The most obvious answer would seemingly be "no". After all, equity markets have not recovered their lost value, and the recession is still spreading throughout the real economy. The Obama administration is planning a $700bn stimulus package to create jobs, and monetary policy has fired just about all its bullets without making too much of a dent.
But a deeper look gives some reasons for optimism. First, the banking industry appears to have been stabilized. There is still some restructuring going on, of course, and that will no doubt continue for quite some time. But the TED spread (a measure of how risky inter-bank lending is perceived to be) is back to relatively low levels, and there are other signs that credit markets have begun to thaw, and we may have escaped a liquidity trap. In short, the TARP program has improved conditions in the banking sector, if only by preventing further collapse.
Of course it is still too soon to tell how everything will play out, but in just two or three months ago we were concerned about the collapse of the entire global financial system, and doomsday scenarios were not considered impossible or even especially unlikely. As we sit now, we are more concerned with getting the real economy moving again, the coming structural adjustment, and trade policy. I do not mean to diminish these other issues, but they are more indicative of a typical -- if deep -- recession than of a Global Financial Armageddon. And keep in mind that TARP has only used about half of the $700bn, which now looks as if it will be repaid to the U.S. Treasury with interest, so there is still some flexibility for the Fed and Treasury as we move forward.
And, as a recent WaPo editorial reminds us, this has benefits for everybody living inside this country, plus many more living outside of it. It's too early to do a celebratory lap, but so far TARP seems to be working.
IPE @ UNC
IPE@UNC is a group blog maintained by faculty and graduate students in the Department of Political Science at the University of North Carolina at Chapel Hill. The opinions expressed on these pages are our own, and have nothing to do with UNC.
Bookshelf
Tags
Academia Adjustment Afghanistan Africa AIG America Argentina Austerity Bailout Banking Bargaining Basel Bernanke Bias Blogging Business cycle; recession; financial crisis Cap and Trade capital controls capital flows central banks; moral hazard Chavez China China Trade Climate Change Contentious Politics Cuba Currencies Currency Crises; financial crisis Current Account Data Debt Debt; China; United States; Decession Politics Decoupling Deflation democracy Democrats; Trade policy development Diplomacy Dollar; China; Currency Manipulation; Exchange Rates dollar; exchange rate policy ECB ECB; Fed; Monetary Policy Economic Growth Economics Egypt election EMU; monetary union Environment EU; Agriculture; Common Agricultural Policy Euro Europe; labor; immigration European Union Exchange Rates Farm Bill; Agriculture FDI Fed; Monetary Policy finance financial crisis financial crisis; subprime Fiscal Policy; monetary policy; elections Fiscal Stimulus Foreign Aid Foreign Policy France Free Trade Agreements G-20 G20 Summit Game Theory Germany global recession globalization Grand Theory Great Britain Greece health care reform Hegemony Human Rights Iceland imbalance IMF immigration Incentives income distribution income inequality; globalization India Inequality inflation institutions Interests international finance International Law International Monetary System International Relations Investment IPE Iran Iraq Ireland ISA Italy Japan labor markets Latin America Libya Macroeconomics Marxism Mexico Microfinance Miscellany monetary policy Monetary policy; Federal Reserve moral hazard Narcissism Networks Nobelist Smackdown North Korea Obama Oil PIGS Pirates Political Economy Political Methodology Political Science Political Survival Political Theory Power Protectionism Protests Public Choice Public opinion Rational Choice regulation Research Review Russia Sanctions Security Dilemma security threats Soccer Social Science Sovereign Debt Spain Sports Statistics stock markets Systems Tariffs TARP Taxes TBTF Technocracy technology terrorism Trade trade policy UNC Unemployment United States US-South Korea Venezuela WTO WTO; Doha
Blog Archive
-
▼
2009
(521)
-
▼
January
(31)
- What A Difference a Decade Makes
- Payback Time
- Meta
- The Real Exchange Rate and the Current Account, 19...
- A Thousand Words
- Canard Pekinois
- Blogging Gets More Cachet
- Financial Crisis' First Casualty?
- Why Adjust?
- What Happens in Davos...
- A Person Needs a Face; A Tree Needs Bark
- Are Economists Completely Clueless?
- Manipulation
- Discounting Obama's 'Aggressive Attitude' Toward C...
- Best Wishes, President Obama, But Low Expectations
- More Sweatshop Blogging
- Deflation Watch
- Revenue Sharing in Iraq: When IPE Meets Security S...
- Sweatshops and Trade Agreements
- When Marx Isn't Really Marx
- Has the Financial Bailout Worked?
- Zimbabwe introduces new $50 billion note
- Foggy Thoughts on Decoupling
- Piracy Update!
- Buying Hearts and Minds
- Breaking: Entire U.S. Economy Ceases to Exist
- BOE sets a record!
- American debt don't taste too good anymore
- On the (De)Merits of Liberal Illiberalism
- Should We Hope For More Protectionism?
- The New Economic Order: Same As the Old Economic O...
-
▼
January
(31)
Wednesday, January 14, 2009
Has the Financial Bailout Worked?
Subscribe to:
Post Comments (Atom)
0 comments:
Post a Comment