DOCSLIB.ORG

IS U.S. GOVERNMENT DEBT DIFFERENT? I

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
IS U.S. GOVERNMENT DEBT DIFFERENT? I IS U.S. GOVERNMENT DEBT DIFFERENT? i IS U.S. GOVERNMENT DEBT DIFFERENT? ii iii IS U.S. GOVERNMENT DEBT DIFFERENT? EDITED BY Franklin Allen Anna Gelpern Charles Mooney David Skeel AUTHORS Donald S. Bernstein William W. Bratton Peter R. Fisher Richard J. Herring James R. Hines Jr. Howell E. Jackson Jeremy Kreisberg James Kwak Deborah Lucas Michael W. McConnell Jim Millstein Charles W. Mooney Jr. Kelley O’Mara Zoltan Pozsar Steven L. Schwarcz Richard Squire Richard Sylla FIC Press Philadelphia, USA iv Published by FIC Press 2405 Steinberg Hall - Dietrich Hall 3620 Locust Walk Philadelphia, PA 19104-6367 USA First Published 2012 ISBN 978-0-9836469-9-0 (paperback) ISBN 978-0-9836469-8-3 (e-book version) Cover artwork, design and layout by Christopher Trollen v Contents The Contributors ix Acknowledgments xxi PREFACE xxiii by Anna Gelpern 1 U.S. Government Debt Has Always Been Different! 1 Richard Sylla 2 A World Without Treasuries? 13 William W. Bratton 3 Default and the International Role of the Dollar 21 Richard J. Herring 4 A Macro View of Shadow Banking: Do T-Bill Shortages Pose a New Triffin Dilemma? 35 Zoltan Pozsar 5 Origins of the Fiscal Constitution 45 Michael W. McConnell 6 The 2011 ebtD Ceiling Impasse Revisited 55 Howell E. Jackson 7 A Market for End-of-the-World Insurance? Credit Default Swaps on US Government Debt 69 Richard Squire vi Contents 8 Thoughts on ebtD Sustainability: Supply and Demand Keynote Remarks 87 Peter R. Fisher 9 The ederalF Debt: Assessing the Capacity to Pay 101 Deborah Lucas 10 TheTax Revenue Capacity of the U.S. Economy 113 James R. Hines Jr. 11 Can the United States Achieve Fiscal Sustainability? Will We? 129 James Kwak 12 Burning the Furniture to Heat the House – The otentialP Role of Asset Sales in Funding the Federal Government’s Deficits 151 Jim Millstein 13 United States Sovereign Debt: A Thought xperimentE On Default and Restructuring 169 Charles W. Mooney, Jr. 14 A Comment on Professor Mooney’s Thought xperiment:E Can U.S. Debt Be Restructured? 237 Donald S. Bernstein 15 Direct and Indirect U.S.Government Debt 245 Steven L. Schwarcz Contents vii Appendix The 2011 ebtD Limit Impasse: Treasury’s Actions & The Counterfactual – What Might Have Happened if the National Debt Hit the Statutory Limit 255 Jeremy Kreisberg & Kelley O’Mara (Under the Supervision of Professor Howell Jackson) viii Contents ix The Contributors Franklin Allen University of Pennsylvania Franklin Allen is the Nippon Life Professor of Finance and Professor of Economics at the Wharton School of the University of Pennsyl- vania. He has been on the faculty since 1980. He is currently Co- Director of the Wharton Financial Institutions Center. He was for- merly Vice Dean and Director of Wharton Doctoral Programs and Executive Editor of the Review of Financial Studies, one of the lead- ing academic finance journals. He is a past President of the American Finance Association, the Western Finance Association, the Society for Financial Studies, and the Financial Intermediation Research So- ciety, and a Fellow of the Econometric Society. He received his doc- torate from Oxford University. Dr. Allen’s main areas of interest are corporate finance, asset pricing, financial innovation, comparative financial systems, and financial crises. He is a co-author with Richard Brealey and Stewart Myers of the eighth through tenth editions of the textbook Principles of Corporate Finance. Donald Bernstein Davis Polk & Wardwell LLP Donald Bernstein, who heads the Insolvency and Restructuring Practice at the international law firm Davis Polk & Wardwell LLP, is recognized as one of the world’s leading insolvency lawyers. He has received numerous honors, including being elected Chair of the Na- tional Bankruptcy Conference, a non-partisan organization of lead- ing academics, lawyers and judges seeking to improve bankruptcy law and administration in the United States. Mr. Bernstein’s practice x The Contributors includes representing debtors, creditors, liquidators, receivers and ac- quirers in major corporate restructurings and insolvency proceed- ings, as well as advising financial institutions and other clients re- garding bank insolvency and resolution planning and the credit risks involved in derivatives, securities transactions, and other domestic and international financial transactions. William