sheet
On Thursday, the Federal Reserve issued its weekly H.4.1 report, which provides details of the Fed’s balance sheet. Once upon a time, this was one of the least interesting of the government’s many releases of data. These days, it’s become one of the most exciting.
CRA and Fannie and Freddie as betes noire
There is so much chaff floating around about the roles of Fannie and Freddie and of the Community Reinvestment Act in the current crisis, despite the best efforts of economists like Jim Hamilton [0] [1], Mark Thoma and Janet Yellen, that it seems worthwhile to once again go through some of the arguments that have been forwarded.
From David Goldstein and Kevin G. Hall, “Private sector loans, not Fannie or Freddie, triggered crisis”:
Federal Reserve Board data show that:
- More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
- Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
- Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics. Continue reading
Credit Spreads and How Lax Is Monetary Policy?
All eyes have been on the housing market as the trigger for the financial crisis, but we’re all aware that there are other potential “triggers” for additional distress: auto loans and credit cards. In addition, spreads are not everything — levels of real interest rates matter as well.
Some encouraging developments
Plenty of gloom out there if you’re hungry for more. But I wanted to pass along a couple of developments this week that give me some hope.
The global recession
IMF research economist
Prakash Loungani reports some statistics on the extent to which housing price declines are being seen worldwide.