Archive for setembro \30\+00:00 2008

Ben Bernanke´s testimony before Joint Economic Committee, U.S. Congress, Sept 24, 2008 (Discurso de Ben Bernanke no Congresso dos EUA em 24/09/2008)

setembro 30, 2008

Para registro histórico, o discurso que o Presidente do Federal Reserve dos EUA, Prof. Ben Bernanke, fez em depoimento ao Congresso Americano no dia 24/09/2008.


Chairman Ben S. Bernanke
Economic outlook
Before the Joint Economic Committee, U.S. Congress
September 24, 2008

Chairman Schumer, Vice Chair Maloney, Representative Saxton, and other members of the committee, I appreciate this opportunity to discuss recent developments in financial markets and to present an update on the economic situation.  As you know, the U.S. economy continues to confront substantial challenges, including a weakening labor market and elevated inflation.  Notably, stresses in financial markets have been high and have recently intensified significantly.  If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse.

The downturn in the housing market has been a key factor underlying both the strained condition of financial markets and the slowdown of the broader economy.  In the financial sphere, falling home prices and rising mortgage delinquencies have led to major losses at many financial institutions, losses only partially replaced by the raising of new capital.  Investor concerns about financial institutions increased over the summer, as mortgage-related assets deteriorated further and economic activity weakened.  Among the firms under the greatest pressure were Fannie Mae and Freddie Mac, Lehman Brothers, and, more recently, American International Group (AIG).  As investors lost confidence in them, these companies saw their access to liquidity and capital markets increasingly impaired and their stock prices drop sharply.

The Federal Reserve believes that, whenever possible, such difficulties should be addressed through private-sector arrangements–for example, by raising new equity capital, by negotiations leading to a merger or acquisition, or by an orderly wind-down.  Government assistance should be given with the greatest of reluctance and only when the stability of the financial system, and, consequently, the health of the broader economy, is at risk.  In the cases of Fannie Mae and Freddie Mac, however, capital raises of sufficient size appeared infeasible and the size and government-sponsored status of the two companies precluded a merger with or acquisition by another company.  To avoid unacceptably large dislocations in the financial sector, the housing market, and the economy as a whole, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship, and the Treasury used its authority, granted by the Congress in July, to make available financial support to the two firms.  The Federal Reserve, with which FHFA consulted on the conservatorship decision as specified in the July legislation, supported these steps as necessary and appropriate.  We have seen benefits of this action in the form of lower mortgage rates, which should help the housing market.

The Federal Reserve and the Treasury attempted to identify private-sector solutions for AIG and Lehman Brothers, but none was forthcoming.  In the case of AIG, the Federal Reserve, with the support of the Treasury, provided an emergency credit line to facilitate an orderly resolution.  The Federal Reserve took this action because it judged that, in light of the prevailing market conditions and the size and composition of AIG’s obligations, a disorderly failure of AIG would have severely threatened global financial stability and, consequently, the performance of the U.S. economy.  To mitigate concerns that this action would exacerbate moral hazard and encourage inappropriate risk-taking in the future, the Federal Reserve ensured that the terms of the credit extended to AIG imposed significant costs and constraints on the firm’s owners, managers, and creditors.  The chief executive officer has been replaced.  The collateral for the loan is the company itself, together with its subsidiaries.1  (Insurance policyholders and holders of AIG investment products are, however, fully protected.)  Interest will accrue on the outstanding balance of the loan at a rate of three-month Libor plus 850 basis points, implying a current interest rate over 11 percent.  In addition, the U.S. government will receive equity participation rights corresponding to a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders, among other things. 

In the case of Lehman Brothers, a major investment bank, the Federal Reserve and the Treasury declined to commit public funds to support the institution.  The failure of Lehman posed risks.  But the troubles at Lehman had been well known for some time, and investors clearly recognized–as evidenced, for example, by the high cost of insuring Lehman’s debt in the market for credit default swaps–that the failure of the firm was a significant possibility.  Thus, we judged that investors and counterparties had had time to take precautionary measures.

