*noun*, efforts by the government to intentionally run a deficit in order to stimulate the economy during a recession. Loosely associated with Keynesian economics.
According to basic economic theory, recessions occur because there is a basic mismatch between aggregate demand and potential output. One approach for solving this is for the government to buy more goods and services than it has revenues to cover, thereby creating conditions in which effective demand is greater than the stock of goods currently in business inventory (given recessionary prices).
Under a stimulus, the jolt of extra money in circulation creates inflation, which has the effect of lowering real prices. Customers then respond to the {de facto} price reduction by buying more, which leads to more hiring, thence to more effective demand, thence to economic recovery.
Another reason fiscal policy stimulates the economy is that the private sector is not investing or consuming its own output. Increased taxes would simply reduce private consumption, so those cannot be increased; but spending is increased to fill the breach.
According to basic economic theory, recessions occur because there is a basic mismatch between aggregate demand and potential output. One approach for solving this is for the government to buy more goods and services than it has revenues to cover, thereby creating conditions in which effective demand is greater than the stock of goods currently in business inventory (given recessionary prices).
Under a stimulus, the jolt of extra money in circulation creates inflation, which has the effect of lowering real prices. Customers then respond to the {de facto} price reduction by buying more, which leads to more hiring, thence to more effective demand, thence to economic recovery.
Another reason fiscal policy stimulates the economy is that the private sector is not investing or consuming its own output. Increased taxes would simply reduce private consumption, so those cannot be increased; but spending is increased to fill the breach.
I think it is possible that fiscal policy will have even more 'oomph' in this situation," Christina Romer, who heads the Council of Economic Advisers, told an economics conference.
"When households and businesses are liquidity-constrained by reduced lending, any money put in their pockets is more likely to be spent," she said.
--Reuters, "White House's Romer: Stimulus may pack more punch" (3 March 2009)
"When households and businesses are liquidity-constrained by reduced lending, any money put in their pockets is more likely to be spent," she said.
--Reuters, "White House's Romer: Stimulus may pack more punch" (3 March 2009)
by Abu Yahya March 03, 2009
national income and product accounting; refers to the formal system of measuring capital accounts, current accounts, and gross domestic product.
National income and product accounting is the centerpiece of national economic
accounting in the United States. The NIPA's show the real and nominal value of output, the composition of output, and the distribution across types of income generated in its production.
Abraham & Mackie, *Beyond the Market,* p.40
accounting in the United States. The NIPA's show the real and nominal value of output, the composition of output, and the distribution across types of income generated in its production.
Abraham & Mackie, *Beyond the Market,* p.40
by Abu Yahya February 14, 2009
(US ECONOMY) One of the 12 district Federal Reserve Banks. Based in New York (2nd FR district). Along with members of the Federal Reserve Board, enjoys a permanent seat on the FOMC (other district banks only get to rotate).
Main job is to regulate banks and administer monetary policy through open market operations. Former New York Fed president Tim Geithner is now Secretary of the US Treasury Department (as of early 2009).
Main job is to regulate banks and administer monetary policy through open market operations. Former New York Fed president Tim Geithner is now Secretary of the US Treasury Department (as of early 2009).
Prior to 1928, the President of the Federal Reserve Bank of New York was the de facto leader of the entire system. This was because of the powerful personality and connections of Benjamin Strong, a former J.P. Morgan partner.
by Abu Yahya September 10, 2010
A currency whose value is set by the currency markets; money whose exchange rate relative to other currencies is determined mainly or entirely by unrestricted trading in the currency. Most currencies are dirty float|dirty floats, which means that the government issuing them attempts to manage their traded value in some way; or else hard peg|hard pegs, in which the value is tied to something specific.
When a currency is floating, then its value may rise because the county is running a trade surplus, or it is running a capital account surplus. Floating currencies are not fiat money, although they are often confused for each other.
When a currency is floating, then its value may rise because the county is running a trade surplus, or it is running a capital account surplus. Floating currencies are not fiat money, although they are often confused for each other.
by abu yahya September 28, 2008
(FINANCE) a financial derivative that consists of a contract to buy a fixed amount of a thing at a fixed price at a fixed time in the future,. For example, a commodity future may specify 1000 British barrels (bbl) of West Texas Intermediate (WTI) crude oil for $85.75/bbl, for delivery at Cushing, OK, on 31 November 2010.
Futures are "written" by the person with the commodity to sell, and sold to either a financial speculator or else to someone who wants the product--in this case, an oil refinery. Sellers/owners do this because they want to be assured of a fixed price for the thing they're selling. The official reason for buying a future is to get a fixed price for something. This allows businesses to plan ahead.
However, since futures contracts are traded on secondary markets, it's possible to make (or lose) a lot of money trading them.
Futures are "written" by the person with the commodity to sell, and sold to either a financial speculator or else to someone who wants the product--in this case, an oil refinery. Sellers/owners do this because they want to be assured of a fixed price for the thing they're selling. The official reason for buying a future is to get a fixed price for something. This allows businesses to plan ahead.
However, since futures contracts are traded on secondary markets, it's possible to make (or lose) a lot of money trading them.
SOMEBODY: A futures contract can be extremely valuable for doing business. One of the best examples was Southwest Airlines, which weathered the oil crisis of 2007-2008 with futures for aviation fuel. When the market price of fuel doubled, Southwest was able pay a low, low contract price.
SOMEBODY ELSE: Doesn't it ever backfire?
SOMEBODY: Yes, the market price could fall through the floor and you'd be stuck paying THAT instead of the new, lower price. But at least you know what your cash flow will be.
SOMEBODY ELSE: Doesn't it ever backfire?
SOMEBODY: Yes, the market price could fall through the floor and you'd be stuck paying THAT instead of the new, lower price. But at least you know what your cash flow will be.
by Abu Yahya April 05, 2010
(JOURNALISM) using flattery to gain access to sources. The phrase is usually used in the context of White House or Congressional press corps, who use fulsome praise of high-ranking officials whose favor they need. Usually, officials like to be publicly represented as magnificent, selfless, tireless public servants; in exchange for such blurbs, they may invite specific reporters to exclusive events, thereby boosting the reporter's status.
It's actually been a feature of the business press for ages.
It's actually been a feature of the business press for ages.
Since the financial crisis of 2008, business reporters have tended to write dismissively of bank executives. Six years ago they were likely to have written a beat sweetener about some CEO who was now shithead-of-the week.
by Abu Yahya April 09, 2010
*noun*; a subdivision of economics that focuses on addressing recessions by stimulating supply, rather than demand. During a recession, supply siders recommend cutting taxes rather than increasing government spending.
"Supply side" is in contrast to traditional practitioners of Keynesianism, "demand siders" who believe the main fiscal policy tool for recessions should be increased government spending.
Both supply siders and demand siders believe the government is responsible for formulating effective fiscal policy during recessions.
The most famous advocate of supply side economics was Arthur Laffer.
"Supply side" is in contrast to traditional practitioners of Keynesianism, "demand siders" who believe the main fiscal policy tool for recessions should be increased government spending.
Both supply siders and demand siders believe the government is responsible for formulating effective fiscal policy during recessions.
The most famous advocate of supply side economics was Arthur Laffer.
When Ronald Reagan ...promised to cut taxes ...he claimed tax revenue would go up, not down... as the economy boomed in response to lower rates. Since then, supply side economics ... has become a central tenet of Republican political and economic thinking in the country.
"McCain sticks to Supply Side Economics..." *International Herald Tribune* (24 March 2008)
"McCain sticks to Supply Side Economics..." *International Herald Tribune* (24 March 2008)
by Abu Yahya March 05, 2009