WRONG
Nine Economic Policy Disasters and What We Can Learn from Them
Richard S. Grossman
From Our Blog
One of the issues that distinguishes Donald Trump from mainstream Republicans ' aside from his bigotry towards Mexicans, women, and Muslims'is his opposition to free trade, which has been a staple of Republican ideology since shortly after World War II.
Posted on July 6, 2016
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It is hard to imagine two politicians that are further apart ideologically than Bernie Sanders and Donald Trump. Nonetheless, these two presidential candidates have a lot in common: their outsider status, their unrealistic fiscal plans, and a desire to punish foreigners for America's economic problems.
Posted on June 1, 2016
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On 23 June, British voters will go to the polls to decide whether the UK should remain in the European Union (EU) or leave it in a maneuver the press has termed 'Brexit.' As of late April, public opinion polls showed the 'remain' and 'exit' sides running neck-- and -- neck, with a large share of the electorate still undecided. The economic arguments for remaining in the EU are overwhelming. The fact that the polls are so close suggests that a substantial portion of the British electorate is being guided not by economic arguments, but by blind commitment to ideology.
Posted on May 4, 2016
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In the 1983 movie The Right Stuff, during a test of wills between the Mercury Seven astronauts and the German scientists who designed the spacecraft, the actor playing astronaut Gordon Cooper asks: 'Do you boys know what makes this bird fly?' Before the hapless engineer can reply with a long-winded scientific explanation, Cooper answers: 'Funding!' If an economist were asked, 'Do you know what makes this economy fly?' the answer, in one word, would be 'trust.'
Posted on April 13, 2016
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Last month HSBC, one of the world's largest banks, decided not to move its headquarters from London to Hong Kong.The revelation that a company is staying put is usually not earth-shattering news. Nonetheless, HSBC's decision made headlines in Asia, Europe, and the US for three reasons. First, HSBC is the world's fifth largest commercial bank: it holds more than $2.5 trillion in assets and is exceeded in size only by four state-owned Chinese banks.
Posted on March 9, 2016
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The Chinese New Year begins on 8 February, ushering out the year of the sheep (or goat, or ram) and bringing in the year of the monkey. People in China will enjoy a week-long vacation and will celebrate with dragon dances and fireworks. Given the financial fireworks emanating from China, this is a good time to briefly review some of the major economic news coming out of the Middle Kingdom.
Posted on February 3, 2016
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Economists are better at history than forecasting. This explains why financial journalists sound remarkably intelligent explaining yesterday's stock market activity and, well, less so when predicting tomorrow's market movements. And why I concentrate on economic and financial history. Since 2015 is now in the history books, this is a good time to summarize a few main economic trends of the preceding year.
Posted on January 6, 2016
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Seven years ago this month the federal funds rate'a key short-term interest rate set by the Federal Reserve'was lowered below 0.25%. It has remained there ever since.Lowering the fed funds rate to rock-bottom levels did not come as a surprise. The sub-prime mortgage crisis led to a severe economic contraction, the Great Recession, and Federal Reserve policy makers used low interest rates'among other tools'in an effort to revive the economy.
Posted on December 9, 2015
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With elections just about a year away, Americans can expect to hear a lot about regulation during the next twelve months'most of it from Republicans and most of it scathing. Republican frontrunner Donald Trump typifies the GOP's attitude toward regulation.
Posted on November 4, 2015
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t the conclusion of the mid-September meeting of the Federal Open Market Committee (FOMC), the Federal Reserve announced its decision to leave its target interest rate unchanged through the end of this month. Although some pundits had predicted that the Fed might use the occasion of August's decline in the unemployment rate (to 5.1 percent from 5.3 percent in July), to begin its long-awaited monetary policy tightening, those forecasts left out one crucial fact.
Posted on October 7, 2015
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Unlike fine wine, bad ideas don't improve with age. One such idea is the Invest in Transportation Act, co-sponsored by Sens. Barbara Boxer (D-CA) and Rand Paul (R-KY), which would institute a temporary tax cut on profits brought back to the United States by American firms from their overseas operations and use the proceeds to fund investment in transportation infrastructure.
Posted on September 2, 2015
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The next time you are slipping the valet a couple of folded dollar bills, take a good look at those George Washingtons. You might never see them again. Every few years, there is a renewed push for the United States to replace the dollar bill with its shiny cousin, the one dollar coin.
Posted on August 5, 2015
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One of the most striking structural weaknesses uncovered by the euro crisis is the lack of consistent banking regulation and supervision in Europe. Although the European Banking Authority has existed since 2011, its influence is often trumped by national authorities. And many national governments within the European Union do not seem anxious to submit their financial institutions to European-wide regulation and supervision.