While perhaps manageable in itself, Lehman’s default was combined with the unexpectedly rapid collapse of AIG, which together contributed to the development last week of extraordinarily turbulent conditions in global financial markets.  These conditions caused equity prices to fall sharply, the cost of short-term credit–where available–to spike upward, and liquidity to dry up in many markets.  Losses at a large money market mutual fund sparked extensive withdrawals from a number of such funds.  A marked increase in the demand for safe assets–a flight to quality–sent the yield on Treasury bills down to a few hundredths of a percent.  By further reducing asset values and potentially restricting the flow of credit to households and businesses, these developments pose a direct threat to economic growth.

The Federal Reserve took a number of actions to increase liquidity and stabilize markets.  Notably, to address dollar funding pressures worldwide, we announced a significant expansion of reciprocal currency arrangements with foreign central banks, including an approximate doubling of the existing swap lines with the European Central Bank and the Swiss National Bank and the authorization of new swap facilities with the Bank of Japan, the Bank of England, and the Bank of Canada, among others.  We will continue to work closely with colleagues at other central banks to address ongoing liquidity pressures.  The Federal Reserve also announced initiatives to assist money market mutual funds facing heavy redemptions and to increase liquidity in short-term credit markets.

Despite the efforts of the Federal Reserve, the Treasury, and other agencies, global financial markets remain under extraordinary stress.  Action by the Congress is urgently required to stabilize the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy.  In this regard, the Federal Reserve supports the Treasury’s proposal to buy illiquid assets from financial institutions.  Purchasing impaired assets will create liquidity and promote price discovery in the markets for these assets, while reducing investor uncertainty about the current value and prospects of financial institutions.  More generally, removing these assets from institutions’ balance sheets will help to restore confidence in our financial markets and enable banks and other institutions to raise capital and to expand credit to support economic growth. 

I will now turn to a brief update on the economic situation.

Ongoing developments in financial markets are directly affecting the broader economy through several channels, most notably by restricting the availability of credit.  Mortgage credit terms have tightened significantly and fees have risen, especially for potential borrowers who lack substantial down payments or who have blemished credit histories.  Mortgages that are ineligible for credit guarantees by Fannie Mae or Freddie Mac–for example, nonconforming jumbo mortgages–cannot be securitized and thus carry much higher interest rates than conforming mortgages.  Some lenders have reduced borrowing limits on home equity lines of credit.  Households also appear to be having more difficulty of late in obtaining nonmortgage credit.  For example, the Federal Reserve’s Senior Loan Officer Opinion Survey reported that as of July an increasing proportion of banks had tightened standards for credit card and other consumer loans.  In the business sector, through August, the financially strongest firms remained able to issue bonds but bond issuance by speculative-grade firms remained very light.  More recently, however, deteriorating financial market conditions have disrupted the commercial paper market and other forms of financing for a wide range of firms, including investment-grade firms.  Financing for commercial real estate projects has also tightened very significantly.

When worried lenders tighten credit, then spending, production, and job creation slow.  Real economic activity in the second quarter appears to have been surprisingly resilient, but, more recently, economic activity appears to have decelerated broadly.  In the labor market, private payrolls shed another 100,000 jobs in August, bringing the cumulative drop since November to 770,000.  New claims for unemployment insurance are at elevated levels and the civilian unemployment rate rose to 6.1 percent in August.  Households’ real disposable income was boosted significantly in the spring by the tax rebate payments, but, excluding those payments, real after-tax income has fallen this year, which partly reflects increases in the prices of energy and food. 

In recent months, the weakness in real income together with the restraining effects of reduced credit flows and declining financial and housing wealth have begun to show through more clearly to consumer spending.  Real personal consumption expenditures for goods and services declined in June and July, and the retail sales report for August suggests that outlays for consumer goods fell noticeably further last month.  Although the retrenchment in household spending has been widespread, purchases of motor vehicles have dropped off particularly sharply.  On a more positive note, oil and gasoline prices–while still at high levels, in part reflecting the effects of Hurricane Ike–have come down substantially from the peaks they reached earlier this summer, contributing to a recent improvement in consumer confidence.  However, the weakness in the fundamentals underlying consumer spending suggest that household expenditures will be sluggish, at best, in the near term.

