Prieur’s readings (March 10, 2010)

This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Brian Sack (New York Fed – transcript of speech): Preparing for a smooth (eventual) exit, March 8, 2010.
When the time comes to tighten monetary policy, the Federal Reserve will be embarking on a tightening cycle like no other in its history. First, this tightening cycle will have two policy dimensions, in that the FOMC will have to decide on the path of its asset holdings in addition to the path of the short-term interest rate. Second, we will be using tools to drain reserves that are new and that will have to be implemented on a scale that the Fed has never before tried. And third, we will be operating in a framework of interest on reserves that has not been fully tested in US markets.

• John Cassidy (The New Yorker): No credit, March 15, 2010.
Timothy Geithner’s financial plan is working – and making him very unpopular.

• Clive Crook (Financial Times): Good for America, as far as it went, March 7, 2010.
Three-quarters of Americans think last year’s fiscal stimulus was mismanaged. But actually it’s been helpful. It would have helped a lot more, though, if it had been bigger, if its designers had commanded public confidence; and if a plan to control medium-term borrowing had been included up front.

• Joshua Aizenman and Gurnain Kaur Pasricha (National Bureau of Economic Research): On the ease of overstating the fiscal stimulus in the US, February 2010.
This note shows that the aggregate fiscal expenditure stimulus in the United States, properly adjusted for the declining fiscal expenditure of the fifty states, was close to zero in 2009. While the Federal government stimulus prevented a net decline in aggregate fiscal expenditure, it did not stimulate the aggregate expenditure above its predicted mean. This paper discusses the implications of limitations on states’ ability to run deficits for the design of fiscal stimulus at the federal level.

• Lynn Thomasson (Bloomberg): S&P rally slowed by fastest cash depletion since 1991, March 8, 2010