Summary: First Republic Bank has folded and the Fed has a new “unflinching” report on the regulatory and supervisory failures leading to the SVB failure. SVB’s own mismanagement, the 2018 relaxation to Dodd-Frank plus lax and lethargic supervision are to blame. Our student application exercise gets into some of the specifics here (CAMELS ratings anyone?) while also discussing broad trade-offs that regulators face.
Summary: Big Bank of Japan coming up!! As world markets brace for more news, The Indicator describes how changes to Japan’s yield curve control could create ripples throughout financial markets. Our accompanying exercise works through a graphical exercise to strengthen students’ understanding of the yield curve, especially when “kinks” appear…
Summary: The Fed raised interest rates by 25bp yesterday. How does that affect you? This episode aired almost exactly year ago– when the Fed was just embarking on its rate hikes– delves into the implications for mortgage rates. The accompanying teaching idea prompts students to put themselves in the shoes of a homebuyer.
Summary: The latest Intergovernmental Panel on Climate Change (IPCC) report is out, and the scientists have delivered their “final” warning, calling for aggressive actions to reduce carbon emissions. This episode of The Indicator which aired during last fall’s COP27 climate summit explores a radical but intriguing idea– the “Carbon Coin,” which leverages the power of monetary (and fiscal) policy to bring about large-scale carbon reduction. The accompanying exercise explores the carbon coin and how it compares to currency that we know and use today?
Summary: February inflation numbers are out and the bottom line is that inflation remains stubbornly high. However, the Fed’s job, laser focused on price stability till now, gets complicated in the aftermath of the SVB collapse. Today’s exercise asks students to debate whether the Fed should pause interest rate hikes as it weighs the tradeoffs between fighting inflation and stressing bank balance sheets.
On this episode from Planet Money, they discuss the events and people that led the creation of the Fed, relevant in 2022 in light of the pressure the Fed is facing in as inflation continues to rise. A quick guide to J.P. Morgan’ s influence and help with founding the Fed so big bailouts no longer had to fall on his pockets.
During World War II, when inflation was very high, the United States government took many different actions to fight it including implementing an income tax, rationing, and price ceilings. Today we have the Federal Reserve which means we will hopefully not have to resort to these drastic measures to fix inflation ever again.
$1.86 trillion in relief spending has been authorized by congress, which will be financed by the sale of government bonds and other debt instruments. The Federal Reserve Bank will purchase many of these bonds which will cause an inflow of money into the economy. This podcast also elaborates on the inflationary implications of the stimulus checks entering the economy.
There is also discussion of Google’s market power and vaccination progress.
Discussion Prompt: What is the intended goal of the stimulus checks and what unintended consequences can arise as a result?
Biden has proposed an economic plan to contain the coronavirus while opening the economy again when it is safe to do so. His plan primarily focuses on affordable child care, creating more jobs in the green energy sector, and closing the racial wealth gap. This podcast discusses his plans to raise taxes on the wealthy, remove certain deductibles for these individuals, and increase taxes on corporations in order to fund some of these programs.
In the wake of the Covid-19 crisis, the U.S. government is pushing out a $2 trillion stimulus package. The Fed is also purchasing large quantities of U.S. Treasury bonds in order to stimulate the economy. This podcast discusses where this stimulus is coming from, and how it will effect the economy.
Original Air Date: March 26, 2020
Length: 20 minutes 29 seconds
Discussion Prompt: Why is demand for U.S. Treasury bonds so high right now? Will the stimulus package be enough to keep the economy safe from a recession?
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