The recent indicators of the demand for new and existing homes hint at some stabilization of sales, and lower mortgage rates are likely to provide some support for demand in coming months.  Moreover, although expectations that house prices will continue to fall have probably dissuaded some potential buyers from entering the market, lower house prices and mortgage interest rates are making housing increasingly affordable over time.  Still, homebuilders retain large backlogs of unsold homes, which should continue to restrain the pace of new home construction.  Indeed, single-family housing starts and new permit issuance dropped further in August.  At the same time, the continuing decline in house prices reduces homeowners’ equity and puts continuing pressure on the balance sheets of financial institutions, as I have already noted.

As of midyear, business investment was holding up reasonably well, with investment in nonresidential structures particularly robust.  However, a range of factors, including weakening fundamentals and constraints on credit, are likely to result in a considerable slowdown in the construction of commercial and office buildings in coming quarters.  Business outlays for equipment and software also appear poised to slow in the second half of this year, assuming that production and sales slow as anticipated.

International trade provided considerable support for the U.S. economy over the first half of the year.  Economic activity has been buoyed by strong foreign demand for a wide range of U.S. exports, including agricultural products, capital goods, and industrial supplies, even as imports declined.  However, in recent months, the outlook for foreign economic activity has deteriorated amid unsettled conditions in financial markets, troubled housing sectors, and softening sentiment.  As a consequence, in coming quarters, the contribution of net exports to U.S. production is not likely to be as sizable as it was in the first half of the year. 

All told, real gross domestic product is likely to expand at a pace appreciably below its potential rate in the second half of this year and then to gradually pick up as financial markets return to more-normal functioning and the housing contraction runs its course.  Given the extraordinary circumstances, greater-than-normal uncertainty surrounds any forecast of the pace of activity.  In particular, the intensification of financial stress in recent weeks, which will make lenders still more cautious about extending credit to households and business, could prove a significant further drag on growth.  The downside risks to the outlook thus remain a significant concern. 

Inflation rose sharply over the period from May to July, reflecting rapid increases in energy and food prices.  During the same period, price inflation for goods and services other than food and energy also moved up from the low rates seen in the spring, as the higher costs of energy, other commodities, and imported goods were partially passed through to consumers.  Recently, however, the news on inflation has been more favorable.  The prices of oil and other commodities, while remaining quite volatile, have fallen, on net, from their recent peaks, and the dollar is up from its mid-summer lows.  The declines in energy prices have also led to some easing of inflation expectations, as measured, for example, by consumer surveys and the pricing of inflation-indexed Treasury securities.

If not reversed, these developments, together with a pace of growth that is likely to fall short of potential for a time, should lead inflation to moderate later this year and next year.  Nevertheless, the inflation outlook remains highly uncertain.  Indeed, the fluctuations in oil prices in the past few days illustrate the difficulty of predicting the future course of commodity prices.  Consequently, the upside risks to inflation remain a significant concern as well.

Over time, a number of factors should promote the return of our economy to higher levels of employment and sustainable growth with price stability, including the stimulus being provided by monetary policy, lower oil and commodity prices, increasing stability in the mortgage and housing markets, and the natural recuperative powers of our economy.  However, stabilization of our financial system is an essential precondition for economic recovery.  I urge the Congress to act quickly to address the grave threats to financial stability that we currently face.  For its part, the Federal Open Market Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.


1.  Specifically, the loan is collateralized by all of the assets of the company and its primary non-regulated subsidiaries.  These assets include the equity of substantially all of AIG’s regulated subsidiaries.

