abu yahya's definitions

FOMC

(US GOVERNMENT) Federal Open Market Committee; a committee whose members include the 7 governors of the Federal Reserve Board plus five presidents of the Federal Reverse Banks (there are 12 district banks). The FOMC is responsible for open market operations of the Federal Reserve System.

The FOMC manages purchases and sales of Treasury securities.

by Abu Yahya June 17, 2010

CGD trap

Economic problem faced by LDCs. The problem occurs when the country tries to stimulate FDI by establishing a hard peg of its currency to that of another country (usually the US dollar). Initially, the plan may work very well, but then, as capital flows in, growth prospects deteriorate rapidly because the local currency is so strong its exports are not competitive. The country's growth slows down, and external debt soars. The government is stuck trying to defend the currency on international markets, a battle it is nearly always doomed to loose.

Term was coined by De la Torre, Levy Yeyati, and Schmukler in "Living and Dying with Hard Pegs: The Rise and Fall of Argentina’s Currency Board," *Economia*, Spring, pp. 43-107

Right from the beginning of the De la Rúa administration (which assumed power in December 1999), the Argentine economy was caught in a CGD trap. The currency was overvalued, growth was faltering, and the debt was hard to service.

by abu yahya June 24, 2008

fiat money

Money that (a) derives its value entirely from the mandate of the government, and (b) cannot be freely traded. Fiat money is not the same thing as floating currency, because if a floating currency is intrinsically worthless then its lack of worth will be reflected in the forex markets. Fiat money, on the other hand, does not require a disciplined monetary of fiscal policy on the part of the issuing authorities; exchange rates are fixed by decree, which means the state also controls supplies of hard (foreign) currency.

Examples of fiat money include the French revolutionary assignat and the Soviet-era ruble.

by abu yahya September 28, 2008

Underwriter

(FINANCE) a person or entity that lends money to someone else by creating securities and selling them. In commercial milieux, this is investment banking, and the most famous investment bank is Goldman Sachs. Another major investment bank is Morgan Stanley.

Most major countries have a ministry of the treasury, or ministry of finance, that issues bonds for the government and is responsible for selling them to raise money for government borrowing. These are treasury securities.

Peter Warburg was an underwriter who helped "design" the Usonian federal reserve system.

by Abu Yahya May 5, 2010

U-6

(ECONOMICS) Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force. Put another way, U-6 = U-3 (headline unemployment) + discouraged workers + part-time workers in need of full-time jobs.

The US Bureau of Labor Statistics regularly publishes six estimates of unemployment. The others are U-1, U-2, U-3, U-4, and U-5. Eurostat publishes one monthly estimate of unemployment for the European Union, which is approximately midway between U-3 and U-4.

The unemployment statistics for the USA are collected through a monthly Current Population Survey (CPS) (also known as the household survey) and an establishment survey.

U-6 is often referred to as "real unemployment" because it attempts to measure the total number of people who would like to have more work than they do have. Some have argued that U-6 is closer to historic measures of unemployment than U-3 is (we didn't have either during the Great Depression).

by Abu Yahya July 15, 2010

Federal Reserve Bank of New York

(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).

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

floating currency

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.

For most of the last half century, most money used around the world has been floating currency.

by abu yahya September 28, 2008