The document summarizes the economic situation in the United States from 1981 to 2011 under different presidents. It discusses Ronald Reagan's economic policies of reducing taxes and government spending which led to strong economic growth during his terms. It then discusses the policies and economies under George H.W. Bush, Bill Clinton, George W. Bush, including the 2008 financial crisis and recession at the end of Bush's second term.
Monetary policy is an important public policy, but it is not the only one to stabilize our economy and reduce its business cycles. The leading central bank, the Federal Reserve of the U.S., has introduced, after the 2008 global financial crisis, new instruments and unusual facilities to implement its new innovative monetary policy. The financial world and mostly the social scientists watch as the Federal Open Market Committee (FOMC) decides on a target interest rate in the federal funds market for the next period. The framework that the FOMC uses to implement monetary policy has changed over the last twelve years and continues to evolve today. Here, we try to evaluate the new instruments and their “effectiveness”. Before the 2008 financial crisis, policymakers used one set of traditional instruments (tools) to achieve the target rate. However, several policy interventions, introduced soon after the crisis, drastically altered the landscape of the federal funds market and the traditional economic theory. This new and uncertain environment, with enormous reserves and even interest on reserves, necessitated a new set of instruments by the Fed for its monetary policy implementation. Lately, after seven years of zero interest rate, the FOMC began in December 2015 to increase the target rate and then, went back again to a lower one, but many questions arise. How did they evaluate the effectiveness of these new instruments? Is the current federal funds rate the appropriate one for our economic wellbeing? How efficient was so far this ZIR monetary policy after the latest global financial crisis? Why the Fed put all these burdens of its ‘innovated” new monetary policy to the poor taxpayers (bail out) and to the risk-averse depositors (bail in)? Is it possible for the Fed’s policy to prevent the future financial crises? The federal funds rate was very low and affected negatively the financial markets (bubbles were growing), the real rates of interest (it is negative for twelve years), and the deposit rates (they are closed to zero for twelve years). The redistribution of wealth of depositors and taxpayers continues, which means the true economic welfare is falling and a new global recession was in preparation, if the current unfair easy money policy will persist, ignoring the necessity of a prevention of financial crises. Then, it came as an unexpected plague the coronavirus pandemic, following with a new but, the worse in economic history global crisis (chaos).
Inflation Views by the author Bud LabitanBud Labitan
I release this free book project file here as "Inflation Views" and dedicate it to the friends, members, and acquaintances of ISVI, International Society of Value Investors. "Inflation Views" covers Warren Buffett's writings on inflation from 1977 to 1983. I added data and commentary to help the reader understand that period. In my view, much of the knowledge gained during that time is relevant to us today.
Western governments are hopelessly addicted to deficit financing while refusing to address looming funding issues - with apologies to the embarrassingly foolish Angela Merkel, politicians can no more successfully “battle” the markets than you and I can successfully “battle” gravity. Petrocapita is an investment trust built around the premise that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil & gas assets directly to their portfolios.
arifanee.com is world's leading website on the hottest financial news, perspectives and behind the scenes stories. arifanees.com brings you insight and information to inspire and transform your paradigm by enriching your with the best of facts and the vision.
arifanees.com
Information-Inspiration-Transformation
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
Please note that our risk-based benchmark (cross-asset allocation calibrated to a given C-Var), our tilted portfolio (with tactical overlay exposures implied by the market views expressed above), as well as the corresponding main characteristics (usual statistics, risk contributions, backtests…), are available only for our subscribers.
Many of the world's poorest citizens live in peripheral spaces their states have chosen
not to control. Leaving these spaces ungoverned poses challenges for development, global
terrorism, and conflict. Can the international community induce countries to invest in
controlling their territory? I consider the Bush Administration's foreign policy, which,
following the September 11th attacks, demanded countries take active steps to reduce
terrorist safe havens or risk a US invasion. Drawing upon recent work on the determinants
of government control, I develop a difference-in-difference strategy to test for evidence
of government expansions and implement this test using subnational conflict data from Africa. Across a wide range of specifications and measures, I consistently find precise
estimates suggesting African states did not engage in these expansions. The results suggest that broad-based deterrence is an ineffective policy strategy to reduce ungoverned spaces.