It’s a post-traumatic stretch (É um pós-traumático estiramento)

setembro 30, 2008

Como eu havia previsto ontem, após o anúncio que o Fed iria investir U$ 630 bilhões, que os mercados seriam outros hoje, eis então as novas vindas do Market Watch

September 30, 2008

It’s a post-traumatic stretch

“Dow industrials climb 3.5%; S&P rises 4.2%; Nasdaq gains 4% — and crude surges 5%”

Deregulation Not to Blame for Financial Woes (Desregulamentação não pode ser acusada pela desgraça financeira)

setembro 30, 2008

Deu no Bloomberg de hoje!

Deregulation Not to Blame for Financial Woes

Commentary by Peter J. Wallison

Sept. 30 (Bloomberg) — In the debate on Sept. 26, Democratic presidential nominee Barack Obama argued that the current crisis in the financial markets is the result of Republican deregulation.

The advertising from his campaign has been saying the same thing, and this claim is becoming a fixed element in the talking points of Democratic candidates this year.

The credibility of the charge depends on ignoring several important facts:

— There has been a great deal of deregulation in our economy over the last 30 years, but none of it has been in the financial sector or has had anything to do with the current crisis. Almost all financial legislation, such as the Federal Deposit Insurance Corp. Improvement Act of 1991, adopted after the savings and loan collapse in the late 1980s, significantly tightened the regulation of banks.

— The repeal of portions of the Glass-Steagall Act in 1999 — often cited by people who know nothing about that law — has no relevance whatsoever to the financial crisis, with one major exception: it permitted banks to be affiliated with firms that underwrite securities, and thus allowed Bank of America Corp. to acquire Merrill Lynch & Co. and JPMorgan Chase & Co. to buy Bear Stearns Cos. Both transactions saved the government the costs of a rescue and spared the market substantial additional turmoil.

None of the investment banks that got into financial trouble, specifically Bear Stearns, Merrill Lynch, Lehman Brothers Holdings Inc., Morgan Stanley and Goldman Sachs Group Inc., were affiliated with commercial banks, and none were affected in any way by the repeal of Glass-Steagall.

It is correct to say that there has been significant deregulation in the U.S. over the last 30 years, most of it under Republican auspices. But this deregulation — in long-distance telephone rates, air fares, securities-brokerage commissions, and trucking, to name just a few sectors of the economy where it occurred — has produced substantial competition and innovation, driving down consumer costs and producing vast improvements and efficiencies in our economy.

The Internet, for example, wouldn’t have been economically possible without the deregulation of data-transfer rates. Inc., one of the most popular Internet vendors, wouldn’t have been viable without trucking deregulation.

— Republicans have favored financial regulation where it was necessary, as in the case of Fannie Mae and Freddie Mac, while the Democrats have opposed it. In 2005, the Senate Banking Committee, then under Republican control, adopted a tough regulatory bill for Fannie and Freddie over the unanimous opposition of committee Democrats. The opposition of the Democrats when the bill reached the full Senate made its enactment impossible.

Barack Obama did nothing; John McCain endorsed the bill in a speech on the Senate floor.

— The subprime and other junk mortgages that Fannie and Freddie bought — and the market in these mortgages that their buying spawned — are the underlying cause of the financial crisis. These are the mortgages that the Treasury Department is asking for congressional authority to buy. If the Democrats had allowed the Fannie and Freddie reform legislation to become law in 2005, the entire financial crisis might have been avoided.

Policies that center on deregulation are probably hard for the voting public to grasp, and that has allowed Democratic candidates to spread the idea that there is a connection between deregulation and the current crisis. But an Obama victory, based in part on the claim that deregulation has caused the financial crisis, will create a mandate for new regulation where it isn’t necessary and will do harm to our economy.

(Peter J. Wallison is the Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute. The opinions expressed are his own.)

To contact the writer of this column: Peter J. Wallison at

O Agile Manifesto (Manifesto Ágil) e a Empresa

setembro 30, 2008

“Em fevereiro de 2001, dezessete programadores de software se reuniram num resort de ski, em Utah, EUA, para relaxar e trocar idéias.  O que emergiu deste encontro foi o Agile Software Development Manifesto.

