Cato Journal最新文献

{"title":"Financial Innovation, Regulation, and Reform","authors":"C. Calomiris","doi":"10.7916/D87M0JFV","DOIUrl":"https://doi.org/10.7916/D87M0JFV","url":null,"abstract":"Financial innovations often respond to regulation by sidestepping regulatory restrictions that would otherwise limit activities in which people wish to engage. Securitization of loans (e.g., credit card receivables, or subprime residential mortgages) is often portrayed, correctly, as having arisen in part as a means of \"arbitraging\" regulatory capital requirements by booking assets off the balance sheets of regulated banks. Originators of the loans were able to maintain lower equity capital against those loans than they otherwise would have needed to maintain if the loans had been placed on their balance sheets. (1) Capital regulation of securitization invited this form of off-balance-sheet regulatory arbitrage, and did so quite consciously. Several of the capital requirement rules for the treatment of securitized assets originated by banks, and for the debts issued by those conduits and held or guaranteed by banks, were specifically and consciously designed to permit banks to allocate less capital against their risks if they had been held on their balance sheets (Calomiris 2008a). Critics of these capital regulations have rightly pointed to these capital requirements as having contributed to the subprime crisis by permitting banks to maintain insufficient amounts of equity capital per unit of risk undertaken in their subprime holdings. Investment banks were also permitted by capital regulations that were less strict than those applying to commercial banks to engage in subprime-related risk with insufficient budgeting of equity capital. Investment banks faced capital regulations under SEC guidelines that were similar to the more permissive Basel II rules that apply to commercial banks outside the United States. Because those capital regulations were less strict than capital regulations imposed on U.S. banks, investment banks were able to lever their positions snore than commercial banks. Investment banks' use of overnight repurchase agreements as their primary source of finance also permitted them to \"ride the yield curve\" when using debt to fund their risky asset positions; in that respect, collateralized repos appeared to offer a substitute for low-interest commercial bank deposits. (2) But as the collateral standing behind those repos declined in value and became risky, \"haircuts\" associated with repo collateral became less favorable, and investment banks were unable to roll over their repos positions, a liquidity risk that added to their vulnerability and made their equity capital positions even more insufficient as risk buffers. There is no doubt that the financial innovations associated with securitization and repo finance were at least in part motivated by regulatory arbitrage. Furthermore, there is no doubt that if on-balance-sheet commercial bank capital regulations had determined the amount of equity budgeted by all subprime mortgage originators, then the leverage ratios of the banking system would not have been as large, and the liquid","PeriodicalId":38832,"journal":{"name":"Cato Journal","volume":"6 1","pages":"65-91"},"PeriodicalIF":0.0,"publicationDate":"2009-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90429019","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Book Review: The Libertarian Illusion: Ideology, Public Policy, and the Assault on the Common Good","authors":"J. Kuznicki","doi":"10.5860/choice.46-2941","DOIUrl":"https://doi.org/10.5860/choice.46-2941","url":null,"abstract":"","PeriodicalId":38832,"journal":{"name":"Cato Journal","volume":"110 1","pages":"372-377"},"PeriodicalIF":0.0,"publicationDate":"2009-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73225244","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Renminbi Exchange Rates and Relevant Institutional Factors","authors":"Y. Gang","doi":"10.4324/9780203885321.ch3","DOIUrl":"https://doi.org/10.4324/9780203885321.ch3","url":null,"abstract":"In recent years, China has experienced rapid social and economic development. Against this backdrop, growing pressure for renminbi appreciation emerged and China's trade surplus and foreign reserves increased rapidly. This article explains the development of the RMB exchange rate by examining productivity growth and institutional factors, such as the transformation of the foreign exchange rate system and legal reforms to strengthen the hale of law. Development of the Renminbi Exchange Rate On January 1, 1994, China unified the \"dual\" exchange rate regime into a single one. The official