Finance Basic To Advance Level Knowledge

My latest Macro Musings podcast is with Hugh Rockoff. Hugh is a professor of economics at Rutgers University and has done extensive work on U.S. economic history. He is the coauthor of the popular textbook “ History of the American Economy ” and has served on the editorial boards of the Journal of Economic History and Explorations in Economic History.   Hugh joined me for a fascinating conversation on U.S. monetary history. First, we discuss the idea of an optimal currency area (OCA) and consider how long it took the United States to become one. Hugh makes the case  that it took about 150 years for the United States to become an OCA. As he notes, this does not bode well for the Eurozone.  Second, we talked about the first two central banks of the United States, the 'free-banking' period, the monetary developments during the Civil War, and the flawed National banking system that emerged after the war. Third, we covered one of the more under...

My latest Macro Musings podcast is with Doug Irwin. Doug is a professor of economics at Dartmouth College, a research associate with the National Bureau of Economic Research, and former staff member of the President’s Council of Economic Advisors. Doug also served as an economist at the Federal Reserve’s Board of Governors. Doug is one of the leading experts on trade economics and has published widely on the topic, in both journals and books. His books include Free Trade Under Fire , Against the Tide, an Intellectual History of Free Trade, and Peddling Protectionism: Smooth-Hawley and the Great Depression . Doug is currently working on The Battle Over U.S. Trade Policy a Historical Look at U.S. Trade Policy Since the Founding of the Country and has also researched the role the interwar gold standard played during the Great Depression.  Doug joined me for a fascinating conversation on trade. We began the show by reviewing the main arguments for free trade and why it s...

Don't look now, but the Fed is quietly unwinding QE. As seen in the figure below, the Fed's share of marketable treasuries has been shrinking: To be clear, this is a passive unwinding of QE. The Fed's treasury holdings have not changed, but the stock of marketable treasuries has grown. Nonetheless, this is still an unwinding according to the portfolio channel of monetary policy. This channel says the Fed's taking of safe treasury assets from the public would force investors to rebalance their portfolios toward riskier assets. This rebalancing, in turn, would reduce risk premiums, lower interest rates, push up asset prices, and help shore up the recovery. Now the portfolio channel should be working in reverse. The public is getting a larger share of treasuries relative to the Fed thanks to the ongoing budget deficits. Moreover, this passive unwinding by the Fed is being reinforced by other central banks according to  CNN Money : In the first six months of...

Nominal demand is a shadow of its former self. In the past, it averaged near 5% annual growth but has struggled ever since the crisis. The figures below illustrate this on a per capita basis for aggregate demand and domestic demand growth.  Nominal demand growth ain't what it used to be.  To be clear, nominal demand growth is not what we ultimately care about. That would be real economic growth and over the long run it is not determined by nominal demand growth but by real factors. That, however, is not my point here. My point is that somehow policy makers were able to generate near 5% nominal demand growth per person pre-2008 and now seem completely unable to do so. Why? My answer is that inflation targeting, as it is currently practiced, has become the poisoned chalice of macroeconomic policy .  Central banks have been so good at creating low inflation since the early 1990s that it is now the expected norm by the body politic. Any deviation from low i...

  My latest Macro Musings podcast is with Nick Rowe. Nick is a professor of economics at Carleton University in Ottawa, a member of the CD Howe Institute’s Monetary Policy Council, and part of the Centre for Monetary and Financial Economics at Carleton University. Nick is well-known for his writing on monetary economics at the Worthwhile Canadian Initiative blog.  Nick joins the show for a discussion of monetary economics. We talk about what makes macroeconomics fundamentally different than microeconomics. Nick argues that for short-run macroeconomics the key distinction is money, the one asset on every market. He notes that if you want to disrupt every market all you need to do is disrupt the demand for or supply of money. The potential for monetary disequilibrium, he argues, is at the heart of short-run macroeconomics. We also discuss the difference between money created by banks (inside money) and money created by central banks (outside money). More importantly,...

My latest Macro Musings podcast is with Jason Taylor.  Jason is a professor of economics at Central Michigan University and is editor-in-chief of the journal Essays in Economic & Business History . He has published widely on U.S. economic history, particularly for the Great Depression and World War II periods. Jason joins the show to discuss the causes of the Great Depression and the policy under Herbert Hoover and Franklin D. Roosevelt. We cover  policies ranging from the international gold standard to the National Industrial Recovery Act and how they affected the pace of recovery.  We also look at the brief but amazing recovery of early-to-mid 1933, one of the sharpest recoveries on record (it can be vividly seen in the industrial production ).  Another interesting question we discuss is when did the recovery truly begin from the Great Depression. Standard economic indicators show the recovery began during World War II. But this was a wartime ...

My latest macro musings podcast is with Brad DeLong. Brad is a professor of economics at the University of California at Berkeley, a research associate of the National Bureau of Economic Research, and a former deputy assistant secretary of the U.S. Treasury under President Bill Clinton. Brad’s work ranges from business cycle dynamics to political economy to economic history. He has published widely in these fields and is one of the pioneers in the economic blogosphere. Brad and I sat down to discuss a number of interesting topics. We started with his new book that he coauthored with Stephen Cohen titled “ Concrete Economics: the Hamilton Approach to Economic Growth and Policy ”.  Among other things, we talked about the books pragmatic policy prescriptions outlined in the book and what they mean for today.  The book also provided a good historical context for a discussion on whether the the current wave of populism and nativism is truly new.   We also discusse...