Centered in London, the banking panic of 1825 has been called the first modern financial crisis, the first Latin American crisis, and the first emerging market crisis. And while the panic displayed many of the key elements of past crises we have covered—fluctuations in money growth, an investment bubble, a stock market crash, and bank runs—this crisis had its own twists, including a Bank of England that hesitated before stepping in as lender of last resort. But it is perhaps best known for an infamous bond market swindle surrounding an entirely made-up Central American principality. In this edition of Crisis Chronicles, we explore the Panic of 1825 and visit the mythical nation of Poyais.
Look for our next post on March 23.
April 10, 2015
Crisis Chronicles: The Panic of 1825 and the Most Fantastic Financial Swindle of All Time
Posted at 7:00 am in Economic History, Lender of Last Resort, Panic, Unemployment | Permalink | Comments (3)
April 8, 2015
The FR 2420 Data Collection: A New Base for the Fed Funds Rate
On April 1, 2014, the Federal Reserve began collecting transaction-level data on federal funds, Eurodollars, and certificates of deposits from a large set of domestic banks and agencies of foreign banks operating in the United States. Previously, the Fed had only received fed funds and Eurodollar data from major brokers, and not directly from the banks borrowing in these markets. These new data, collected on form FR 2420, have helped the Fed better understand activity in the fed funds and Eurodollar markets. In this post, we focus on the new data on fed funds, in light of the Federal Reserve Bank of New York’s Trading Desk announcement that it plans to use these data to calculate and publish the fed funds effective rate.
From the Vault: Separating News and Noise … and Jokes
Tesla Motors’ shares saw a brief bounce from a far-out and fictional product (a smart watch) announced as part of an April fool’s prank. While markets evidently made quick sense of the joke, that’s not always the case.
Posted at 12:40 pm in Financial Markets | Permalink
April 6, 2015
Are BHC and Federal Reserve Stress Test Results Converging? What Do We Learn from 2015?
In March, the Federal Reserve and thirty-one large U.S. bank holding companies (BHCs) announced results of the latest Dodd-Frank Act-mandated stress tests. Some commentators have argued that BHCs, in designing their stress test models, have strong incentives to mimic the Fed’s stress test results, since the Fed’s results are an integral part of the Federal Reserve’s supervisory assessment of capital adequacy for these firms. In this post, we look at the 2015 stress test projections by the eighteen largest U.S. BHCs and by the Fed and compare them to similar numbers from 2013 and 2014. As stress testing becomes more established, do we see evidence that the BHCs are mimicking the Fed?
April 3, 2015
Historical Echoes: Pop Culture Sold Savings Bonds
U.S. savings bonds were created in 1935 under President Franklin D. Roosevelt to assist the United States in raising funds for a variety of government programs.
April 1, 2015
Central Bank Solvency and Inflation
Marco Del Negro and Christopher A. Sims The monetary base in the United States, defined as currency plus bank reserves, grew from about $800 billion in 2008 to $2 trillion in 2012, and to roughly $4 trillion at the end of 2014 (see chart below). Some commentators have viewed this increase in the monetary base […]
March 30, 2015
The Effects of Entering and Exiting a Credit Default Swap Index
Since their inception in 2002, credit default swap (CDS) indexes have gained tremendous popularity and become leading barometers of the credit market.
March 27, 2015
Just Released: SCE Credit Access Survey Shows Higher Likelihood of Consumers Applying for Credit
The Federal Reserve Bank of New York today released results from its February 2015, which provides information on consumers’ experiences with and expectations about credit demand and credit access.
March 25, 2015
Choosing the Right Policy in Real Time (Why That’s Not Easy)
Marco Del Negro, Raiden B. Hasegawa, and Frank Schorfheide Second in a two-part series As an economist, you make policy recommendations at any point in time that depend on what model of the economy you have in mind and on your assessment of the state of the economy. One can see these points play out […]
March 23, 2015
Combining Models for Forecasting and Policy Analysis
Model uncertainty is pervasive. Economists, bloggers, policymakers all have different views of how the world works and what economic policies would make it better.
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