Bratton University of Pennsylvania William Bratton is recognized internationally as a leading writer on business law. He brings an interdisciplinary perspective to a wide range of subject matters that encompass corporate governance, cor- porate finance, accounting, corporate legal history, and compara- tive corporate law. His work has appeared in the Cornell, Michigan, Northwestern, Pennsylvania, Stanford, and Virginia law reviews, and the Duke and Georgetown law journals, along with the Amer- ican Journal of Comparative Law and the Common Market Law Review. His book, Corporate Finance: Cases and Materials (Foun- dation Press, 7th ed. 2012), is the leading law school text on the subject. Bratton is a Research Associate of the European Corporate Governance Institute. In 2009, he was installed as the Anton Philips Professor at the Faculty of Law of Tilburg University in The Nether- lands, the fifth American academic to hold the chair. Peter R. Fisher BlackRock Peter R. Fisher, Senior Managing Director, BlackRock, is head of BlackRock’s Fixed Income Portfolio Management Group and a member of the firm’s Global Executive Committee. Prior to joining BlackRock in 2004, Mr. Fisher served as Under Secretary of the U.S. Treasury for Domestic Finance from 2001 to 2003. Before joining the Treasury he worked at the Federal Reserve Bank of New York and at the Bank for International Settlements. He earned a B.A. in history for Harvard College in 1980 and a J.D. from Harvard Law School in 1985. The Contributors xi Anna Gelpern American University Washington College of Law Anna Gelpern is Professor of Law at American University Washing- ton College of Law and Visiting Professor at Georgetown Law. She has published articles on financial integration, government debt, and regulation of financial institutions in law and social science journals, and has co-authored a textbook on International Finance. She has contributed to international initiatives on financial reform and sov- ereign borrowing. Professor Gelpern is a visiting fellow at the Peter G. Peterson Institute for International Economics, a fellow at the George Washington University School of Law Center for Law, Eco- nomics & Finance, and held a visiting appointment at the University of Pennsylvania Law School in Spring 2011. Earlier, she was on the faculty at Rutgers School of Law-Newark and Rutgers University Di- vision of Global Affairs. Between 1996 and 2002, Professor Gelpern served in legal and policy positions at the U.S. Treasury Department. Richard J. Herring University of Pennsylvania Richard J. Herring is Jacob Safra Professor of International Bank- ing and Professor of Finance at The Wharton School, University of Pennsylvania, where he is also founding director of the Whar- ton Financial Institutions Center. From 2000 to 2006, he served as the Director of the Lauder Institute of International Management Studies and from 1995 to 2000, he served as Vice Dean and Direc- tor of Wharton’s Undergraduate Division. During 2006, he was a Professorial Fellow at the Reserve Bank of New Zealand and Vic- toria University and during 2008 he was the Metzler Fellow at Jo- hann Goethe University in Frankfurt. He is the author of more than 100 articles, monographs and books on various topics in financial regulation, international banking, and international finance. His most recent book, The Known, the Unknown & the Unknowable in Financial Risk Management (with F. Diebold and N. Doherty) has just been recognized as the most influential book published on the economics or risk management and insurance by the American Risk and Insurance Association. At various times his research has been funded by grants from the National Science Foundation, the Ford Foundation, the Brookings Institution, the Sloan Foundation, the Council on Foreign Relations, and the Royal Swedish Commis- xii The Contributors sion on Productivity. Outside the university, he is co-chair of the US Shadow Financial Regulatory Committee and Executive Director of the Financial Economist’s Roundtable, a member of the Advisory Board of the European Banking Report in Rome, the Institute for Fi- nancial Studies in Frankfurt, and the International Centre for Finan- cial Regulation in London. In addition, he is a member of the FDIC Systemic Risk Advisory Committee, the Systemic Risk Council and the Stanford University Hoover Institute Working Group on Reso- lution. He served as co-chair of the Multinational Banking seminar