Those Smart New Rules to Spot Troubled Banks — Oops! Last week a Wall Street Journal column claimed that the Federal Reserve Board’s stress tests would not have detected Silicon Valley Bank’s (SVB) problems, because its stress tests did not consider interest rate risk. This struck me as close to crazy. How could a stress test not consider interest rate risk? I recalled the stress tests that the Fed and Treasury performed very publicly in March of 2009, in the middle of the financial crisis. These tests did not consider interest rate risk for the simple reason that, at that point…
Author: Dean Baker
Dean Baker
Dean Baker co-founded the Center for Economic and Policy Research in 1999. His areas of research include housing and macroeconomics, intellectual property, Social Security, Medicare and European labor markets. He is the author of several books, including "Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer."
Trump Gave Mid-size Banks and Big Depositors a Free Lunch Two key points about the decision to guarantee all the deposits at Silicon Valley Bank (SVB): It was a bailout Donald Trump was the person responsible. The first point is straightforward. We gave a government guarantee of great value to people who had not paid for it. This is the Donald Trump bailout. He touted the 2018 bill when he signed it. We are now seeing the fruits of his action. We will get a lot of silly game playing on this issue, just like we did back in 2008-09.…
Broken System Allows Pharmaceutical Companies To Sell Drugs at Prices That Are Typically Several Thousand Percent Above Their Free Market Price Outlawing items such as marijuana or alcohol invariably leads to black markets and corruption. Since there is much money to be made by selling these products in violation of the law, many people will follow the money and break the law. They will also corrupt the legal system in the process, making payments to people in law enforcement and elsewhere in the legal system. The old line from economists on this problem is to take the money out, by…
The Big Risk is the Federal Reserve Going Too Far While the news media keep touting the prospects for a recession, it is difficult to see why there would be one in the immediate future. To start with the basic picture, growth in the fourth quarter was a very solid 2.9 percent, following a slightly stronger 3.1 percent in the third quarter. This is very far from the negative growth we see in a recession and much more indicative of a strong economy with growth. When we look at the individual components, the picture is somewhat mixed. Inventory accumulation accounted for half…
A Simple Shift in What’s Taxed Would Raise More Money
An Economist Explains Why The 1.4% GDP Decline Is Misleading Many people were struck by the 1.4% drop in Gross Domestic Product or GDP in the first quarter of 2022, with some reports suggesting this was the beginning of a recession. That is not the real story of the first quarter GDP. Instead, it looks like economic growth is continuing at a healthy rate. How can that be? To understand this point, it is important to recognize how imports are counted in GDP, since the increase in imports subtracted 2.53 percentage points from GDP growth in the quarter. In short,…
This Isn’t — and Can’t Be — 1970s style inflation A popular line on our recent surge of inflation is that an over-tight labor market has led to rapid wage growth, which in turn forces companies to raise prices. Higher prices in turn lead workers to demand higher wages, which will give us a wage-price spiral and soon lead to double-digit inflation. While this was a story that plausibly fit the data in the 1970s, it is very hard to make the wage-price spiral fit the current situation for a simple reason: The wage share of income has fallen sharply…
Profits Before Saving Lives Is Policy for Both Big Pharma and Politicians
How Big Pharma Is Using Public Money to Make Billions Fighting the Virus … and Dragging Their Feet as they Do It
‘We Can Make Voting Rights About Money’