The volume of excess reserves commercial banks are holding with the Federal Reserve System has declined by $275 billion (31 percent) over the last five weeks, in what could be the first sign of stabilization within the core of the banking system (https://customers.reuters.com/d/graphics/RESBAL.pdf).
The Great Debate
Every budding economist is taught the distinction between nominal variables (expressed in terms of contemporary cash values) and real variables (adjusted for inflation and expressed in constant-dollars).
Yields on long-term U.S. Treasury debt continued to surge higher yesterday as the market braced for a future upturn in inflation and a tidal wave of long-dated issues that will be needed to fund the bank rescues and the emerging stimulus package.
Like a Byzantine emperor, a U.S. president’s every public move is scripted to send signals about his priorities to Congress, the electorate, business, and the vast federal bureaucracy that will actually be responsible for formulating and implementing decisions in his name.
The international system of bank regulation, epitomised by the Basle II process and the light-touch principles-based regulation of Britain’s Financial Services Authority (FSA) has comprehensively failed.
UK Prime Minister Gordon Brown’s call today for a new G20 charter of principles on financial regulation reflects an emerging consensus among policymakers that, once the immediate crisis has passed, the regulatory framework must be fundamentally redesigned.
The last eighteen months have witnessed a revolution in financial regulation — if by that we mean a fundamental reconstruction, total change or turn round from the previous orthodoxy occurring in a relatively compressed time.
For the world monetary system, the financial crisis which erupted in the summer of 2007 is a cataclysmic shift that will prove every bit as significant as the outbreak of the First World War (which heralded sterling’s demise as a reserve currency) and the suspension of gold convertibility in 1971 (which marked the end of bullion’s monetary role).
The global slowdown is hitting China’s modern manufacturing base in Guangdong province especially hard. Deputy governor Huang Longyun on Thursday warned a news conference “the situation is grim” and the manufacturing hub around Pearl River Delta is bearing the brunt of China’s slowdown.