from 1992–2004 and was a Fellow of the World Economic Forum in Davos from 1992–95. Currently, he is an independent director of the DWS mutual fund complex, the Daiwa closed-end Funds, the Aberdeen Singapore closed-end fund, and Barclays Bank, Delaware. Herring received his undergraduate degree from Oberlin College in 1968 and his PhD from Princeton University in 1973. He has been a member of the Finance Department since 1972. He is married, with two children, and lives in Bryn Mawr, Pennsylvania. James R. Hines Jr. University of Michigan James R. Hines Jr. is the L. Hart Wright Collegiate Professor of Law and co-director of the Law and Economics Program at the Univer- sity of Michigan Law School. He is also the Richard A. Musgrave Collegiate Professor of Economics in the Department of Econom- ics at Michigan, and serves as the research director of the Office of Tax Policy Research in the Stephen M. Ross School of Business. His research is focused on various aspects of taxation. Hines taught at Princeton and Harvard Universities prior to joining the Michigan faculty in 1997, and has held visiting appointments at Columbia University, the London School of Economics, the University of Cali- fornia, Berkeley, and Harvard Law School.
Load more

Recommended publications
  • An End to Antisemitism!
    Confronting Antisemitism in Modern Media, the Legal and Political Worlds An End to Antisemitism! Edited by Armin Lange, Kerstin Mayerhofer, Dina Porat, and Lawrence H. Schiffman Volume 5 Confronting Antisemitism in Modern Media, the Legal and Political Worlds Edited by Armin Lange, Kerstin Mayerhofer, Dina Porat, and Lawrence H. Schiffman ISBN 978-3-11-058243-7 e-ISBN (PDF) 978-3-11-067196-4 e-ISBN (EPUB) 978-3-11-067203-9 DOI https://10.1515/9783110671964 This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. For details go to https://creativecommons.org/licenses/by-nc-nd/4.0/ Library of Congress Control Number: 2021931477 Bibliographic information published by the Deutsche Nationalbibliothek The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available on the Internet at http://dnb.dnb.de. © 2021 Armin Lange, Kerstin Mayerhofer, Dina Porat, Lawrence H. Schiffman, published by Walter de Gruyter GmbH, Berlin/Boston The book is published with open access at www.degruyter.com Cover image: Illustration by Tayler Culligan (https://dribbble.com/taylerculligan). With friendly permission of Chicago Booth Review. Printing and binding: CPI books GmbH, Leck www.degruyter.com TableofContents Preface and Acknowledgements IX LisaJacobs, Armin Lange, and Kerstin Mayerhofer Confronting Antisemitism in Modern Media, the Legal and Political Worlds: Introduction 1 Confronting Antisemitism through Critical Reflection/Approaches
    [Show full text]
  • America's Economic Way Of
    |America’s Economic Way of War How did economic and financial factors determine how America waged war in the twentieth century? This important new book exposes the influence of economics and finance on the questions of whether the nation should go to war, how wars would be fought, how resources would be mobilized, and the long-term consequences for the American economy. Ranging from the Spanish–American War to the Gulf War, Hugh Rockoff explores the ways in which war can provide unique opportunities for understanding the basic principles of economics as wars produce immense changes in monetary and fiscal policy and so provide a wealth of infor- mation about how these policies actually work. He shows that wars have been more costly to the United States than most Americans realize as a substantial reliance on borrowing from the public, money creation, and other strategies to finance America’s war efforts have hidden the true cost of war. hugh rockoff is a professor of Economics at Rutgers, the State University of New Jersey, and a research associate of the National Bureau of Economic Research. His publications include numerous papers in professional journals, The Free Banking Era: A Re-examination (1975), Drastic Measures: A History of Wage and Price Controls in the United States (1984), and a textbook, History of the American Economy (2010, with Gary Walton). NEW APPROACHES TO ECONOMIC AND SOCIAL HISTORY series editors Nigel Goose, University of Hertfordshire Larry Neal, University of Illinois, Urbana-Champaign New Approaches to Economic and Social History is an important new textbook series published in association with the Economic History Society.
