Global Crisis
Interest Rate Policies
Fed Rate
Depression Economics
Credit Market : September 2008
Bank bailouts
Mortgage and Housing Prices
Family Costs and Lender Costs
Mortgage Finance
Mortgage-backed Securities
Mortgage as option, not loan
Akerlof’s Problem
Market illiquidity
Fire sale
Hold-to-maturity price
Sub-prime default rates
Raising new capital
Japan’s 1990 s
Japan’s Banks
Conditions set by government
Non performing loans
Sweden in the 1990 s
Capital injection and tax payers
Fed buying unsecured loans
Fed’s new scheme?
Recapitalization of banks
Mark to market and illiquidity
Keynes’ Metaphor for a Bubble
Written in 1859, in a history of the commercial crisis of 1857 -58.
History
THE LENDER OF LAST RESORT
Fannie Mae and Freddie Mac
Asia
Emerging Markets
Index of Financial Instability
An Historical Perspective
the portion of the house price rises explained by fundamentals was larger in, UK, Australia, France and Spain
Rogoff: ft sept 18 2007
Investment Banks
Bail Outs
Moral Hazard
CDS
overshooting
Regulatory arbitrage
Credit Crunch 2008
Market efficiency?
Financial boom and bust cycle
Four vicious cycles
Peak Unemployment Lagged Trough of Output Contraction
Residential Property Prices
Interbank Lending’s Squeeze
Early Warnings?
Global Saving Glut
Capital Flows Destabilizing
Two Global Shocks
US Growth
Euro-zone Growth
Monetary tightening?
Inflationary Pressures
The euro zone has a stronger economy but much tighter monetary conditions
China’s Growth Rates
Official reserves and Inflation
Current account, capital account and Reserves’ account
Outward and inward capital flows
Round-tripping of capital and low domestic wages
current account surplus
Asian Countries’ Exchange Rate Regimes and Monetary Policies
Appreciation of Asian Currencies in the first Half of 2008
China’s exports are growing more slowly than America’s
Food and Energy Prices: Inflation
Three historical precedents
US SAVING AND LOANS CRISIS: The saving and Loan Crisis of the Late 1980 s—the macro economic effects are hinged on the extent to which financial institutions need to reduce balance sheets and recapitalize their assets.
The Dollar Strengthening
Dollar as a Reserve Currency
As the dollar falls, there is an upward pressure on US import prices and more inflationary pressure generally. In response, the Federal Reserve will have to raise interest rates faster than currently expected. Higher interest rates will make borrowing more expensive and slow investment growth.
Can Dollar loses its status as a Reserve Currency? At present, foreigners’ desire to hold dollar cash and bonds as a store of value allows the US to finance its debt at low cost. A loss of that status would mean a permanent loss of wealth for the US.
Booming Credit Growth Fuels Demand for Goods
Why the US saving rate is so low?
US Inequality
Who is paying for the growth of the consumption of oldsters?
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