The Bill Clinton Era the 1990s and the new millenniumBoutkhil Guemide
The Presidency of Bill Clinton has been an important era in the history of the US. Clinton is best known of his economic policies; namely, Clintonomics which produced a huge surplus of the budget. In foreign policy, Clinton is best known of the Engagement and Enlargement which relied on building of a new world order based on both Democracy and Freemarket economy.
Monetary policy is an important public policy, but it is not the only one to stabilize our economy and reduce its business cycles. The leading central bank, the Federal Reserve of the U.S., has introduced, after the 2008 global financial crisis, new instruments and unusual facilities to implement its new innovative monetary policy. The financial world and mostly the social scientists watch as the Federal Open Market Committee (FOMC) decides on a target interest rate in the federal funds market for the next period. The framework that the FOMC uses to implement monetary policy has changed over the last twelve years and continues to evolve today. Here, we try to evaluate the new instruments and their “effectiveness”. Before the 2008 financial crisis, policymakers used one set of traditional instruments (tools) to achieve the target rate. However, several policy interventions, introduced soon after the crisis, drastically altered the landscape of the federal funds market and the traditional economic theory. This new and uncertain environment, with enormous reserves and even interest on reserves, necessitated a new set of instruments by the Fed for its monetary policy implementation. Lately, after seven years of zero interest rate, the FOMC began in December 2015 to increase the target rate and then, went back again to a lower one, but many questions arise. How did they evaluate the effectiveness of these new instruments? Is the current federal funds rate the appropriate one for our economic wellbeing? How efficient was so far this ZIR monetary policy after the latest global financial crisis? Why the Fed put all these burdens of its ‘innovated” new monetary policy to the poor taxpayers (bail out) and to the risk-averse depositors (bail in)? Is it possible for the Fed’s policy to prevent the future financial crises? The federal funds rate was very low and affected negatively the financial markets (bubbles were growing), the real rates of interest (it is negative for twelve years), and the deposit rates (they are closed to zero for twelve years). The redistribution of wealth of depositors and taxpayers continues, which means the true economic welfare is falling and a new global recession was in preparation, if the current unfair easy money policy will persist, ignoring the necessity of a prevention of financial crises. Then, it came as an unexpected plague the coronavirus pandemic, following with a new but, the worse in economic history global crisis (chaos).
Inflation Views by the author Bud LabitanBud Labitan
I release this free book project file here as "Inflation Views" and dedicate it to the friends, members, and acquaintances of ISVI, International Society of Value Investors. "Inflation Views" covers Warren Buffett's writings on inflation from 1977 to 1983. I added data and commentary to help the reader understand that period. In my view, much of the knowledge gained during that time is relevant to us today.
Western governments are hopelessly addicted to deficit financing while refusing to address looming funding issues - with apologies to the embarrassingly foolish Angela Merkel, politicians can no more successfully “battle” the markets than you and I can successfully “battle” gravity. Petrocapita is an investment trust built around the premise that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil & gas assets directly to their portfolios.
arifanee.com is world's leading website on the hottest financial news, perspectives and behind the scenes stories. arifanees.com brings you insight and information to inspire and transform your paradigm by enriching your with the best of facts and the vision.
arifanees.com
Information-Inspiration-Transformation
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
Please note that our risk-based benchmark (cross-asset allocation calibrated to a given C-Var), our tilted portfolio (with tactical overlay exposures implied by the market views expressed above), as well as the corresponding main characteristics (usual statistics, risk contributions, backtests…), are available only for our subscribers.