    [Show full text]
  • The Centennial Anniversary of the Graduation of the First Class, July Third to Seventh 1904
    mra§ra&ra& The University of Vermont >:;'': ;.' Centennial Anniversary,*j Bill 1804-1904 iim| H SSI - I ~^f# ill If Hi •';-.A: .,-; SHEv ,v. ""SfilSsBS M $rui>tm Mia^M ET fSJEBUfr tm «6Nfeft» i n isilllllill:-:-V'>;^ ;::-:-:':-mm *«& i^^^^^8Si| 11111111 IlIflHHMsl --:-V ill Tit. lIBf- « w '? LI] '• RA RY 01 I ill University of California. /sjv- Class \) "University of IDermont jfount>e& 1791 CENTENNIAL ANNIVERSARY i 804- 904 i GENERAL IRA ALLEN THE UNIVERSITY OF VERMONT Zbe Centennial Hnniverear\> of tbe Graduation of tbe jFitst Class July Third to Seventh 1904 BURLINGTON VT. 1905 BURLINGTON FBEE PRESS PRINTING CO. 1905 . CONTENTS Page Sketch of the Commemoration 1-13 Committee of the Faculty and Auxiliary Committees.. 2 Flag Staff Presented and Flag Raising 5 Class Day and Senior Promenade 5 The Tempest of Shakspere presented at Grassmount. 7 Honorary Degrees Conferred 8-11 President's Reception 12 Burlington Day and Cruise on Lake Champlain 12 Sunday, July the third 15 Prayer before Sermon i Baccalaureate Sermon, by the President 18 Address before the Young Men's Christian Association, by Rev. George B. Spalding, 1856 32 Cuesday, 3uly tbc Tiftb THE ALUMNI CONFERENCE ON THE INFLUENCE OF THE UNIVERSITY IN THE WORLD 53-163 1. The Advance in International Relations During the XIXth Century, by John Adam Kasson, 1842 55 2. The University as Preserver and Teacher of the Experience of Nations, by Charles A. Kent, 185fi , 68 3. The Relation of College Education to Business Pursuits,, by John Heman Converse, 1861 79 4. The Relation of the University to Practical So- ciology, by Davis Rich Dewey, 1879 95 5.
    [Show full text]
  • Massachusetts Institute of Technology Department of Economics Working Paper Series
    Massachusetts Institute of Technology Department of Economics Working Paper Series The Rise and Fall of Economic History at MIT Peter Temin Working Paper 13-11 June 5, 2013 Rev: December 9, 2013 Room E52-251 50 Memorial Drive Cambridge, MA 02142 This paper can be downloaded without charge from the Social Science Research Network Paper Collection at http://ssrn.com/abstract=2274908 The Rise and Fall of Economic History at MIT Peter Temin MIT Abstract This paper recalls the unity of economics and history at MIT before the Second World War, and their divergence thereafter. Economic history at MIT reached its peak in the 1970s with three teachers of the subject to graduates and undergraduates alike. It declined until economic history vanished both from the faculty and the graduate program around 2010. The cost of this decline to current education and scholarship is suggested at the end of the narrative. Key words: economic history, MIT economics, Kindleberger, Domar, Costa, Acemoglu JEL codes: B250, N12 Author contact: [email protected] 1 The Rise and Fall of Economic History at MIT Peter Temin This paper tells the story of economic history at MIT during the twentieth century, even though roughly half the century precedes the formation of the MIT Economics Department. Economic history was central in the development of economics at the start of the century, but it lost its primary position rapidly after the Second World War, disappearing entirely a decade after the end of the twentieth century. I taught economic history to MIT graduate students in economics for 45 years during this long decline, and my account consequently contains an autobiographical bias.
