John Edwards’ exit from the presidential race puts his supporters up for grabs. Both Senators Clinton and Obama want those votes. Here’s how to win them.
The central plank of the Edwards’ campaign was restoring a prosperous and secure middle class, which requires ending wage stagnation and having wages again grow with productivity. This must be the central economic policy goal of any candidate wanting the Edwards vote. (more…)
The Federal Reserve’s recent surprise decision to lower its short-term interest rate target by three-quarters of a point has received much attention. Most commentary has focused on the idea that the Fed is trying to stimulate spending in the hope of preventing a recession. Over-looked, and equally important, is the fact that lower interest rates raise asset prices, which is something Wall Street desperately needs to prevent a systemic meltdown. (more…)
The global economy runs on the dollar, and that isn’t about to change. Today the world’s central banks hold about two thirds of their reserves in U.S. dollars. Most commodities are priced in American currency, and much of world’s trade is invoiced in dollars as well. The dollar is the lifeblood of the international system. (more…)
The old saying is that “If you only have a hammer everything looks like a nailâ€. For economists, the hammer is “saving†and a host of problems are reduced to questions of saving. Nowhere is this clearer than discussions of the U.S. trade deficit and global financial imbalances, which are often explained as a saving problem. Unfortunately, this focus on saving distorts understanding and distracts from the real challenge of creating mass consumption markets in developing countries. (more…)
The world economy is poorly served by the current system of exchange rates. That system has contributed to today’s global financial imbalances, which are widely viewed as posing significant economic risk. These imbalances have also created political tensions between countries over how to adjust them, and within countries over job losses. Exchange rates matter more than ever under globalization, which means the world needs a better system. (more…)
For the last several years the euro has been appreciating steadily against the U.S. dollar. Given the Chinese renminbi and other East Asian currencies are pegged to the dollar that means the euro has been appreciating steadily against all. This spells trouble for Euroland, and it suggests European policymakers should join with the U.S. to address the global problem of under-valued currencies. (more…)
With Senator Hillary Clinton firmly cemented as the front-runner for the Democratic Party’s nomination, Rubinomics—named after former Treasury Secretary Robert Rubin, who shaped economic policy under President Clinton—has re-emerged as a critical issue. This is because Senator Clinton has firmly embraced it. Rubinomics rests on faulty economics and embodies bad politics. Progressive Democrats and the nation need to understand this. Here’s an explanation. (more…)
The U.S. economy has been in expansion mode since November 2001. Though of reasonable duration, the expansion has been persistently fragile and unbalanced. That is now coming home to roost in the form of the sub-prime mortgage crisis and the bursting house price bubble. (more…)
The United States Congress is currently contemplating critical legislation aimed at remedying the huge U.S.-China trade deficit. China and businesses that benefit from Chinese imports oppose this legislation, and to discourage action China has hinted at retaliation – including possibly selling its U.S. Treasury bond holdings. That threat has prompted some to argue against legislative action on grounds that risks of a trade war are too large and costly. Such thinking is mistaken. The reality is China’s threats are empty, whereas its currency manipulation is wreaking significant real damage on the U.S. economy. (more…)
With Wall Street beset by a crisis of confidence and the mortgage-backed securities market seizing up, there is urgent need for an immediate emergency Federal Reserve interest rate cut. This sudden need has also revealed how today’s financial system places monetary policy in bondage to markets. That system has evolved over the past twenty-five years with the Fed’s approval, and the current crisis starkly reveals need for reform. (more…)