Many of the world's poorest citizens live in peripheral spaces their states have chosen
not to control. Leaving these spaces ungoverned poses challenges for development, global
terrorism, and conflict. Can the international community induce countries to invest in
controlling their territory? I consider the Bush Administration's foreign policy, which,
following the September 11th attacks, demanded countries take active steps to reduce
terrorist safe havens or risk a US invasion. Drawing upon recent work on the determinants
of government control, I develop a difference-in-difference strategy to test for evidence
of government expansions and implement this test using subnational conflict data from Africa. Across a wide range of specifications and measures, I consistently find precise
estimates suggesting African states did not engage in these expansions. The results suggest that broad-based deterrence is an ineffective policy strategy to reduce ungoverned spaces.
The Bill Clinton Era the 1990s and the new millenniumBoutkhil Guemide
The Presidency of Bill Clinton has been an important era in the history of the US. Clinton is best known of his economic policies; namely, Clintonomics which produced a huge surplus of the budget. In foreign policy, Clinton is best known of the Engagement and Enlargement which relied on building of a new world order based on both Democracy and Freemarket economy.
As late as 1992, the United States was running budget deficits of ne.pdfarihantmum
As late as 1992, the United States was running budget deficits of nearly $300 billion. During the
remainder of the 1990\'s, deficits declined and became surpluses. As the new century began,
these surpluses again turned into deficits. •Explain the decline in deficits and subsequent
surpluses in the late 1990\'s. •Explain the return to deficit spending since the turn of the century.
•Consider the causes of the deficits and surpluses and provide your own insight as to whether
these surpluses or deficits have a \"positive\" or \"negative\" effect on our economy
Solution
As the 1990s came to an end, virtually all financial-market observers and politicians rejoiced that
budget deficits were gone and that the U.S. had entered a period of fiscal stability. Politicians on
both sides of the aisle viewed the new world of budget surpluses as an opportunity to save Social
Security, to cut Federal debt, and to lower taxes.
Budget deficits or budget surpluses are neither good nor bad, they are fiscal policy options that
can stabilize or de-stabilize an economy. The U.S. economy, under Reagan, Bush, and early
Clinton, experienced higher not lower rates of economic growth at a time when budget deficits
were at record levels and tax rates were on the decline. Over the past 20 years a period of record
budget deficits the stock market increased from 950 to over 11,000, providing ample evidence
that budget deficits are not necessarily bad for an economy.On the other hand, budget surpluses
are not necessarily good. As the budget surpluses began to expand dramatically in late 1999 and
into 2000, the stock market appeared to be reversing the record up-trend of the 1980s and \'90s.
One possible reason for the reversal: the growing budget surplus was sapping the savings of the
private sector. Consumers were able to maintain their spending only through expanding debt to
record level.
In the late 90s, the confluence of strong economic growth, decelerating federal government
spending, and substantial increases in tax rates (revenues) had the unexpected effect of producing
enormous budget surpluses. As unexpected budget surpluses burst on the scene in the late 1990s,
most mainstream economists weren’t sensitive to the contractionary impact that surpluses can
have on the economy. The reason was simple that none of their economic models ever included
the forecast of a substantial surplus.
Ronald Reagan’s was the vice president of the USA for eight years and knew firsthand how
difficult it was to bring the federal budget deficit down from 6 percent of GDP in 1983 to 2.8
percent in Reagan’s last budget. Bush knew that the many budget deals of the 1980s had been
hard fought and always involved higher taxes as part of the deficit reduction, Reagan signed into
law 11 major tax increases that raised taxes by $133 billion in 1988 or 2.7 percent of GDP.Bush
administration economists believed that an easier monetary policy was the key to stimulating
growth. But Federal Reserve Board.
Brazil’s Currency CrisisBy Team IV ( Chris Trick, Austin.docxAASTHA76
Brazil’s Currency Crisis
By Team IV ( Chris Trick, Austin Weaver, Tim Moore, Pat Heffernan, Chris Barnes
Why Brazil MattersBiggest economy in Latin AmericaOne of the last big countries to attempt free trade and privatization; if this fails international investors discouraged.Unified global economy is threatened if Brazilian currency fails.
