CERF Blog

Previously Published in CERF’s September 2016 California Economic Forecast: It’s time for another presidential election.  Each candidate is promising new initiatives that will bring prosperity to Americans.  So, we’re forecasting vigorous economic growth?  No. Our forecast is pretty much the same as it’s been for years, anemic economic growth as far as we can see.… Read more

Previously Published by Bill Watkins in the September 2016 California Economic Forecast A decade of slow or declining economic and job growth has been accompanied by fundamental changes in America’s job composition.  Those changes have caused profound disruptions in the lives of millions of workers, primarily low-educational-attainment workers, and their families. The situation is not… Read more

Let’s think about the structure of the perfect retirement investment vehicle.  The perfect vehicle would have annual payouts that exceed what could be achieved by buying bonds or other asset classes.  The perfect vehicle would hedge against so-called “longevity risk” which is the risk of outliving your money.  The perfect vehicle would have annual payments… Read more

William Goetzmann has written a masterful book (Money Changes Everything) on the role of finance in world history.  The basic message is that financial development has played an enormous role in the advancement of civilization.  This is in spite of various financial debacles that have come along periodically.  Goetzmann suggests that there are four major… Read more

Previously published on August 26, 2016 on newgeography.com Most discussions of our slow economic growth includes a seemingly compulsory demand for increased public capital spending, so-called infrastructure spending or simply “roads and bridges.”  Both Donald Trump and Hillary Clinton promise increased public capital spending on their websites.   Larry Summers made perhaps the best case for… Read more

Interest rates are historically low and so is the return on savings.  People commonly talk about low interest rates being an inducement to increase spending and reduce saving.  In fact, this is one of the “transmission mechanisms” by which expansionary monetary policy is presumed to stimulate the economy.  In economic theory, consumption spending is modeled… Read more

Previously published on Friday, June 10th, 2016 on pacbiztimes.com By Dan E. Hamilton Since 2008, the Federal Reserve has been engaged in an unprecedented experiment, one without any economic theory to recommend it. Its policies are internally inconsistent. Some work to restrict credit. Others ease credit. The 2007 failure of New Century Financial, a leading… Read more

Previously published on Friday, May 27th 2016 on pacbiztimes.com By Matthew Fienup As forecasts of torrential El Nino rains have given way to the hard reality of another year of drought on the Central Coast, calls to punish farmers or to seize farmers’ water are once again being voiced. Not only do these calls embody… Read more

In his book The End of Alchemy, former Bank of England Chairman Mervyn King has presented a riveting treatise on banking, monetary policy, financial crises and financial regulation.   The title of the book refers to what King calls the “alchemy” of banking, whereby liquid and safe deposits are transformed into illiquid, risky loans and securities. … Read more

We need to find a way to separate our fiscal and monetary policies. Previously published on June 17, 2016 on city-journal.org Never heard of fiscal dominance? Don’t worry, you have lots of company. Even many economists are unfamiliar with the term. That’s going to change, though, as more and more Western governments careen toward insolvency.… Read more

Like the Orcas at Sea World, the mortgage market has been coddled by government support for more than half a century.  Having decided Orcas would be better off in the wild, Sea World has announced that it will no longer seek to capture Orcas or to breed them in the park.  However, due to concern… Read more

When talking about the national debt, people tend to use absolute metrics like the size of the outstanding federal debt ($19 trillion total, $14 trillion held by the public) or ratios like the ratio the outstanding debt to GDP.  Instead of trying to fathom the raw numbers, it is a good idea to scale by… Read more

In previous blogs we have discussed appropriate debt levels for nonfinancial companies and for large banks.  What about for the individual household?  Sometimes, households are ‘credit-constrained’ in that they cannot find borrowers to lend them their desired amounts.  In economic booms, like the housing boom that preceded the 2007-2008 crisis, lending standards tend to soften… Read more

Previously published on April 14, 2016 on Newgeography.com  Most commentary on California’s decision to increase the state minimum wage to $15 over time is either along the lines of it being a boon to minimum-wage workers and their families or a disaster for California’s economy.  Neither is accurate.  Different regions sill see different outcomes.  Central… Read more

Large banks (think of Wells Fargo, Citicorp, JP Morgan and Bank of America) today hold equity capital roughly equal to about ten percent of total assets.  Inverting that ratio we get assets to equity of ten times or leverage as commonly defined (debt divided by equity, instead of assets divided by equity) of nine times. … Read more