    [Show full text]
  • Public Feed Back for Better Banknote Design 2 Central Bank and Prudential Supervisor of Financial Institutions
    Occasional Studies Vol.5/No.2 (2007) Hans de Heij Public feed back for better banknote design 2 Central bank and prudential supervisor of financial institutions ©2007 De Nederlandsche Bank nv Author: Hans de Heij e-mail: [email protected] The aim of the Occasional Studies is to disseminate thinking on policy and analytical issues in areas relevant to the Bank. Views expressed are those of the individual authors and do not necessarily reflect official positions of De Nederlandsche Bank. Editorial Committee: Jan Marc Berk (chairman), Eelco van den Berg (secretary), Hans Brits, Maria Demertzis, Peter van Els, Jan Willem van den End, Maarten Gelderman, Klaas Knot, Bram Scholten and Job Swank. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopy, recording or otherwise, without the prior written permission of De Nederlandsche Bank. Subscription orders for dnb Occasional Studies and requests for specimen copies should be sent to: De Nederlandsche Bank nv Communications p.o. Box 98 1000 ab Amsterdam The Netherlands Internet: www.dnb.nl Public feed back for better banknote design 2 Public feed back for better banknote design 2 Hans A.M. de Heij De Nederlandsche Bank nv, Amsterdam, The Netherlands Abstract Developers of new banknotes can optimise banknote designs by making use of 1) public feedback, 2) strategic communication policy, 3) a design philosophy and 4) the stakeholders’ approach reflected in a Programme of Requirements. The synthesis of these four elements will lead to new design concepts for banknotes, as illustrated in this article.
    [Show full text]
  • Administration by Treasury
    Article Administration by Treasury David Zaring† INTRODUCTION The Treasury Department pulled out all the stops during the beginning and middle of the financial crisis, and toward the end, when Congress got involved, its efforts got even more dramatic. First, Treasury engineered the sale of some financial intermediaries,1 seized two congressionally chartered corpora- tions designed to encourage home lending,2 and issued death sentences against other financial institutions, including Leh- man Brothers and Washington Mutual, by far the two largest † Assistant Professor, Legal Studies Department, Wharton School of Business. Thanks to Robert Ahdieh, Cary Coglianese, Kristin Hickman, and participants in workshops at the annual meetings of Connecticut, Emory, Penn, and the Law & Society Association and Academy of Legal Studies in Business. Thanks also to Laura Kaufman and Justin Simard for research as- sistance, and to the Zicklin Center at Wharton for research support. Copyright © 2010 by David Zaring. 1. See Eric Dash & Andrew Ross Sorkin, In Largest Bank Failure, U.S. Seizes, Then Sells, N.Y. TIMES, Sept. 26, 2008, at A1, available at 2008 WLNR 18286005 (describing the circumstances surrounding Treasury’s engineering the sale of Washington Mutual to J.P. Morgan Chase for $1.9 billion); Megan Davies & Joseph Giannone, JPMorgan to Buy Bear Stearns for $2 a Share, REUTERS, Mar. 17, 2008, available at http://www.reuters.com/article/idUSN 1671008920080317 (describing the takeover of Bear Stearns by J.P. Morgan as having “the backing” of the Treasury); Robin Sidel et al., WaMu Is Seized, Sold Off to J.P. Morgan, in Largest Failure in U.S.