HistoryBrazil had been through 6 currencies since the 1960’sIn 1994 the Real Plan was adoptedBefore it were a series of failed plans (the Cruzado Plan of 1986, Bresser plan of 1987, and more)It worked well to tame inflation and maintain exchange rate stability for 5 years
HistoryThe Real was initially indexed one-for-one with the dollarIt was quickly allowed to float thoughA policy of high interest rates to discourage speculation and over-borrowing quickly attracted a surge of capital inflowsBy the mid 1995 the Real Plan evolved into a crawling peg
HistorySaid to be the worst currency crisis in the western hemisphere to dateThe Real Plan was one of the longest running exchange rate stabilization programs
Facts of Life Before Crisis43% of Brazilians – over sixty million people - lack the essentials of a decent lifeOne in three children drop out of school without completing primary Drug gangs rule the favelas and the middle class lives behind bolted doors Half a million North-eastern farmers watch crops wither in yet one more drought The urban environment, home to four out of five Brazilians, is deteriorating fast Blacks, over-represented amongst the poor, suffer social discrimination Indians face severe threats to their economic and cultural survivalThe income gap between men and women is the worst in Latin America
Why Peg to Dollar?Needed to convince domestic and international investors that chronic inflation would be stopped.Before Real Plan, inflation was 3000%.Fixing the exchange rate was easier then reducing government commitments.
The FallIt was in a financially fragile stateIt required large capital inflows to build up the central bank to defend currencyThis built investor confidence and led to exchange rate appreciationThis fueled import-driven consumption and stifles export growthIn order to attract the inflows the real interest rate had to rise
The FallThe high interest rates lead to a rising debt burden and a deteriorating fiscal balanceA rising budget deficit and deteriorating trade balance inevitably lead to devaluationIt just could not finance its current account deficit due to insufficient long-term instruments
The FallInvestors came to believe the capital inflows were insufficient to finance its current account deficitProductivity did grow from the imported capital goods The industrial restructuring it caused was not enough to fight off the deteriorating trade balance as unemployment rose
The FallSpeculative pressure built up and it became harder and harder for the central bank to maintain the rateEventually the peg had to break; calling for a floating rat ...
4. REAGONOMICS The four pillars of Reagan's economic policy were to: Reduce government spending, Reduce income and capital gains marginal tax rates, Reduce government regulation, Control the money supply to reduce inflation.
5.
6. As a percentage of the gross domestic product (GDP), federal revenues declined only slightly from 18.9 percent in 1980 to 18 percent in 1990.
7.
8. The American economy grew by about one-third in real inflation-adjusted terms. This was the equivalent of adding the entire economy of East and West Germany or two-thirds of Japan's economy to the U.S. economy.
9.
10. As a percentage of GDP, federal expenditures grew slightly from 21.6 percent in 1980 to 21.8 percent in 1990.
11. Contrary to popular myth, while inflation-adjusted defense spending increased by 50 percent between 1980 and 1989, it was curtailed when the Cold War ended and fell by 15 percent between 1989 and 1993. However, means-tested entitlements, which do not include Social Security or Medicare, rose by over 102 percent between 1980 and 1993, and they have continued climbing ever since.
15. George H. W. Bush lead one of worst economy policy, but he is an economist. He involves form Republican Party During his term inflation, unemployment and public debt has grown. It was main reasons of his defeat in reelection.
16. Gross Domestic Product: $7,536 billions, increase during the term 6.5% Federal Spendings: $1,615 billions, increase during the term 7.8% Federal Debt: $4,987 billions, increase during the term 32.7% Inflation: Overall inflation during the term 17.75% Unemployment: Rate of unemployment reached 7.8%, and 14.2% of Americans lived in poverty.
17.
