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Symposium on Operations and Economics of Competitive Sports Teams

Monday, April 11, 2016

UWL Graff Main Hall Auditorium

Featuring: Oliver Luck, NCAA Executive Vice President Regulatory Affairs

More details

Shut Down.

Estimates of the consequences of the shut down.

The Fed Surprise

As an exercise for the macro student, watch this video starting around minute 30. The video is a brief Q&A with Narayana Kocherlakota, the President of the Minneapolis Federal Reserve Bank.

Then make a prediction for monetary policy going forward.
A) The Fed Tapers or
B) The Fed Waits.

Then read what happened here.

Surprised?

What can the Fed do about stagflation?

The NY Times had a nice article about the Fed's lack of options to fight stagflation and the hope the China's economy doesn't sputter and make things worse for the U.S.

http://www.nytimes.com/2011/04/29/business/economy/29norris.html

FOMC post-meeting press conference

In an effort to be ever-more transparent, Ben Bernanke gave his first ever, of many, press conference. He'll be giving press conferences after every FOMC meeting.

Here is a summary of what he said,

http://www.reuters.com/article/2011/04/27/us-usa-fed-bernanke-highlights-idUSTRE73Q6ZU20110427

Central Banking Videos

The Federal Reserve has a lot of videos on its website about monetary policy and the federal reserve in general, and even information about recent news monetary policy actions.

Here is one short video about what the Federal Reserve is:
http://bcove.me/yq3ydto2

Here are all of the vidoes:
http://www.federalreserve.gov/mediacenter/media.htm

Inflation and U.S. Federal Government Debt

Here is short interesting article from the St. Louis Fed about the possibility that the Federal Reserve might "monetize" the U.S. debt.

Fiscal Policy and Expected Inflation

QE2 in Cartoon

Diarrhea-Constipation Cycle

Which school of thought do you belong to?

Here's Keynes' own take on managing business cycles and the digestive health of our children:

http://thinkmarkets.wordpress.com/2010/02/18/keynes-on-the-bismuth-castor-oil-cycle/

The Fed struggles against a 'good old boys' persona

The NY Fed President resigned after announcement of his ownership and connections to Goldman Sachs who applied to become a bank holding company. I can understand the initial waiver of the conflict of interest, but I can't understand why he thought he could buy more shares.
Read the article here.

A Rare Interview with the Chairman

Ben Bernanke was interviewed on 60 minutes this week.
Part I

Watch CBS Videos Online

Part II

Watch CBS Videos Online

Credit Crisis

This is an okay visualization of the credit crisis.


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Economist Panel Inteview about the Crisis

Economics Student Discussion

The current economic situation in the US has prompted many discussions of macroeconomic policy, monetary policy, and the workings of the US economy. Multiple students have expressed interest in getting together to discuss current economic events. This discussion would be student led.

I propose an initial meeting time of 4:30pm on Wednesday, October 22 in room 257 in the Cartwright Center. If you are interested, join the Facebook group ‘UW-L Economics Students’ or email me.

If you have a specific question or an article to discuss, bring it with you.

Kathryn Birkeland
birkelan.kath@uwlax.edu

Bailout Plan Summary

If you're wondering what's in the bailout plan passed by Congress this week, check out this summary.
http://money.cnn.com/2008/10/03/news/economy/house_bill_summary/

Credit Crisis Timeline

For a timetable of the current crisis, check out this CNBC slideshow.
http://www.cnbc.com/id/26885751

How Three Economists View a Financial Rescue Plan

By THE NEW YORK TIMES Business Section

Published: September 22, 2008

While the Oval Office and Congress hastily hammer out the details, The Times asked three economists to offer their thoughts on the economic plan. Click here to read the article.

Expanding Power

Here's an article about the proposed new powers of the Fed.

http://www.bloomberg.com/apps/news?pid=20601068&sid=aZ8kIhVPApw8&refer=home

The proposal includes combining the Office of the Comptroller of the Currency and the Office of Thrift Supervision, transferring state bank regulation to the FDIC, and expanding the Fed's legislated "lender of last resort" function.

It also includes the establishment of three new regulators: the prudential financial regulator, the business conduct regulator, and the corportate finance regulator.

Some would assert that a reason behind the current financial turmoil was the increased regulations on banks that created incentives to expand the use of these new financial derivatives. So regulation may have gotten us into this, but let's see if it can get us out of this.

Let me know what you think.

What happend to the Bear?

This latest worry for the Fed stems from the essential collapse of Bear Stearns, one of the largest U.S. investment banks.

Some of the trouble for Bear Stearns stemmed from the Global Legal Settlement of 2002 in which the 10 largest investment banks were barred from combining research and underwriting activities and required to pay substantial fines. Bear Stearns' original fines were approximately $80 million. The investment bank did have some insurance to help with the penalties except they management of Bear Stearns signed the Settlement agreement without talking to its insurers first as their contract stated. So there was $45 million of the penalty that Bear expected would come from insurers, but the insurers felt they hadn't been given sufficient notice. So, the two sides went to court.

Late last week, a NY appeals court ruled that the insurance companies were not responsible for that $45 million. So, Bear Stearns would now have to pay the $45 million penalty out of their own pockets. Worried that the investment bank would not be able to do so, shareholders got out fast. It was a fire sale on Bear Stearn shares dropping from a price of $68 per share on Tuesday, to under $30 per share on Friday to a buyout by JP Morgan on Sunday for $2 per share.

The problem for Bear Stearns is the same as all firms in today's securities markets - asymmetric information. Savers are having a hard time determining the risk of banks, investment banks, and publicly traded companies. With an increase in uncertainty comes an increase in the lemons problem. Without being able to tell stable investment banks from unstable, savers choose to pull back their lending.

The risk that this will spread is high. The increase in adverse selection problems after Bear Stearns has stopped most bank-to-bank lending. The interbank and federal funds markets are not functioning well. Those banks with reserves to lend are holding on to them for fear of getting a lemon.

Fighting a Financial Crisis

The Federal Reserve made the bold move this weekend to extend the discount window to investment banks. The Fed's lender-of-last-resort function is normally reserved for commercial banks and bank holding companies.

In an attempt to calm the financial markets after the essential collapse of Bear Stearns, the Fed has extended this safety net to investment banks as well. At the same time, the Fed lowered the discount rate to 3.25% only 25 basis points above the current federal funds target although the target is expected to be lowered at the meeting on Tuesday. It is not clear how long the Fed expects to maintain this reduction in the premium on discount loans.

Investment banks are large players in the smooth functioning of financial markets. Until this new lending facility from the Fed, these investment houses did not have a government safety net. I believe the Fed is hoping that the availability of support from the Fed will decrease the uncertainty plaguing these investment banks to the extent that the loans will not even be needed. After all, the last time the Fed took steps to extend the discount window was when the markets tumbled after September 11, 2001. The availability of support from the Fed was enough to calm the market and very few loans were actually extended.

The fundamental question: Will all this frantic activity by the Fed instill confidence or increase uncertainty?

Let me know what you think.