Daily Archives: March 12, 2010

Simone Baribeau

You’ve got to hand it to President Barack Obama’s expected Fed picks – they have some strong consumer credentials.

Peter A Diamond co-wrote a book with Peter Orszag, now OMB director, on saving social security. The book, first published in 2004, suggests only minor reforms, and makes clear that social security needs saving as much from its reformers as from the deficit expected in 2042. Read more

Simone Baribeau

The big news is that Janet Yellen is set to be tapped by President Barack Obama to replace Donald Kohn as the Fed’s second in command. But two other seats are still open, and it looks like Mr Obama may, after 14 months of silence on the open seats, be set to announce his nominations.

Via Reuters:

Sarah Raskin, the top banking regulator for the state of Maryland, and Peter Diamond, a Massachusetts Institute of Technology economist, are also under consideration for Fed board vacancies, the official said.

Sarah Bloom Raskin, official bio:  Read more

Simone Baribeau

Analyst reaction to reports Janet Yellen may be tapped to be Fed Vice Chairman:

Action Economics:

Outside of Boston Fed’s Rosengren and Fed Chief Bernanke himself, Yellen is one of the most dovish members on the FOMC and this would certainly raise her status as a permanent voter. Yellen has done a past stint as a governor at the Fed and returned to the SF Fed after a period as a professor of economics at U.C. Berkeley, and is very well-versed on the inner workings of the Fed.

 Read more

Simone Baribeau

On Janet Yellen potentially becoming vice chairman of the Federal Reserve

For Friday fun

Robin Harding

Lesson #1 for all politicians taking office: be careful what you say about currencies. (Actually, maybe lesson #1 should be: don’t say anything about currencies).

Japan’s prime minister, Yukio Hatoyama, caused a fuss today by saying that the yen is too strong, but put into context his remarks don’t add up to much.

From the FT:

“The recent strength of the yen does not necessarily reflect the strength of the Japanese economy and its industries,” Mr Hatoyama told a Diet committee.

An official at the ruling Democratic party said Mr Hatoyama told the committee that the exchange rate should be left to the markets, except in cases where there were sudden moves in the market that did not reflect the fundamental value of the currency.

Mr Hatoyama was responding to a question from the opposition Liberal Democratic party. The official stressed that the prime minister was not suggesting the need for an immediate policy response because the yen has not been particularly volatile recently.

All of which suggests that exchange rate intervention is not likely and nor would it be particularly justified, as the Bank of Japan’s real, trade-weighted exchange rate index indicates. Read more

Chris Giles

Almost everyone agrees Britain needs to cut its budget deficit. The action is needed whether it is because British government debt is rising at an unsustainable pace; because there is a sizable risk that the cost of servicing each pound of debt will rise sharply; because we think it is unfair our children should fund our profligacy; or because spending much more on debt servicing limits government’s ability to spend money on things we really care about.

The question is how fast. In this big debate, there are two sorts of people: fundamentalists and equivocators.

The fundamentalists include almost all politicians. Gordon Brown insists fiscal tightening now is dangerous for the recovery. On the opposite side, the equally fundamentalist David Cameron asserts that the truth lies with the reverse argument. “To get the economy moving you’ve got to lift the black cloud of the deficit,” he says repeatedly. Business organisations, such as the CBI and IoD are fundamentalists. And many economists have also been overcome with fundamentalist tendencies, as evidenced by the spate of letter writing to newspapers.

The other group are equivocators. These people are reasonably sure there needs to be a credible plan to reduce the deficit, but are unsure about its timing, its effects, and whether history tells them very much. Many Treasury officials I know are equivocators, so was the recent Green Budget from the Institute for Fiscal Studies, so are significant elements of the Monetary Policy Committee and, to my surprise, so is the governor of the Bank of England. Mervyn King is often portrayed as a fundamentalist on fiscal policy, but his answers at the latest Inflation Report (pages 7 to 9) can be summarised as: ‘The effect of fiscal policy on the economy? Well, it depends’. I am also firmly in the equivocators’ camp.

Being unsure about the best policy is rather uncomfortable, feeble even. But I’ll try to explain why the decision is so difficult. Read more

Robin Harding

Some interesting thoughts on Japan’s monetary policy and fiscal deficit from the ‘shadow’ policy board run by Nomura Research Institute.

Simone Baribeau

Via Reuters:

US President Barack Obama plans to nominate San Francisco Federal Reserve Bank President Janet Yellen to be vice chairman of the central bank, a source familiar with the process said on Thursday. Read more

Simone Baribeau

William C Dudly, president of the NY Fed, today outlined his concerns with the direction of financial regulatory reform. His three-fold concerns (in brief).

  1. There is no global consensus on regulatory reform. The problem, he says, is that “without harmonized standards, financial intermediation would inevitably move toward geographies and activities where the standards are more lax.” He recommended “a long phase-in period in the transition to ” new standards. “The focus should be more on the side of all ending up in the same place, rather than on the relative degree of difficulty in getting there.”

 Read more