rate before January 1, 1994 was 5.8 RMB per USD and 8.7 RMB per USD after exchange rate unification. Some observers argued that China depreciated the RMB by 40 percent in 1994. However, that argument is a misconception. Before 1994, China was still under the \"dual\" exchange rate regime, under which 80 percent of the foreign exchange trading volume was at the market rate, and only 20 percent at the official rate. The 8.7 RMB per USD rate was basically the market rate at the end of 1993. During 1993, the supply of foreign exchange mainly consisted of two sources: (1) joint-venture firms that were 'allowed to retain their foreign exchange, and (2) domestic export companies that had excess foreign exchange retained under the foreign exchange retention system. Under the \"dual\" exchange rate regime, if a firm needed foreign exchange to import, it could obtain foreign exchange through three channels: (1) buy foreign exchange at the market rate, (2) buy a quota from the market and use the quota to purchase foreign exchange at the official rate, and (3) apply for a quota from the State Administration of Foreign Exchange (SAFE) and use the quota to buy foreign exchange at the official rate. The price of a quota was roughly the difference between the official and the market rates. My estimation is that the weighted average of the RMB exchange rate depreciated by 4 percent vis-a-vis the dollar in 1993, compared with the 8.7 RMB per USD as the starting rate of the new regime at the beginning of 1994 (Table 1). The trade surplus in 1994 was very modest, only $5.4 billion. And the trade surplus for 1995-2004 was fairly stable, indicating that the RMB/USD exchange rate was close to its equilibrium level. the appreciation pressure afterward was partly driven by the productivity gains and the institutional reasons explained in this article, and partly by the weakening of U.S. dollar; especially since 2002. Since 1994, China has been promoting market-oriented reform of the RMB exchange rate mechanism. Three stages can be delineated: 1. 1994-96: a single and managed floating exchange rate regime based on market supply and demand. During this period, the nominal BMB/USD exchange rate rose by nearly 5 percent. 2. 1997-2005: after the 1997-98 Asian financial crisis China maintained a stable exchange rate at 8.28 RMB per USD. 3. July 2005-present: China reformed the RMB exchange rate regi","PeriodicalId":38832,"journal":{"name":"Cato Journal","volume":"22 1","pages":"187-196"},"PeriodicalIF":0.0,"publicationDate":"2008-03-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87739049","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Cold Case Files: The Athenian Grain Merchants, 386 B.C","authors":"Wayne R. Dunham","doi":"10.2139/SSRN.976028","DOIUrl":"https://doi.org/10.2139/SSRN.976028","url":null,"abstract":"While most economic analysis of the effects of market power has focused on monopoly power (a single seller of a good) or cartels among sellers, there has always remained some degree of interest in monopsony power (a single buyer) or buying cartels. In the United States there have been antitrust cases involving monopsony and buyer's cartels at least as far back as 1925, and there is continuing interest in the potential for monopsony power in the retail and health care sectors. This paper examines one of the earliest known antitrust or competition policy cases for possible lessons concerning antitrust treatment of monopsony power in the present day. In 388 B.C., grain regulators in Athens, Greece, were attempting to respond to a sharp increase in grain prices. They encouraged grain importers to form a buyers' cartel with the purpose of decreasing the price of imported grain. However, this action resulted in an overall increase in price and the grain merchants soon found themselves on trial for their lives. In this paper the information presented at that trial is used to evaluate the grain merchants' actions and the impact of monopsony on prices and consumption more generally.","PeriodicalId":38832,"journal":{"name":"Cato Journal","volume":"14 1","pages":"495-514"},"PeriodicalIF":0.0,"publicationDate":"2007-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88768894","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"The Roadblock to a Sovereign Bankruptcy Law","authors":"J. Sachs","doi":"10.7916/D80G3RTV","DOIUrl":"https://doi.org/10.7916/D80G3RTV","url":null,"abstract":"Bankruptcy law is a necessary feature of a modern economy, and the principles for a bankruptcy apply whether the debtor happens to be a sovereign or not. The essential point is that markets cannot handle situations of extreme financial distress or debtor-creditor workouts in an efficient manner without a sound legal framework. Indeed, Adam Smith himself was a champion of applying bankruptcy processes to insolvent sovereign debtors, arguing that when the situation warranted it, bankruptcy was a sensible alternative to the chaotic ways that sovereign insolvency was otherwise handled. 