CAMBRIDGE: During the past four years, the United States Federal Reserve has added enormous liquidity to the US commercial banking system, and thus to the American economy. Many observers worry that this liquidity will lead in the future to a rapid (...)
CAMBRIDGE: The driving force of Europe's economic policy is the “European project” of political integration. That goal is reflected in the European Union's current focus on creating a “fiscal compact,” which would constitutionalize member states' (...)
CAMBRIDGE: European political leaders may be about to agree to a fiscal plan which, if implemented, could push Europe into a major depression. To understand why, it is useful to compare how European countries responded to downturns in demand before (...)
CAMBRIDGE: Europe is now struggling with the inevitable adverse consequences of imposing a single currency on a very heterogeneous collection of countries. But the budget crisis in Greece and the risk of insolvency in Italy and Spain are just part (...)
CAMBRIDGE: The French government just doesn't seem to understand the real implications of the euro, the single currency that France shares with 16 other European Union countries.
French officials have now reacted to the prospect of a credit (...)
CAMBRIDGE: The United States appears trapped in a dangerous economic stalemate. The refusal by both Republicans and Democrats to give ground on the budget is preventing the government from dealing with its massive fiscal deficit and rapidly rising (...)
CAMBRIDGE: The Greek government needs to escape from an otherwise impossible situation. It has an unmanageable level of government debt (150 percent of GDP, rising this year by 10 percentage points), a collapsing economy (with GDP down by more than (...)
CAMBRIDGE: America's enormous budget deficit is now exceeded as a share of national income only by Greece and Egypt among all of the world's major countries. To be sure, the current deficit of 9.1 percent of GDP is due in part to the automatic (...)
CAMBRIDGE: The American economy has recently slowed dramatically, and the probability of another economic downturn increases with each new round of data.
This is a sharp change from the economic situation at the end of last year — and represents a (...)
CAMBRIDGE: The world's 20 most important finance ministers and 20 most important central bankers traveled to Washington this month from every part of the globe to accomplish, predictably, exactly nothing.
The subject of the G-20's recent meeting (...)
CAMBRIDGE: China's new five-year plan will have important implications for the global economy. Its key feature is to shift official policy from maximizing GDP growth toward raising consumption and average workers' standard of living. Although this (...)
CAMBRIDGE: The tax package agreed to by President Barack Obama and his Republican opponents in the United States Congress represents the right mix of an appropriate short-run fiscal policy and a first step toward longer-term fiscal prudence. The key (...)
CAMBRIDGE: The United States Federal Reserve's policy of “quantitative easing” is reducing the value of the dollar relative to other currencies that have floating exchange rates. But what does the new Fed policy mean for one of the most important (...)
CAMBRIDGE: The United States' import bill now exceeds $2.4 trillion a year, more than twice that of China and greater than that of the 27 European Union countries combined. Since the volume of US imports varies with the overall strength of the (...)
CAMBRIDGE: Japan is heading toward a savings crisis. The potential future clash between larger fiscal deficits and a low household saving rate could have powerful negative effects on both Japan and the global economy.
First, some background. (...)
CAMBRIDGE: The household saving rate in the United States has tripled in the past three years. Why? And what does it mean for the US economy and the rest of the world?
The rapid rise in saving has reduced consumer spending, slowing the pace of (...)
CAMBRIDGE: Just how bad is the outlook for the United States' economy? Unfortunately, you cannot tell from the forecasts.
These days, it is common to read forecasts predicting that the US economy will grow at a 3 percent annual rate in the coming (...)
CAMBRIDGE: The investors that I talk to these days are not sure whether to worry more about future inflation in the United States or about future deflation. The good news is that the answer — for at least the next few years — is that investors (...)
CAMBRIDGE: The crisis in Greece and the debt problems in Spain and Portugal have exposed the euro's inherent flaws. No amount of financial guarantees — much less rhetorical reassurance — from the European Union can paper them over. After 11 years of (...)
CAMBRIDGE: Greece will default on its national debt. That default will be due in large part to its membership in the European Monetary Union. If it were not part of the euro system, Greece might not have gotten into its current predicament and, even (...)
CAMBRIDGE: An American traveler in Paris or Berlin is continually struck by how high prices are relative to those in the United States. A hotel room, a simple lunch, or a man's shirt all cost more at today's exchange rate than they would in New York (...)
CAMBRIDGE: Chinese officials and private investors around the world have been worrying aloud about whether their dollar investments are safe. Since the Chinese government holds a large part of its $2 trillion of foreign exchange in dollars, they (...)
CAMBRIDGE: Although the strength of the US economy in 2010 remains uncertain, it is important to look ahead to its likely performance in the coming decade. The rise of GDP over the next ten years will reflect the very positive effect of the eventual (...)
CAMBRIDGE: As I walked through the airport in Dubai recently, I was struck by the large number of travelers who were buying gold coins. They were not reacting to Dubai's financial trouble, but rather were joining the eager rush to own gold before (...)
CAMBRIDGE: Since assuming the presidency earlier this year, Barack Obama's primary legislative focus has been on reforming the financing of American health care. Yet his proposals are meeting strong opposition from fiscally conservative Democrats as (...)