Dr. J's GMI Topic Overviews with Eve and Wally

This Bonus Session summarizes Dr. J's live discussion on tariffs and the US economy held on March 15, 2025.

Main Points - Tariffs

• Theoretical Irrelevance Post-Great Depression: Economists widely agree tariffs generally harm economies based on insights gained since the Great Depression.

• Presidential Power and Constitutional Authority: Presidents have limited short-term influence on economic strength but can negatively impact it...

Overview of Module 4, Section 8: Central Bank Operations in the New Norm, which discusses the evolution of the Fed's monetary policy operations, particularly the transition from a "corridor policy" to a "floor policy" following the 2008 financial crisis.

Main Themes

1. Shift from Corridor Policy to Floor Policy

• Corridor Policy (Pre-2008): This regime operated when reserves in the banking system were...

Overview of Module 4, Section 7: Central Bank Operations in "Normal" Times, which discusses mechanisms through which Central Banks manage the overnight bank-to-bank lending rate during “normal” economic periods. i.e. in periods prior to significant events like the 2008 Financial Crisis.

Main Themes

1. The Overnight Bank-to-Bank Lending Rate as a Key Monetary Policy Tool

• The overnight bank-to-bank lending rate (in ...

Overview of Module 4, Section 6: Quantitative Easing, regarding Quantitative Easing (QE) as implemented by the Federal Reserve, particularly during &after the 2008 Financial Crisis and during the COVID-19 pandemic.

Main Themes

1. Definition and Purpose of Quantitative Easing (QE)

• QE is described as credit easing without sterilization focused on a much larger range of assets, specifically those having long maturities.
• The...

Overview of Module 4, Section 5: The Financial Crisis, which introduces the Federal Reserve's balance sheet and the tools it employs to manage the money supply & influence interest rates.

Main Themes

1. Short-Term Collateralized Financial Products: Repurchase Agreements (Repos) and Reverse Repurchase Agreements (Reverse Repos)

Repo (RP) A financial product involving the purchase of securities (generally Treasury securi...

Overview of Module 4, Section 4: The Financial Crisis, which summarizes the four phases of the 2008 Financial Crisis, which ultimately resulted in a near collapse of the global financial system.

Four Phases of The Financial Crisis:

Phase 1: The Bursting of the Housing Bubble

• The crisis originated with a significant housing bubble. Home prices peaked nationally in July 2006 and subsequently dropped by 9% in less than two ye...

Overview of Module 4, Section 3: Crisis Precursors, which focuses on the events and conditions that led to the 2008 Financial Crisis.

Main Themes

The Rise and Proliferation of Asset-Backed Securities (ABS) The securitization of debt, particularly mortgages, played a central role in the lead-up to the crisis. ABS transformed illiquid loans into tradable assets, offering benefits like liquidity and risk transference for issuers ...

Overview of Module 4, Section 2: Bank Contagion, which is defined as the failure of one bank leading to the failure of another bank due to the interconnected nature of the financial system. The major sources of bank contagion are outlined as well as the structural elements that amplify it and the inherent trade-offs associated with a global banking system.

Main Themes

Interconnectedness as the Foundation of Contagion Banks do not op...

Overview of Module 4, Section 1: Bank Risk, covering the three primary sources of bank risk and the regulations designed to mitigate this risk. An understanding of these sources of bank risk is key for comprehending the potential vulnerabilities within the financial system, how these manifested in the Financial Crisis of 2007-2009, and how the post-Financial Crisis regulations were designed to enhance the resilience of banks and co...