For Future Reference

This commentary is about setting up a government infrastructure bank. We will talk in a few weeks about the causes and consequences of government debt. This article is about one aspect of that - is government debt a bad thing if it funds productive investments?

Falling Dollar

Martin Feldstein (really smart economist) has a commentary on the fall in value of the U.S. dollar. You can frame his argument in terms of the real vs. nominal exchange rates, and then think about how this relates to our large trade deficit.

Let's All Just Relax

Robert Samuelson tells us to calm down about the economy. Given our class on the Great Depression, how/why does he feel so little panic?

How did this happen?

The Economist has a nice article describing the conditions that led to the current financial situation in the U.S.. It's more complex than what we discussed in class, but it is a nice summary.

Icelandomics

What you've learned in this class doesn't just work in the U.S. This article discusses the situation in Iceland and how they are acting to try and rescue the value of their currency. Can they continually prop up their exchange rate? Why not?

Banks Raising Reserve Ratios

This article gets at the heart of the issue with a financial crisis - banks horde cash. So how does this work without our model of the money market and the IS/LM?

Chinese Slides

Powerpoint slides for todays class.

Spillovers

Apparently the Canadians are worried. Think about how poor economic performance in the U.S. might affect Canada - specifically, what might happen to their net export demand? Does this matter if they have perfectly flexible exchange rates? How about if they have fixed exchange rates?

Stagflation?

This editorial discusses the possibility of stagflation - that is, both rising unemployment AND rising inflation. How can both of these occur at the same time? Specifically, think about the AD/AS diagram. How can you generate both falling output and rising prices? Think about how rising commodity prices may be changing the SRAS curve.

Bernanke Asks for Easier Loans

In this article, the Fed Chairman asks for banks to renegotiate or forgive portions of mortgages that might default. In terms of our model of the money market, what is he trying to do to money demand (L)? How would this help the economy?