325_Supplement20

325_Supplement20 - Department of Economics University of Maryland Economics 325 Intermediate Macroeconomic Analysis Supplement 20 Professor Sanjay

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Intermediate Macroeconomic Analysis Spring 2011 1 Department of Economics University of Maryland Economics 325 Intermediate Macroeconomic Analysis Supplement 20 Professor Sanjay Chugh Spring 2011 The following op-ed, which appeared in the Wall Street Journal on April 17, 2009, discusses two leading academics’ (Paul Krugman and Lawrence Summers) basic views on key steps required to aid financial markets’ recovery. You should be able to recognize how some of the broad themes sounded here echo some of the basic ideas captured by the financial accelerator framework.
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Intermediate Macroeconomic Analysis Spring 2011 2 OPINION APRIL 17, 2009, 12:06 A.M. ET Europe Is No Model for Our Banks We need a financial system that supports innovation. By DAVID SMICK Barack Obama is facing a policy civil war within his party. One side is led by New York Times columnist Paul Krugman. The other is led by the president's top economic adviser, Larry Summers. The battle is over the future of Wall Street banks. The president's dilemma is that both sides offer credible arguments but both also miss an essential point. As the Krugmanites argue, we got into today's mess because of a lack of financial transparency. Yet everything about big banks still seems murky. Their undisclosed off-balance-sheet exposure remains a mystery, and the Treasury's public/private scheme to clear balance sheets risks transferring yet more
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This document was uploaded on 11/01/2011 for the course ECON 325 at Maryland.

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325_Supplement20 - Department of Economics University of Maryland Economics 325 Intermediate Macroeconomic Analysis Supplement 20 Professor Sanjay

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