1 Thus, the fact that the private financial community continues to oppose a sovereign bankruptcy law is quite unconvincing, especially since an enormous number of countries has had a sovereign workout at some point in history.","PeriodicalId":38832,"journal":{"name":"Cato Journal","volume":"36 1","pages":"73-77"},"PeriodicalIF":0.0,"publicationDate":"2003-03-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80393784","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Lessons from Argentina and Brazil","authors":"Charles W. Calomiris","doi":"10.7916/D802922V","DOIUrl":"https://doi.org/10.7916/D802922V","url":null,"abstract":"What have we learned from the sovereign debt crises in Argentina and Brazil, and what can the United States and the International Monetary Fund do, if anything, to repair the damage, and to avoid similar problems elsewhere? Policy Lessons I would emphasize five policy lessons: * First, in emerging market countries (EMs), monetary policy--or, what amounts to the same thing, exchange rate policy--is often constrained by the need to finance government spending, which underlies the eventual collapse of the exchange rate. * Second, even well-regulated banking systems are highly vulnerable to the risks of fiscal imbalance. * Third, the IMF needs to stop intervening to prevent sovereign defaults when they are necessary. * Fourth, EM debt capacity cannot be captured adequately by the ratio of sovereign debt to GDP. Export growth, and hence the need to follow through on trade reform, is just as important a fundamental determinant of debt repayment as discipline over government spending. * Fifth, \"contagion\" among sovereign debtors is selective. Fiscal Imbalance and Monetary Collapse Unlike the United States or the European Union, where an independent central bank determines monetary policy, in most EMs, the policies of central banks are often determined by arithmetic--the arithmetic that requires debts to be monetized, because that is the only way that they can be repaid. When government debt grows too fast, the government is unable to repay debt service with future taxes, and the government forces debt monetization to occur. That problem is at the core of every exchange rate collapse of the recent and distant past. Typically, exchange rate depreciation precedes debt monetization because the markets anticipate the inevitable monetization that will occur. Sometimes, fiscal imbalance does not show itself in government accounts. That was true of Brazil in the 1970s, which used off-balance sheet spending to disguise its fiscal imbalance (Brazil often ran an official fiscal surplus 'alongside high inflation in the 1960s and 1970s). Anticipated banking bailouts (which have been costing upward of 20 percent of GDP in the \"twin-crises\" countries of the past two decades) are the most frequent source of fiscal imbalance in recent crises. But Brazil and Argentina reached their current fiscal difficulties and weak currencies largely in the \"old-fashioned way\"--by failing to rein in measured government spending programs. In Argentina, government spending grew substantially in the final years of the Menem administration, despite the crescendo of criticism of the debt run-up and the visible need to reform the infamous \"coparticipation\" system that hampered fiscal reform. And that debt was almost entirely denominated in hard currency, despite the lack of adequate growth in exports. The fiscal side of the liberalization cycle in these and other countries seems to follow a familiar path: liberalization and privatization result in new revenues for government and ebullient e","PeriodicalId":38832,"journal":{"name":"Cato Journal","volume":"33 1","pages":"33-45"},"PeriodicalIF":0.0,"publicationDate":"2003-03-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77198925","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"WHEN WILL ECONOMICS GUIDE IMF AND WORLD BANK REFORMS","authors":"Charles W. Calomiris","doi":"10.7916/D8CC1961","DOIUrl":"https://doi.org/10.7916/D8CC1961","url":null,"abstract":"The “Report of the International Financial Institution Advisory Commission” (IFIAC 2000), released in March, is a blueprint for reforming the International Monetary Fund, the World Bank, and other multilateral development banks. That report, known as the “Meltzer Commission Report” (Allan H. Meltzer was chairman of the IFIAC), was signed by a bipartisan majority of 8 to 3. It has generated its share of criticism from opponents in the commission minority, the Clinton administration, labor unions, and Congress. 