    [Show full text]
  • Accessible Version
    441 G St. N.W. Comptroller General Washington, DC 20548 of the United States Accessible Version June 16, 2021 The Honorable Janet Yellen Secretary of the Treasury U.S. Department of the Treasury 1500 Pennsylvania Avenue, NW Washington, D.C. 20220 Priority Open Recommendations: Department of the Treasury Dear Madame Secretary: The purpose of this letter is to provide an update on the overall status of the U.S. Department of the Treasury’s implementation of GAO’s recommendations and to call your personal attention to areas where open recommendations should be given high priority.1 In November 2020, we reported that on a government-wide basis, 77 percent of our recommendations made 4 years ago were implemented.2 Treasury’s implementation rate was 80 percent. As of June 2021, Treasury had 103 open recommendations, not including recommendations to the Internal Revenue Service (IRS), which are addressed in a separate letter to the Commissioner. We have sent a copy of that letter to your office. As operations return to normal from the Coronavirus Disease 2019 (COVID-19) pandemic, fully implementing these open recommendations could significantly improve Treasury’s operations. Since our April 2020 letter, Treasury has implemented 14 of our 31 open priority recommendations. Specifically, Treasury has: · Made significant progress implementing the Digital Accountability and Transparency Act of 2014 (DATA Act), closing all four of our priority recommendations in this area.3 For example, Treasury implemented a system to improve the completeness of agency data submissions and took multiple steps to provide the users of USAspending.gov with a fuller understanding of existing data limitations.
    [Show full text]
  • Liberty Loans of World War I
    NBER WORKING PAPER SERIES CAPITALIZING PATRIOTISM: THE LIBERTY LOANS OF WORLD WAR I Sung Won Kang Hugh Rockoff Working Paper 11919 http://www.nber.org/papers/w11919 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 January 2006 The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. ©2006 by Sung Won Kang and Hugh Rockoff. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Capitalizing Patriotism: The Liberty Loans of World War I Sung Won Kang and Hugh Rockoff NBER Working Paper No. 11919 January 2006 JEL No. N2 ABSTRACT In World War I the Secretary of the Treasury, William Gibbs McAdoo, hoped to create a broad market for government bonds, the famous Liberty Loans, by following an aggressive policy of "capitalizing patriotism." He called on everyone from Wall Street bankers to the Boy Scouts to volunteer for the campaigns to sell the bonds. He helped recruit the nation's best known artists to draw posters depicting the contribution to the war effort to be made by buying bonds, and he organized giant bond rallies featuring Hollywood stars such as Douglas Fairbanks, Mary Pickford, and Charlie Chaplin. These efforts, however, enjoyed little success. The yields on the Liberty bonds were kept low mainly by making the bonds tax exempt and by making sure that a large proportion of them was purchased directly or indirectly by the Federal Reserve.
    [Show full text]
  • William V. Allen in the United States Senate, 1893-1901
    University of Nebraska at Omaha DigitalCommons@UNO Student Work 8-1-2003 Genuine Populist: William V. Allen in the United States Senate, 1893-1901 David W. Hoelscher University of Nebraska at Omaha Follow this and additional works at: https://digitalcommons.unomaha.edu/studentwork Recommended Citation Hoelscher, David W., "Genuine Populist: William V. Allen in the United States Senate, 1893-1901" (2003). Student Work. 479. https://digitalcommons.unomaha.edu/studentwork/479 This Thesis is brought to you for free and open access by DigitalCommons@UNO. It has been accepted for inclusion in Student Work by an authorized administrator of DigitalCommons@UNO. For more information, please contact [email protected]. GENUINE POPULIST: WILLIAM V. ALLEN IN THE UNITED STATES SENATE, 1893- 1901 A Thesis Presented to the Department of History and the Faculty of the Graduate College University of Nebraska In Partial Fulfillment of the Requirements for the Degree Master of Arts University of Nebraska at Omaha by David W. Hoelscher August, 2003 UMI Number: EP73117 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. IJMI Dissertation Publishing UMI EP73117 Published by ProQuest LLC (2015). Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code ProQuest' ~«L ProQuest LLC.