Representantes das comunidades de Extreme Programming, SCRUM, DSDM, Adaptative Software Development, Crystal, Feature-Driven Development, Pragmatic Programming, e outros simpatizantes da necessidade de uma alternativa ao desenvolvimento de processos de software pesado, e guiado por documentação, promoveram uma convenção.”

Esta é a introdução à newsletter da Creativante desta semana, que você pode acessar aqui!

Fed Pumps Further $630 Billion Into Financial System (Federal Reserve vai bombear $ 630 bilhões no Sistema Financeiro)

setembro 29, 2008

É sempre bom ter cautela nas opiniões econômicas. Vejam só que fato.  Logo antes da rejeição do pacote Paulson no Congresso Americano, o Fed anuncia sua corajosa medida.  Amanhã os mercados serão outros com este Plano B!

Fed Pumps Further $630 Billion Into Financial System

By Scott Lanman and Craig Torres

Sept. 29 (Bloomberg) — The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed’s emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

The Fed’s expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone.

“Today’s blast of term liquidity will settle the funding markets down, and allow trust to slowly be restored between borrowers and lenders,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. On the other hand, “the Fed’s balance sheet is about to explode.”

The MSCI World Index of stocks in 23 developed markets sank 6 percent, the most since its creation in 1970. Credit markets deteriorated further as authorities tried to save more financial institutions from collapse.

European Rescue

European governments have rescued four banks in two days and the Federal Deposit Insurance Corp. said today it helped Citigroup Inc. buy the banking operations of Wachovia Corp. after its shares collapsed. The Standard & Poor’s 500 Index fell 3.8 percent and the cost of borrowing dollars for three months rose to the highest since January. The rate for euros hit a record.

“If people think the authorities may give in to fears, they are wrong,” Financial Stability Forum Chairman Mario Draghi said today in Amsterdam, where the international group of regulators and finance officials is meeting. “There is willingness and determination on winning the battle to restore confidence and stability.”

Banks and brokers have slowed lending as they struggle to restore their capital after $586 billion in credit losses and writedowns since the mortgage crisis began a year ago. The bankruptcy of Lehman Brothers Holdings Inc. also sparked fears among banks they wouldn’t be repaid by counterparties, driving up the cost of short-term loans between banks.

Funding Risk

“By committing to provide a very large quantity of term funding, the Federal Reserve actions should reassure financial market participants that financing will be available against good collateral, lessening concerns about funding and rollover risk,” the central bank said.

The Bank of England and the ECB will each double the size of their dollar swap facilities with the Fed to as much as $80 billion and $240 billion, respectively. The Swiss National Bank and the Bank of Japan will also double their dollar swap lines, while the central banks in Australia, Norway, Sweden, Denmark and Canada tripled theirs.

All the banks extended their facilities until the end of April 2009.

The Fed is also increasing the size of its three 84-day TAF sales to $75 billion apiece, from $25 billion. That means the Fed will make a total of $225 billion available in 84-day loans. The central bank will keep the sales of 28-day credit at $75 billion.

Special Sales

In addition, the Fed will hold two special TAF sales in November totaling $150 billion so banks can have funding available for one or two weeks over year-end. The exact timing and terms will be determined later, the Fed said. The TAF program began in December, totaling $40 billion.

The bank-rescue plan being debated by Congress today would give the Fed more power over short-term interest rates by providing authority as of Oct. 1 to pay interest on reserves held at the central bank by financial institutions. That would make it easier for the Fed to pump funds into the banking system.

Paying interest on reserves puts a “floor” under the traded overnight rate, which would allow a central bank “to provide liquidity during times of stress” without affecting the rate, New York Fed economists said in a paper last month.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.netCraig Torres in Washington at

Last Updated: September 29, 2008 14:28 EDT

New Banking Data: Where’s The Credit Crisis? Total Bank Loans and Leases Exceed $7T For First Time (Novos dados bancários nos EUA: Onde está a crise de crédito?)

setembro 29, 2008

Mais evidências das contradições desta “crise financeira”.  Os dados vêm do blog do Prof. Mark Perry!


