1 / 17

Commentator Tassos Malliaris December 1, 2011

Loyola University Chicago School of Business Administration Symposium on Economic Policy at a Crossroad: What Next? . Commentator Tassos Malliaris December 1, 2011. My Plan. Offer Comments on Monetary Policy Offer Fewer Comments on Fiscal Policy Global Issues Make a Bold Suggestion.

torgny
Télécharger la présentation

Commentator Tassos Malliaris December 1, 2011

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Loyola University ChicagoSchool of Business AdministrationSymposium on Economic Policy at a Crossroad: What Next? Commentator Tassos Malliaris December 1, 2011

  2. My Plan • Offer Comments on Monetary Policy • Offer Fewer Comments on Fiscal Policy • Global Issues • Make a Bold Suggestion

  3. “The dogmas of the quiet past are inadequate to the stormy present” Abraham Lincoln

  4. “It is better to act and repent than not to act and regret it” Machiavelli

  5. Prior to the Global Financial Crisis • Success of Great Moderation • Macroeconomic Stability • Dual Mandate: Price Stability and Maximum Employment • Risk Management Approach • Price Stability implies Financial Stability • Clean vs Lean Against Bubbles (Also called the Jackson Hole Consensus)

  6. Lessons Learned from the Crisis • Price Stability Does Not Imply Financial Stability • The Cost of Cleaning up After a Bubble Bursts is Very High • Financial Instability Seriously Impacts the Real Macroeconomy

  7. Where Are We Now? • 15 million Unemployed in the U.S. • 13 trillion of wealth lost in the U.S. • Slow Growth in the U.S. and Europe • Significant Increases in U.S. Deficits • Sovereign Debt Crisis in the EU • Unbalanced Growth in China

  8. Why Are We at a Crossroad? • Monetary (primarily) and Fiscal Policies Have Contributed to Stopping the Decline of the Real Economy along Multiple Equilibria. • Zero Bound Policies Contribute Modestly • Reasonable to Target Unemployment • Difficult to Manage Expectations • Time Inconsistency Issue

  9. Moving Forward • Reinhart and Rogoff: Recovery from Financial Crises takes Long Time • Additional Difficulties from the EU • The Instability of the Euro and Eventually of the Dollar. • BRIC Countries and Mild Global Inflation

  10. A Balanced Approach • The Tinbergen Principle • Priority: Maximum U.S. Employment • The Contribution of Fiscal Policy • The Contribution of Monetary Policy • Financial Stability • Macroprudential Policies

  11. Beyond the Crossroad: Three Choices

  12. 1: Present Course: Primarily the Fed

  13. 2: Fiscal Policy for Jobs • Obama Plan: 447 billion (payroll tax cuts; extending unemployment insurance; new schools; public works; aid to states and cities). • Modify plan so all 447 billion go for new jobs; may succeed to create 6 million jobs paying an average of $75,000 each per year. • Reduce unemployment to 5.2%; promote growth.

  14. 3: Focus on Financial Stability • Long History described by Reinhart and Rogoff • Monitor Credit Expansion • Lean Against Asset Price Bubbles • Two Bubbles are bursting in the EU: sovereign debt and the euro • With U.S. interests near zero, do we have a government bond bubble? What impact on the dollar? • Are we addressing time inconsistency?

  15. Longer Term: The Fed and Financial Stability • The Fed and Monetary Policy • The Financial Stability Oversight Council established by the Dodd Frank Act • IMF and Global Financial Stability

More Related