18. FAILURES: Rise of unemployment Rise of inflation Rise of public debt ACHIEVEMENTS: End of Cold War USSR collapse Kuwaitprotection Reduction of weaponary
20. Clinton presided over the continuation of an economic expansion that would later become the longest period of peace-time economic expansion in American history William Jefferson "Bill" Clinton served asthe 42nd PresidentoftheUnited States from 1993 to 2001
21. „Bill Clinton cut the military drastically. It’s called the peace dividend, one of those nice-sounding phrases, very devastating. It was a 25, 30 percent cut in the military. President Bush has never made up for that. We – our Army had been at 725,000; it’s down to 500,000.” Numerous military events occurred during Clinton's presidency. The Battle of Mogadishu also occurred in Somalia in 1993. During the operation, two U.S. MH-60 Black Hawk helicopters were shot down byrocket-propelled grenade attacks to their tail rotors, trapping soldiers behind enemy lines.
22. The table below shows the annual federal spending, gross federal debt, and gross domestic product
23. THE LOWEST UNEMPLOYMENT RATE SINCE 1969 AND MORE THAN 20 MILLION NEW JOBS. In 1992, when Bill Clinton was elected President, the American economy was barely creating jobs, wages were stagnant, and the unemployment rate was 7.5 percent. His bold, three-part economic strategy focused on three objectives: fiscal discipline, investing in education, health care, science and technology, and opening foreign markets. Today’s jobs release provides more evidence that this strategy is working: The Unemployment Rate Was 4.2 Percent in 1999 -- the Lowest Since 1969. The unemployment rate was 4.1 percent in December bringing the average unemployment rate for 1999 to 4.2 percent -- the lowest since 1969. The unemployment rate has fallen for seven years in a row. It has remained below 5 percent for 30 months in a row. For women the unemployment rate was 4.1 percent -- the lowest since 1953
25. Clinton's job approval rating ranged from 36% in mid-1993 to 64% in late 1993 and early 1994. In his second term, his rating consistently ranged from the high-50s to the high-60s.After his impeachment proceedings in 1998 and 1999, Clinton's rating reached its highest point at 73% approval. He finished with an approval rating of 68%, which matched those of Ronald Reagan and Franklin D. Roosevelt as the highest ratings for departing presidents in the modern era.
27. The economic policy of the George W. Bush administration was a combination of tax cuts, expenditures for fighting two wars, and a free-market ideology intended to de-emphasize the role of government in the private sector. He advocated the ownership society, premised on the concepts of individual accountability, less government, and the owning of property. When we look back someday at the catastrophe that was the Bush administration, we will think of many things: the tragedy of the Iraq war, the shame of Guantánamo and Abu Ghraib, the erosion of civil liberties. The damage done to the American economy does not make front-page headlines every day, but the repercussions will be felt beyond the lifetime of anyone reading this.
28.
29.
30. 2008 economic crisis and recession The last year of Bush's second term was dominated by an economic recession. The National Bureau of Economic Research (NBER) marked December 2007, the month with the highest payroll employment numbers, as the high point of American economic production with output declining from then on to the present.GDP declined by an annualized -0.5% in the third quarter and -3.8% in the fourth quarter of 2008.The two consecutive quarters of negative economic growth met the "rule of thumb" definition of a recession, confirming the NBER's declaration of a recession. Bush responded to the early signs of economic problems with lump-sum tax rebates and other stimulative measures in the Economic Stimulus Act of 2008. In March 2008, Bear Stearns, a major US investment bank heavily invested in subprime mortgage derivatives, began to go under. Rumors of low cash reserves dragged Bear's stock price down while lenders to Bear began to withdraw their cash. The Federal Reserve funneled an emergency loan to Bear through JP Morgan Chase. (As an investment bank, Bear could not borrow from the Fed but JP Morgan Chase, a commercial bank, could). The Fed ended up brokering an agreement for the sale of Bear to JP Morgan Chase that took place at the end of March. In July, IndyMac went under and had to be placed in conservatorship. In the middle of the summer it seemed like recession might be avoided even though high gas prices threatened consumers and credit problems threatened investment markets, but the economy entered crisis in the fall. Fannie Mae and Freddie Mac were also put under conservatorship in early September. A few days later, Lehman Brothers began to falter. Treasury Secretary Hank Paulson, who in July had publicly expressed concern that continuous bailouts would lead to moral hazard, decided to let Lehman fail. The fallout from Lehman's failure snowballed into market-wide panic. AIG, an insurance company, had sold credit default swaps insuring against Lehman's failure under the assumption that such a failure was extremely unlikely. Without enough cash to pay out its Lehman-related debts, AIG went under and was nationalized. Credit markets locked up and catastrophe seemed all too likely. Paulson proposed providing liquidity to financial markets by having the government buy up debt related to bad mortgages with a Troubled Asset Relief Program. Congressional Democrats advocated an alternative policy of investing in financial companies directly. Congress passed the Emergency Economic Stabilization Act of 2008, which authorized both policies. Throughout the crisis, Bush seemed to defer to Paulson and Federal Reserve Chairman Ben Bernanke. He kept a low public profile on the issue with his most significant role being a public television address where he announced that a bailout was necessary otherwise the United States "could experience a long and painful recession."
