How the Fed Helped Harley

Have you ever thought about how, every month or every week, businesses have money for paychecks? One answer is commercial paper. It is amazing that commercial paper is central to so much economic activity and few people have even heard…

Who Do We Owe?

Who do you think is the biggest holder of U.S. government debt? China? No. It is the U.S. government. Why? Please think about extra money the government might collect for Social Security. What does it do with those funds? Retaining…

Virginia and Germany

“Where…is the justice of compelling a State which has taxed her citizens for the sinking of her debt, to pay…the debts of other states, which have made no exertions whatever?” This quote, from John Steele Gordon’s, Hamilton’s Blessing (p. 29)…

More of a Contagious Disease

From FT.com: “The Irish say they are not Greece. The Portuguese say they are not Irish. The Spanish finance minister said last week that Spain is not Portugal. There are no prizes for guessing what Italy is not.” Also, This…

What If A State Defaulted?

What would happen if a state defaulted on its debt? It is unlikely. It has not happened since 1933. But…what if? In a fascinating simulation at The Economist’s Buttonwood Conference, an auspicious group of role players simulates a state debt…

QE2: Pros and Cons

Reminding us that there is no such thing as a free lunch, The Washington Post has an excellent interactive summary of the pros and cons of a QE2 impact. But first…what is QE2? Through a second round of quantitative easing,…

Where is QE2 Going?

Did you ever wonder how things really happen? We read about quantitative easing and hear some gigantic number but then…what? Who does it and how? In a Planet Money podcast, journalists visit the Fed and observe how one person implements…

GPI Instead of CPI?

Your grandma cares about the CPI. If it indicates the price level is rising, then she will automatically get a COLA–a cost of living adjustment that elevates her monthly social security check. This video from NPR’s Paul Solman shows how…

Cyclical or Structural?

Economists still cannot agree. With the new unemployment rate, at 9.6%, the same as the old unemployment rate, one question remains the same. Is it a jobs mismatch, contractionary lay-offs, or a third economic ailment? The diagnosis you choose will…

Inflation Stories

Arrive at a supermarket at the same time everyday? Require cash instead of credit?  Stop making beer? Why? The answer to each question is INFLATION. We are told that the Fed is always worried about inflation. If you know that…