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Opinions and views from expert CFOZone members.

Tag >> recovery
Aug 19
2010

A better way to boost demand

Posted by Ron F in Riskrecoveryrecessionfinancial market reformfinancial crisisFederal ReserveFedeconomycareer advancementbubblesBanksbank lending

Ron F

Bear with me here. This is going to be one of those "out there" posts. But Steve Randy Waldman takes an interesting stab at a problem I've been wrestling with, at least in the furthest reaches of the financial corner of my brain, since the financial crisis began.

And that is how to stimulate the economy without creating another asset bubble. It sounds easy enough to the Keynesians, but as Waldman has pointed out before, rebooting aggregate demand through traditional government action may simply create another bubble. And ultimately, the distinction between monetary and fiscal policy may be moot.

Aug 18
2010

Keynes' biographer skewers deficit hawks

Posted by Ron F in recoveryrecessionObama Administrationgovernment financeglobal economyFederal ReserveFedeconomyECBdemanddefaultcareer/management

Ron F

This piece published today by Project Syndicate is as insightful a critique as I've seen of the consensus that has emerged among policymakers that government deficits must be cut to restore economic growth.

Not that we haven't taken a stab at that ourselves.

Aug 13
2010

Time to keep subsidizing home prices

Posted by Ron F in RegulationrecoveryrecessionFreddie Macfinancial crisisFederal ReserveFASBFannie MaeemploymentCareers/Managementbankruptcybanking industrybailoutsAccounting

Ron F

I have to disagree with my colleague Steve Taub on this, not because my heart bleeds for jobless, underwater homeowners, but to keep foreclosures from driving home prices ever downward.

Here's the thing: What is the "natural" price that Steve wants the market to find?

Aug 03
2010

Why corporations may not care about the domestic economy

Posted by Ron F in recoveryrecessionoutsourcingoffshorejoblessnessglobal economyemployment growthemploymentemerging marketseconomyearningsdemandcutting costscorporations

Ron F

Paul Krugman today once again bemoans the lack of Keynesianism in what passes for economic policymaking discussions these days, and I share that complaint.

However, Krugman may be missing part of the problem here, which is that those who pooh-pooh the prospect of deflation may actually not much care if it materializes, though they would be mistaken to do so.

Jul 27
2010

Time to reread Keynes

Posted by Ron F in recoveryrecessionObama Administrationjobsjoblessnessinvestmentfinancial crisisenvironmental policyenergyemploymenteconomydemandCongressCareers/Management

Ron F

I've avoided rehearsing the on-going debate over the bleak macroeconomic picture, because it quickly descends into endless political back and forth along with the usual name-calling, as my colleague Steve Taub and I have been discussing internally today.  But it's time to make an exception:

Is the private sector not hiring because it fears more aggressive action from the public sector, and so the public sector (read Obama administration) should leave the economy to itself, as those on the right claim? Or is the lack of private sector hiring a reflection of a lack of private sector hiring, and thus a vicious circle and market failure that requires the public sector (read Obama administration) to step in with a serious jobs program involving infrastructure, alternative energy and schools, as those on the left insist?

Not to speak for Steve, but my sense is he tends to agree with the first perspective, at least for the most part, and I can safely report that I agree with the second, and would recommend James Surowiecki's recent column to help make my case if I could find it. Since I can't, suffice it to say Surowiecki made the useful observation that the two sectors where hiring is picking up, banking and health care, are those where the government has taken the most aggressive regulatory action.

Jul 08
2010

Why companies aren't spending

Posted by Ron F in recoveryrecessionObama AdministrationObamajobsjoblessnessemploymenteconomyearningsdemandcash positioncash managementCashcapital expenditurescapex

Ron F

There's a political debate heating up about companies' hesitancy to invest the cash they're sitting on.

Essentially, the Democrats--or at least those in favor of further government stimulus measures such as a jobs program or at least extended unemployment benefits--argue that companies are wary of spending because of the lack of aggregate consumer demand.

Jul 01
2010

Companies sitting on still more cash

Posted by Ron F in TaxTARPrecoveryrecessioneconomydemanddefaultconsumer spendingCongresscash managementcash concernsCashCarmen ReinhartCareers/Managementcapital expenditurescapexBanks

Ron F

A survey released today by the Association of Financial Professionals will do nothing to dampen the austerity versus stimulus debate.

To wit: Forty-three percent of US corporations had larger US cash and short-term investment holdings this May than they did six months earlier. Only 24 percent of respondents reported that their short-term holdings had shrunk during the past six months.

Jun 23
2010

Dividend increases a sign of weak economy

Posted by mcole in unemploymentshareholdersshare repurchaserecoverydividendsCash

mcole

While the US economy struggles to recover and the unemployment rate continues to hover around 10 percent, several companies have increased dividend payments in recent weeks for lack of opportunities to invest in their business.

In early June, Target authorized a 47 percent increase in its quarterly dividend, citing the fact that "cash generation is well above the amount needed for optimal reinvestment in its core business."

Jun 22
2010

Why Keynes was only half right

Posted by Ron F in unemploymentSpendingRiskrecoveryrecessionObamajobsjoblessnessglobal economyGermanyeconomydemandconsumer spendingclimate changeclean energyCareers/Managementcarbon emissionsCapitalcap and tradeBarry Ritholtzalternative energy

Ron F

At long last, one writer has seriously addressed the potential problems with more stimulus spending. (I sent Paul Krugman a question about this more than a week ago, via a comment on his blog, but from what I can see he has yet to address it. And Dean Baker too easily dismisses the issue, in my opinion.)

The problem is not the federal budget deficit, not at least in the short term, but the potential political fallout from bad decision making. That way, says Steve Randy Waldman, indeed lay a possible US currency crisis. And this is ultimately where Friedrich Hayek and his associates were coming from in blaming Weimar for the disasters that followed.

Jun 16
2010

Fears about central banks' "independence" overblown

Posted by Ron F in RiskRegulationrecoveryrecessionPaul Volckerinflationfinancial reformFederal ReservecomplianceBanksBanking

Ron F

This Bloomberg story echoes a common complaint about efforts to increase the public accountability of the Federal Reserve, which is that they will weaken its independence.

I've ranted before about the Fed's "independence" being in the eye of the beholder. (A central bank beholden to private banks is hardly independent.) But proponents have one valid concern: Subjecting the Fed to the will of the mob could be inflationary (though why inflation is a bad thing when demand is depressed is beyond me).

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