1 Since our report was published, it has become clear to me that two separate debates are being waged over the new “global financial architecture.” One is the narrow (visible) debate over the technical aspects of specific proposals for designing mechanisms to achieve well-defined economic objectives. The other is a broader (less visible) debate over whether the IMF, the World Bank, and the other development banks should have narrowly defined economic objectives or alternatively, be used as tools of ad hoc diplomacy. Until we settle that second, broader political debate, we cannot seriously even begin the constructive dialogue over how best to achieve economic objectives. That dialogue is important; our proposals are a starting point for","PeriodicalId":38832,"journal":{"name":"Cato Journal","volume":"171 1","pages":"85-103"},"PeriodicalIF":0.0,"publicationDate":"2000-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74328822","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"MISES AND HIS UNDERSTANDING OF THE CAPITALIST SYSTEM","authors":"Israel M. Kirzner, G. Tullock","doi":"10.4324/9780203465974.ch9","DOIUrl":"https://doi.org/10.4324/9780203465974.ch9","url":null,"abstract":"To someone not familiar with Ludwig von Mises’ understanding of the market, there would, on the surface of Mises’ exposition, appear to be a puzzling tension in that exposition—a tension having to do with some very basic elements of Mises’ position. We shall find that the resolution of this tension is, once it has been explained, fairly obvious, but we shall also find that a careful consideration of this resolution can help us more fully appreciate the uniqueness (and the intellectual integrity) of Mises’ understanding of the capitalist system.","PeriodicalId":38832,"journal":{"name":"Cato Journal","volume":"285 1","pages":"215-232"},"PeriodicalIF":0.0,"publicationDate":"1999-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76873680","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Is There a Need for an International Lender of Last Resort","authors":"A. Schwartz","doi":"10.4324/9780203327586-30","DOIUrl":"https://doi.org/10.4324/9780203327586-30","url":null,"abstract":"","PeriodicalId":38832,"journal":{"name":"Cato Journal","volume":"100 1","pages":"1-6"},"PeriodicalIF":0.0,"publicationDate":"1999-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83346756","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"THE FUTURE OF THE WTO","authors":"Daniel T. Griswold","doi":"10.30875/71402755-en","DOIUrl":"https://doi.org/10.30875/71402755-en","url":null,"abstract":"Once an obscure international body tucked away in Geneva, Switzerland, the World Trade Organization (WTO) has become almost a household word in the United States today. Its name recognition rose dramatically in fall 1999 when tens of thousands of protestors took over the streets of Seattle at the beginning of the WTO’s November 30–December 3 ministerial meeting. The demonstrators seemed to blame the WTO for undermining all that is good in the world—from democracy and living standards to air quality and sea turtles. The protests were followed later in the week by the collapse of talks among the WTO’s more than 100 members, talks that were supposed to launch a new round of multilateral trade negotiations. This double failure—to persuade hearts and minds outside the negotiating rooms and to achieve consensus within—was an undeniable setback for the WTO and free trade. Events in Seattle invigorated opponents of the WTO, weakened its base of support in Congress, and revived questions about the desirability of trade liberalization itself as a goal of U.S. policy. More so than anytime since its founding, doubts are being raised about the future of the WTO. Those doubts need to be met head-on. Both the WTO and, before it, the General Agreement on Tariffs and Trade have played an important role in expanding international trade during the post-World War II era, which in turn has helped to spread prosperity to a widening circle of humanity. When representatives of 23 mostly industrialized nations met in 1947 to sign the original General Agreement on Tariffs and Trade (GATT) treaty, the world economy was still on its knees","PeriodicalId":38832,"journal":{"name":"Cato Journal","volume":"4 1","pages":"345-350"},"PeriodicalIF":0.0,"publicationDate":"1999-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78924861","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}