DEDICATED TO MY FORMER CLASSMATES IN RUSSIA, FUTURE ONES AT HARVARD UNIVERSITY, AND ESPECIALLY THOSE WHO ARE INTERESTED IN LEARNING ECONOMICS
The Student Word
I would like to invite everybody to this blog to discuss important macroeconomic events, monetary policy and of course macroeconomics as a whole. Every comment has a value, every thought has a right to exist.
Friday, July 8, 2011
Operation Twist and the Effect of Large-Scale Asset Purchases
By Titan Alon and Eric Swanson
The Federal Reserve's current large-scale asset purchase program, dubbed "QE2," has a precedent in a 1961 initiative by the Kennedy Administration and the Federal Reserve known as "Operation Twist." An analysis finds that four of six potentially market-moving Operation Twist announcements had statistically significant effects and that the program cumulatively caused a significant but moderate 0.15 percentage point reduction in longer-term Treasury yields. These results can be used to estimate QE2's effects.
How Inflation Tax affects the future of our children
As life goes on, the number of taxes we have to pay grows up significantly. We disburse income, corporate, capital gains, payroll taxes and much more. The colossal interference of the government nowadays must ring a bell to us of another enemy – inflation tax. According to Gregory Mankiw, a professor from Harvard University, inflation tax is the revenue the government raises by creating money. It is not a secret that the government use money creation as a way to pay for the spending. The insatiable appetite shown in the last 20 years has lifted up a crucial question: Who is going to pay for irrational decisions taken by the government? The answer is fairly palpable – our children.
What approach does the USA use: Classical or Keynesian?
I was visiting my uncle in Europe in 2008 and did not even realize that the world would experience one of the most terrifying crises in the history. With the population of almost 3 million people, Latvia seems to be a small spot on the map. Because of the unfair policy, few resources and corruption, the country faces a crash.
How the Fed Could Set Off a New Recession by Mr.Thoma, a professor from Oregon University
Until recently, it seemed unlikely that we were headed for a double-dip recession. We were clearly looking at a very slow recovery, especially for employment, but there was little reason to worry about a second recession.
Now widespread weakness in recent economic data makes a double dip much more likely. In May, just 54,000 jobs were added, auto sales declined significantly, retail sales were sluggish even excluding autos, and growth in manufacturing slowed sharply. Meanwhile, house prices continue to decline to new post-bubble lows, home sales have slowed, claims for unemployment insurance have risen, and consumer sentiment has weakened. Both stimulus spending and QE2 are coming to an end, state and local budgets are still a problem, and corporate bond issuance “fell to its slowest pace of the year.” The fall in investment activity is particularly worrisome because business investment has been growing at near pre-recession rates and has been a key factor in bringing about the moderate output growth we’ve experienced recently. If business investment falls off, it’s hard to see what will replace it.