Posted on July 1, 2015
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Once again, one of President Obama's major legislative initiatives is being battered by a hostile Congress. Only this time, it is not Republicans standing in the way of the Administration's plans, but the Democratic minority in the US Senate holding up the president's Trans-Pacific Partnership (TPP) trade deal. The TPP is an ambitious trade deal currently being negotiated between eleven countries: Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, United States, Singapore and Vietnam.
Posted on June 3, 2015
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On May 7, British voters will head to the polls to elect a new Parliament. If mid-April forecasts are correct, the formation of a government will be a bit more complicated than in elections past. The results of those elections will have important ramifications for the conduct of economic policy in both Britain and the European Union. For most of the last two centuries, British governments have been formed by one of the two major political parties of the time.
Posted on May 6, 2015
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As long as rulers have needed money for the military, public works, or just to enrich themselves, they have relied on taxes. As Americans approach the dreaded April 15 income tax-filing deadline, it is worth considering some key facts about taxation. There are many different modes of taxation: individual income taxes, corporate profits taxes, capital gains taxes, property taxes, inheritance taxes, sales taxes, social insurance taxes, taxes on imports, and a whole host of government-levied fees that look and feel a lot like taxes.
Posted on April 1, 2015
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The industrialized world is currently moving through a period of ultra-low interest rates. The main benchmark interest rates of central banks in the United States, the United Kingdom, Japan, and the euro-zone are all 0.50% or less. The US rate has been near zero since December 2008; the Japanese rate has been at or below 0.50% since 1995. Then there are the central banks that have gone negative: the benchmark rates in Denmark, Sweden, and Switzerland are all below zero. Other short-term interest rates are similarly at rock-bottom levels, or below.
Posted on March 4, 2015
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Last month, the European Central Bank (ECB) announced its plans to commence a '¬60 billion (nearly $70 billion) of quantitative easing (QE) through September 2016. In doing so, it is following in the footsteps of American, British, and Japanese central banks all of which have undertaken QE in recent years. Given the ECB's actions, now is a good time to review quantitative easing. What is it?
Posted on February 4, 2015
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Burdensome, costly, and'let's face it'just plain stupid government regulation is all around us. And even well-meaning, reasonably well-designed regulations can impose costs all out of proportion with their benefits.
Posted on January 7, 2015
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In the weeks and months following the subprime crisis, a number of financial swindles have come to light. Perhaps the most famous of these was the Bernie Madoff scandal. Madoff ran a Ponzi scheme, in which he attracted money from individuals (and institutions) who were hoping that he would provide sound investment management and a healthy return on the funds entrusted to him. Instead, the money ended up in his pocket. The small number of 'investors' who did withdraw their funds from Madoff were paid with money from new investors.
Posted on December 3, 2014
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Although the media hype is usually most frenetic during presidential election years, this season's mid-term elections are generating a great deal of heat, if not much light. By October 13, contestants in 36 gubernatorial races had spent an estimated $379 million on television ads, while hopefuls in the 36 Senate races underway had spent a total of $321 million. For those addicted to politics, newspapers and magazines have long provided abundant, sometimes even insightful coverage.
Posted on November 5, 2014
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I have written about the dangers of making economic policy on the basis of ideology rather than cold, hard economic analysis. Ideologically based economic policy has laid the groundwork for many of the worst economic disasters of the last 200 years.
Posted on October 1, 2014
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On September 18, Scots will go to the polls to vote on the question 'Should Scotland be an independent country?' A 'yes' vote would end the political union between England and Scotland that was enacted in 1707. The main economic reasons for independence, according to the 'Yes Scotland' campaign, is that an independent Scotland would have more affordable daycare, free university tuition, more generous retirement and health benefits, less burdensome regulation, and a more sensible tax system.
Posted on September 3, 2014
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As an early-stage graduate student in the 1980s, I took a summer off from academia to work at an investment bank. One of my most eye-opening experiences was discovering just how much effort Wall Street devoted to 'Fed watching', that is, trying to figure out the Federal Reserve's monetary policy plans. If you spend any time following the financial news today, you will not find that surprising. Economic growth, inflation, stock market returns, and exchange rates, among many other things, depend crucially on the course of monetary policy.
Posted on August 6, 2014
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Oxford University Press is saddened to hear of the passing of Broadway legend Elaine Stritch. We'd like to present a brief extract from Eddie Shapiro's interview with Elaine Stritch in November/December 2008 in Nothing Like a Dame.
Posted on July 18, 2014
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Is it morbid or therapeutic to analyze the economic catastrophes of the past? What critical strategies can be imported from the realms of medicine and military history to the study of the current state of the economy? Richard Grossman, author of Wrong: Nine Economic Policy Disasters and What We Can Learn From Them, skillfully dissects the cadavers of economic policies.
Posted on January 5, 2014
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