I don't know how many view are familiar with Tom's organization and
materials they publish, but you should take a look.
On Sun, Sep 02, 2001 at 10:58:11PM -0400, [EMAIL PROTECTED] wrote:
> In the LAT piece, Tom P. is referring to a system of asset-based reserve
> requirements. Applied to all financial sector assets, such a system would:
> a) respond to the long-term movement of this sector's assets out of the
> banking industry and into nonbank financial firms; b) respond to banks
> shifting deposits into non-reservable sweep accounts; and c) enable monetary
> policymakers to target sectoral bubbles and droughts w/o exposing the broader
> economy to blunt-instrument interest rate changes. Used properly, these
> universalized reserve requirements would have strong counter-cyclical effects
> (at every stage of the cycle) in contrast to the prevailing regime of bank
> capital standards. There's even an existing domestic precedent of sorts in
> the National Assn. Of Insurance Commissioners' Asset Valuation
> Reserve/Interest Maintenance Reserve, adopted after the insurer meltdowns of
> the early 1990s.
>
> Long version: "Stabilizing Finance: The Case for Asset-Based Reserve
> Requirements," Thomas I. Palley, Financial Markets & Society, August 2000
> http://www.fmcenter.org/pdf/FMSaug2000.pdf
>
>
> Subj: [PEN-L:16565] He's not God after all!
> Date: 9/1/01 11:19:40 AM Eastern Daylight Time
> From: [EMAIL PROTECTED] (Jim Devine)
>
> [note that leftist economist Tom Palley is quoted below. I hope that the
> AFL-CIO isn't saying that financial controls should be imposed at this
> point in the business cycle...]
>
> September 1, 2001 / Los Angeles TIMES.
>
> Talk about it Fed Chairman Talks of Limits to His Powers
>
> By ROBERT A. ROSENBLATT, TIMES STAFF WRITER
>
> WASHINGTON -- Federal Reserve Board Chairman Alan Greenspan warned Friday
> that huge swings in the stock market and big changes in home prices are
> making consumers more unpredictable in their behavior, making it much
> harder for policymakers to influence the economy.
> >****<
> The changes in financial institutions give consumers more knowledge and
> more opportunities to change their spending rapidly, undermining the powers
> at Greenspan's disposal.
> >****<
> The current system emphasizes the 401(k) salary set-aside accounts, with
> individuals getting monthly or quarterly statements showing their
> retirement balances. The stock market boom often changed consumers'
> outlook, sometimes making them enthusiastic spenders, said Tom Palley,
> deputy chief of public policy at the AFL-CIO. "You receive a statement
> saying that your wealth has increased, and you think that means there is
> less need to save, that the savings is being done by the [stock] market,"
> Palley said. Consumers, feeling rich, rush to spend, he said.
> >****<
> The AFL-CIO would like Greenspan to use other tools than interest rate
> changes to deal with the economy. Imposing new reserve requirements on
> banks could slow down the growth of home equity loans, or the Fed could ask
> mutual funds to hold more of their assets in cash to dampen stock market
> fluctuations, Palley said. Such steps would slow the erratic swings in
> consumer spending, he said.
>
--
Michael Perelman
Economics Department
California State University
Chico, CA 95929
Tel. 530-898-5321
E-Mail [EMAIL PROTECTED]
