Economics & Global Affairs

430 Items

Blog Post - Views on the Economy and the World

The Lesson from George H.W. Bush’s Tax Reversal

| Dec. 13, 2018

When President George H.W. Bush was laid to rest earlier this month, the remembrances appropriately remarked on his general decency and competence.  In public commentary, the encomiums tend to be followed by a “but.”  For journalists and historians, it is “but he was only a one-term president.”  He lost the election of 1992, in part because of the recession of 1990-91.  For members of his own political party, the “but” is, “but he broke with the legacy of Ronald Reagan and with his own ‘no new taxes’ pledge.”  They have always blamed his failure to win re-election on that perceived betrayal.

But President Bush’s mistake was making the anti-tax pledge in 1988 in the first place and sticking to it in the first part of his presidency. The 1990 reversal on fiscal policy set the stage for a decade of economic growth that eventually achieved budget surpluses.

Blog Post - Views on the Economy and the World

Gopinath follows Obstfeld at the IMF, in a great tradition

| Dec. 10, 2018

Maury Obstfeld this month completes his exemplary term as Chief Economist at the International Monetary Fund. His departing economic outlook foresees slowing growth in the world economy in 2019 and 2020.

Gita Gopinath, my Harvard colleague, will take up the position in the new year.  (Technically the title is Economic Counsellor and Director of the Research Department.)

This photo shows the Federal Reserve Building on Constitution Avenue in Washington in March 2009. 

AP Photo/J. Scott Applewhite

Analysis & Opinions - The Wall Street Journal

The Case for Pausing the Interest-Rate Climb

| Nov. 27, 2018

The Federal Reserve has done an outstanding job fulfilling its dual mandate of maximum employment and price stability. To keep the economy in this happy Goldilocks position, the Fed should hold off on raising rates at its December meeting and consider incoming data before deciding when—or even whether—to resume tightening.

Federal Reserve Chairman Jerome Powell speaks during a news conference in Washington in September 2018.

AP Photo/Susan Walsh

Analysis & Opinions - The Wall Street Journal

Raise Rates Today to Fight a Recession Tomorrow

| Nov. 26, 2018

Some observers worry that higher short-term rates will push the economy into recession and wonder why the Fed is continuing to raise rates despite already having achieved its explicit monetary-policy goals. Yet that view overlooks the role that higher interest rates today must play in enabling the recovery from an inevitable future downturn. It is in the interest of the next recovery, I believe, that the Fed will continue its steady rate increases.

A photograph of the U.S. dollar among international bank notes.

Creative Commons

Analysis & Opinions - Belfer Center for Science and International Affairs, Harvard Kennedy School

The Future of the U.S. Dollar in a Post Iran Deal World

| Oct. 26, 2018

The European Union’s announcement in September 2018 that it would begin to create a special payments channel with Iran in response to the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA) once again raises the question of the role of the U.S. Dollar (USD) in the international economic order.  Under the surface of discussions of alternative payment mechanisms is the legitimate question of the negative impacts of American coercive economic statecraft on the USD status as the leading global reserve currency.

In this photo taken on August 25, 2010, a bank clerk counts Chinese 100 Yuan notes in Shanghai. 

AP Photo/Eugene Hoshiko

Analysis & Opinions - The Wall Street Journal

Currency Manipulation Isn’t Among China’s Trade Sins

| Oct. 15, 2018

The Trump administration is railing against Chinese currency manipulation without any regard for the yuan’s actual ups and downs. Yes, the numbers superficially back Treasury Secretary Steven Mnuchin’s warnings: The yuan has dropped about 10% against the dollar since mid-April, effectively offsetting the impact of U.S. tariffs on Chinese goods. But this doesn’t prove that China is defying the laws of market economics. In fact, Beijing is doing precisely the opposite.

Sovereign Venture Capitalism: At a Crossroad

StockSnap/Pixabay

Analysis & Opinions - The Economist

Sovereign Venture Capitalism: At a Crossroad

| Oct. 03, 2018

What the Iron Man-like character is claiming for his futuristic automotive company is not unheard of. On a systemic basis, mammoth institutional investment—especially from sovereign wealth funds (SWFs)—is flowing into start-ups and technology-oriented publicly traded companies. In this case, Saudi billions would help Mr Musk escape the pressures of being publicly listed. SWFs have invested large sums into high-growth start-ups promising innovation and financial returns. In fact, just this month, Saudi’s Public Investment Fund (PIF) announced a US$1bn investment in Tesla’s rival, Lucid, and a US$2bn stake in Tesla. The rise in SWF balance sheets and activity is having ramifications on global efforts to be more Silicon Valley-like, and on Silicon Valley itself.