31. Bush'sEconomicMistakes Bush's Budget Blunders The Return to Deficits Iraq TaxCuts for the Rich Financial Regulation TellingUs to Go Shopping Energy Policy A State of Denial The MuddledBailout - Economic growth. U.S. output has expanded faster than in most advanced economies since 2000. The IMF reports that real U.S. gross domestic product (GDP) grew at an average annual rate of 2.2% over the period 2001-2008 (including its forecast for the current year). President Bush will leave to his successor an economy 19% larger than the one he inherited from President Clinton. This U.S. expansion compares with 14% by France, 13% by Japan and just 8% by Italy and Germany over the same period. The latest ICP findings, published by the World Bank in its World Development Indicators 2008, also show that GDP per capita in the U.S. reached $41,813 (in purchasing power parity dollars) in 2005. This was a third higher than the United Kingdom's, 37% above Germany's and 38% more than Japan's. - Household consumption. The ICP study found that the average per-capita consumption of the U.S. population (citizens and illegal immigrants combined) was second only to Luxembourg's, out of 146 countries covered in 2005. The U.S. average was $32,045. This was well above the levels in the UK ($25,155), Canada ($23,526), France ($23,027) and Germany ($21,742). China stood at $1,751. - Health services. The U.S. spends easily the highest amount per capita ($6,657 in 2005) on health, more than double that in Britain. But because of private funding (55% of the total) the burden on the U.S. taxpayer (9.1% of GDP) is kept to similar levels as France and Germany. The U.S. Census Bureau reports that 84.7% of the U.S. population was covered by health insurance in 2007, an increase of 3.6 million people over 2006. The uninsured can receive treatment in hospitals at the expense of private insurance holders. While life expectancy is influenced by lifestyles and not just access to health services, the World Bank nevertheless reports that average life expectancy in the U.S. rose to 78 years in 2006 (the same as Germany's), from 77 in 2000. - Income and wealth distribution. The latest World Bank estimates show that the richest 20% of U.S. households had a 45.8% share of total income in 2000, similar to the levels in the U.K. (44.0%) and Israel (44.9%). In 65 other countries the richest quintile had a larger share than in the U.S.... - Employment. The U.S. employment rate, measured by the percentage of people of working age (16-65 years) in jobs, has remained high by international standards. The latest OECD figures show a rate of 71.7% in 2006. This was more than five percentage points above the average for the euro area. The U.S. unemployment rate averaged 4.7% from 2001-2007. This compares with a 5.2% average rate during President Clinton's term of office, and is well below the euro zone average of 8.3% since 2000.
32. President Bush has presided over the weakest eight-year span for the U.S. economy in decades, according to an analysis of key data, and economists across the ideological spectrum increasingly view his two terms as a time of little progress on the nation's thorniest fiscal challenges.