Monday, September 29, 2008

New Banking Data: Where’s The Credit Crisis? Total Bank Loans and Leases Exceed $7T For First Time


New banking data were released today from the Federal Reserve on bank loan volume through September 17 (for weekly data and August for monthly data), showing that “Total Loans and Leases at All Commercial Banks” reached an all-time high of $7.026 trillion (reported weekly) in mid-September, going over $7 trillion for the first time in history (see graph below).

Consumer loans (reported monthly) hit an all-time high of $845 billion in August:

Real estate loans (reported monthly) peaked out this year at about $3.642 trillion, and increased slightly in August from July:

Commercial and industrial loans at large commercial banks (reported weekly) were close to an all-time in September, just slightly below record levels reached in July:

Q: Where’s the credit crisis?

Crise financeira com rejeição do “pacote Paulson”: agora é com o mercado mesmo!

setembro 29, 2008

Ainda não processei as informações sobre a rejeição, no Congresso Americano, do Plano de Salvação do Secretário do Tesouro Henry Paulson, mas algumas impressões podem formadas à luz da decisão.

Em primeiro lugar, parece que a rejeição (vinda mais do flanco dos Republicanos, como se pode ver abaixo pela numerologia abaixo (retirada do blog do Prof. Brad DeLong: advém de uma descrença da efetividade da intervenção nos mercados (algo caro aos republicanos conservadores).

Democrats: 141 Yea,  94 Nay
Republican:  66 Yea, 132 Nay.

Em segundo, lugar, e como manifestado pelo blog Market Watch, agora só resta ver se Henry Paulson e Ben Bernanke estavam certos de que a crise de crédito poderia piorar e impingir sérias consequências na economia global. Ou talvez os muitos críticos do plano Paulson estivessem certos em afirmar que os mercados de crédito e os preços de mercado podem se ajustar por conta própria, uma vez que a promessa de dinheiro livre é retirada.

Os líderes no Congresso e no Governo irão tentar novamente, na esperança de escreverem uma legislação-compromisso que possa atrair a maioria.  Mas não será algo fácil.

“Algo me diz que a semana de trabalho, que começa amanhã, não será tão tranquila quanto a sexta-feira passada, depois que o governo americano anunciou seu plano de “salvação” da crise.Pela polêmica que o plano tem causado entre os especialistas, é possível acreditar que muita água ainda vai rolar, e isso vai se refletir nos indicadores financeiros (que poderão oscilar bastante esta semana)!”

… era ingenuidade acreditar que o Congresso dos EUA decidisse tão rápido (favoravelmente) algo tão polêmico, principalmente às vésperas de uma eleição tão importante quanto esta deste ano. 

Em resumo, agora é com o mercado mesmo (por enquanto)!

The domino effect – what’s that? (O efeito dominó- o que é isto?)

setembro 29, 2008

Vejam o que peguei no blog !

Monday, September 29, 2008

The domino effect – what’s that?


Here are some nice illustrations for the republicans in the US Congress.

Too complex? Try this one instead:

Or maybe this one?


The $700bn bail-out and the budget (Os 700 bilhões de dólares de salvação e o orçamento dos EUA)

setembro 29, 2008

Novos comentários do Prof. Larry Summers sobre a crise financeira em sua coluna no Financial Times!


The $700bn bail-out and the budget

By Lawrence Summers

Published: September 28 2008 19:37 | Last updated: September 28 2008 19:37

Congressional negotiators have now completed action on a $700bn authorisation for the bail-out of the financial sector. This step was as necessary as the need for it was regrettable. There are hugely important tactical issues regarding the deployment of these funds that the authorities will need to consider in the weeks and months ahead if the chance of containing the damage is to be maximised. I expect to return to these issues once the legislation is passed.

In the meantime, it is necessary to consider the impact of the bail-out and the conditions necessitating it on federal budget policy. The idea seems to have taken hold in recent days that because of the unfortunate need to bail out the financial sector, the nation will have to scale back its aspirations in other areas such as healthcare, energy, education and tax relief. This is more wrong than right. We have here the unusual case where economic analysis actually suggests that dismal conclusions are unwarranted and the events of the last weeks suggest that for the near term, government should do more, not less.