    [Show full text]
  • Capitalizing Patriotism: the World War I Liberty Bonds
    Tuesday, January 04, 2005 Capitalizing Patriotism: The World War I Liberty Bonds Preliminary: Comments are welcome. Hugh Rockoff Department of Economics Rutgers University and NBER New Brunswick NJ 08901 [email protected] Abstract The outbreak of World War I presented the U.S. Treasury with the classic problem of war finance: to what extent should the government rely on taxes, borrowing, or creating new money? Although taxes were raised substantially, tax revenues fell far short of expenditures, and recourse was had to five bond issues, the famous Liberty Bonds, to finance the bulk of the war expenditures. The Secretary of the Treasury, William Gibbs McAdoo, hoped to create a broad market for the Liberty Bonds and to hold down interest rates on them by following an aggressive policy of “capitalizing patriotism.” He called on everyone from Wall Street bankers to the Boy Scouts to volunteer for the campaigns to sell the “Liberty bonds.” He recruited the nation’s best known artists to create posters depicting the contribution to the war effort to be made by buying bonds and he organized giant bond rallies featuring Hollywood stars such as Douglas Fairbanks, Mary Pickford, and Charlie Chaplin. It appears, however, that these efforts enjoyed only limited success. Nominal interest rates were kept down mainly by making the bonds tax exempt and by making sure that a large proportion of the debt was purchased directly or indirectly by the Federal Reserve, turning the Federal Reserve into an engine of inflation. 2 1. The Liberty Bonds1 When World War I began the Secretary of the Treasury, William Gibbs McAdoo, turned to the record of Lincoln’s Secretary of the Treasury, Samuel Chase, for lessons on how to finance a major war.2 McAdoo believed that Chase had made a major error in turning over the marketing of the government’s securities to a private firm, Jay Cooke and Company.
    [Show full text]
  • Towards a Cashless Society: Economic Analysis and Measurement Issues
    Department of Economics and Finance Bachelor thesis in Money and Banking Towards a cashless society: economic analysis and measurement issues Candidate: Tommaso De Portu (Student ID 208471) Tutor: Professor Paolo Paesani A.Y. 2018-2019 Table of Contents INTRODUCTION .....................................................................................................................................................2 1. MOVING TOWARDS A CASHLESS SOCIETY ...................................................................................4 1.1 INCENTIVES TO THE SHADOW ECONOMY: IS CASH ONE OF THEM? .............................................................. 4 1.1.1 The 500€ Note and the Eurozone ....................................................................................................................... 5 1.1.2 The 500 and 1,000₹ notes’ demonetisation .................................................................................................. 7 1.2 PROBLEMS RELATED WITH THE USE OF CASH ..................................................................................................... 10 1.2.1 The shadow economy and a cashless society ........................................................................................... 11 1.2.2 Business Risk ................................................................................................................................................................ 14 1.2.4 Household risk ............................................................................................................................................................
    [Show full text]
  • Implications of the Expanding Use of Cash for Monetary Policy Daniel Gros
    View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Archive of European Integration No 2017/21, June 2017 Implications of the Expanding Use of Cash for Monetary Policy Daniel Gros Summary Financial innovation seems to have had little impact on the oldest medium of transaction, namely cash. The ratio of currency in circulation to GDP has increased in most countries, independently of the continuing spread of cashless transactions. Currency is part of the monetary base. Its increase thus leads to an automatic increase in central banks’ balance sheets. This becomes relevant when the size of a central bank’s balance sheet becomes a policy instrument. Taking account of the increase in cash holdings can lead to a different view of the monetary policy stance over longer periods of time. Holding the size of the overall balance sheet constant is equivalent to a gradual exit when currency holdings continue to increase. Daniel Gros is Director of CEPS. This policy contribution was prepared for the Committee on Economic and Monetary Affairs of the European Parliament (ECON) as an input for the Monetary Dialogue of 29 May 2017 between Committee and the President of the European Central Bank (http://www.europarl.europa.eu/committees/en/econ/monetary-dialogue.html). Copyright remains with the European Parliament at all times. CEPS Policy Insights offer analyses of a wide range of key policy questions facing Europe. As an institution, CEPS takes no position on questions of European policy. Unless otherwise indicated, the views expressed are attributable only to the author and not to any institution with which he is associated.
    [Show full text]