First, note that there is a major difference between a $700bn (€479bn, £380bn) programme to support the financial sector and $700bn in new outlays. No one is contemplating that the $700bn will simply be given away. All of its proposed uses involve either purchasing assets, buying equity in financial institutions or making loans that earn interest. Just as a family that goes on a $500,000 vacation is $500,000 poorer but a family that buys a $500,000 home is only poorer if it overpays, the impact of the $700bn programme on the fiscal position depends on how it is deployed and how the economy performs.

The American experience with financial support programmes is somewhat encouraging. The Chrysler bail-out, President Bill Clinton’s emergency loans to Mexico, and the Depression-era support programmes for housing and financial sectors all ultimately made profits for taxpayers. While the savings and loan bail-out through the Resolution Trust Corporation was costly, this reflected enormous losses in excess of the capacity of federal deposit insurance programmes. The head of the FDIC has offered assurances that nothing similar will be necessary this time. It is impossible to predict the ultimate cost to the Treasury of the bail-out programme and of the other guarantee commitments that financial authorities have – this will depend primarily on the economy as well as the quality of execution and oversight. But it is very unlikely to approach $700bn and will be spread over a number of years.

Second, the usual concern about government budget deficits is that the need for government bonds to be held by investors will crowd out other, more productive, investments or force greater dependence on foreign suppliers of capital. To the extent that the government purchases assets such as mortgage-backed securities with increased issuance of government debt, there is no such effect.

Third, since Keynes we have recognised that it is appropriate to allow government deficits to rise as the economy turns down if there is also a commitment to reduce deficits in good times. After using the economic expansion of the 1990s to bring down government indebtedness, the US made a serious error in allowing deficits to rise over the last eight years. But it would be compounding this error to override what economists call “automatic stabilisers” by seeking to reduce deficits in the near term.

Indeed, in the current circumstances the case for fiscal stimulus – policy actions that increase short-term deficits – is stronger than at any time in my professional lifetime. Unemployment is now almost certain to increase – probably to the highest levels observed in a generation. Monetary policy has very little scope to stimulate the economy given how low policy rates already are and the problems in the financial system. And experience around the world with economic downturns caused by financial distress suggests that while they are of uncertain depth, they are almost always of long duration.

The economic point here can be made more straightforwardly. The more people who are unemployed the more desirable it is that government takes steps to put them back to work by investing in infrastructure, energy or simply through tax cuts that allow families to avoid cutting back on their spending.

Fourth, it must be emphasised that nothing in the short-run case for fiscal stimulus vitiates the argument that action is necessary to ensure the US is financially viable in the long run. We still must address issues of entitlements and fiscal sustainability.

From this perspective the worst possible actions in the current context would be steps that have relatively modest budget impacts in the short run but that cut taxes or increase spending by growing amounts over time. Examples would include new entitlement programmes or exploding tax measures. The best measures would be those that represent short-run investments that will pay back to the government over time or those that are packaged with longer-term actions to improve the budget. Examples would include investments in healthcare restructuring or steps to enable states and localities to accelerate, or at least not slow down, their investments.

A time when confidence is lagging in the household, financial and business sectors is not a time for government to step back. Well-designed policies are essential to support the economy and given the seriousness of healthcare, energy, education and inequality issues, can make a longer-term contribution as well.


The writer is the Charles W. Eliot professor at Harvard University and managing director of D.E. Shaw & Co

Web 2.0 At Work – Simple And Social Collaboration Between Coworkers (Web 2.0 funcionando- Colaboração Social e Simples entre Co-trabalhadores)

setembro 29, 2008

Eis aqui um conjunto de slides bastante interessante sobre Social Collaboration: Web 2.0 At Work – Simple And Social Collaboration Between Coworkers.

Você pode acessar este conjunto de slides aqui: !

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