Financial Dislocation Research Articles

Dollar Liquidity, Financial Vulnerability and Monetary Sovereignty

ABSTRACTPeriods of dollar‐led global monetary tightening generate negative effects in many lower‐ and middle‐income countries. The tightening cycle which commenced in early 2022 has exacerbated the financial dislocation experienced by countries including Zambia, Sri Lanka and Pakistan. How can policy makers protect their economies from such external shocks and foster a stable developmental environment? Some recent contributions argue that the capacity of countries to insulate domestic policy from global financial conditions depends upon ‘monetary sovereignty’. This contribution argues that this misrepresents the constraints to macroeconomic policy and development strategy. Monetary sovereignty, if narrowly defined, is necessary but not sufficient for domestic policy autonomy. Stronger definitions impose unrealistic requirements on debt denomination and exchange rate regimes. The authors argue that, outside of currency unions, the main policy constraints for developing countries are limited domestic productive capacity and integration into global trade and financial networks rather than monetary arrangements. The discussion is illustrated with an empirical examination of three recent episodes of global illiquidity and/or policy tightening: the 2013 taper tantrum, the March 2020 liquidity shock and the 2022 dollar tightening cycle. The authors find evidence that monetary sovereignty does not insulate a country from episodes of dollar illiquidity. While ‘fundamentals’ such as current account deficits and foreign exchange reserves provide limited power in identifying vulnerability, measures of financial depth and activity do appear related to vulnerability.

Did weekly economic index and volatility index impact US food sales during the first year of the pandemic?

We explore the impacts of economic and financial dislocations caused by COVID-19 pandemic shocks on food sales in the United States from January 2020 to January 2021. We use the US weekly economic index (WEI) to measure economic dislocations and the Chicago Board Options Exchange volatility index (VIX) to capture the broader stock market dislocations. We validate the NARDL model by testing a battery of models using the autoregressive distributed lags (ARDL) methodology (ARDL, NARDL, and QARDL specifications). Our study postulates that an increase in WEI has a significant negative long-term effect on food sales, whereas a decrease in WEI has no statistically significant (long-run) effect. Thus, policy responses that ignore asymmetric effects and hidden cointegration may fail to promote food security during pandemics.

An Approach to Consolidating Pediatric Hospital Beds During the COVID-19 Surge.

On April 3, 2020, in response to the coronavirus disease 2019 pandemic, the Children’s Hospital Association of the United States issued guidance for coordinating pediatric hospital care and increasing general hospital surge capacity.1 Observing that ∼200 hospitals already care for 50% of all pediatric admissions, it called for immediate consolidation of pediatric care within experienced pediatric facilities and coordinated efforts between children’s and community hospitals to benefit both adult and pediatric patients. The goal was to expand adult capacity in community hospitals caring for older patients while, at the same time, providing care for pediatric patients in settings where customized pediatric resources are available. Because local conditions vary, flexibility and thoughtful coordination across hospital systems were advised. Here, we estimate hospital bed capacity under potential consolidation and the corresponding impact on patient travel distance.We used data from the 2018 American Hospital Association Annual Survey Database2 to quantify the availability of pediatric hospital beds within the continental United States. Ratios of beds per 1000 children (<18 years old) were calculated by using population data from the US Census.3 We excluded psychiatric, chemical-dependence, and neonatal beds. We report descriptive statistics and/or numbers for states, hospital service areas, and hospital referral regions.4 The distance from the centroid of counties to hospitals was estimated by using the Haversine formula.5 All analyses were conducted by using Jupyter notebooks and Python 3.7. Interactive visualizations were produced with Plotly (available at https://bit.ly/ped_beds_covid).From a universe of 6218 institutions, 3547 general hospitals with functioning emergency departments were identified. Of these, 3524 were located within the continental United States, and 1193 maintained a total of 30 798 pediatric beds. Only 52 institutions were characterized as exclusively pediatric (9904 beds, 32.2% of total US pediatric capacity), but 319 were sufficiently specialized to require PICUs. These were distributed more widely and housed 23 085 beds, or 74.9% of total US pediatric inpatient capacity.The distribution of all pediatric beds and of those in hospitals with PICUs is shown in Fig 1. The statewide fraction of pediatric beds contained in hospitals with PICUs ranged from 100% in Washington, District of Columbia, to 0% in Wyoming (median: 72.1%; interquartile range [IQR]: 61.0%–82.4%). The median distances from county centroids to the nearest pediatric bed increased from 24.4 miles (IQR: 13.7–37.2) under baseline conditions to 52.3 miles (IQR: 31.9–77.7 miles) with diversion to PICU hospitals.Populational distance estimates based on county census data are presented in Fig 2.Notably, 93.2% of hospital service areas and 39.8% of hospital referral regions did not contain a PICU. In the few regions with multiple PICUs (eg, Baltimore, Boston, Chicago, El Paso, Fort Lauderdale, Houston, Indianapolis, and Los Angeles), additional consolidation could be undertaken with little impact on travel distance.Decades of pediatric hospital care consolidation has left a system that is highly dependent on a subset of specialized centers.6,7 In a pandemic that preferentially spares children,8 this provides an opportunity for those centers to assume the entire burden of pediatric inpatient care. Here, we show that roughly three-quarters of all pediatric beds are currently maintained in centers with PICUs, so the remaining capacity could theoretically be accommodated if a corresponding volume of nonemergent caseload is deferred. Because, from previous estimates, it is suggested that at least 1 in 5 admissions to children’s hospitals can be considered elective and that admissions to general hospitals tend to have shorter lengths of stay,9 such accommodation may be achievable. However, as acknowledged by the Children’s Hospital Association,1 the degree to which this can be practically implemented will depend on many factors, including local practice characteristics, operating guidelines, transport systems, and the surge in patients with coronavirus disease 2019. Additionally, in our analysis we suggest that the immediate cost of such a strategy is, on average, a doubling of travel distances for families seeking urgent or emergent pediatric care. Additional costs from delayed care and financial dislocations will depend on the duration of the disruption and the extent to which elective pediatric medical and surgical care can be deferred. General pediatricians must be prepared to monitor and manage patients whose care has been delayed and to continue this through an extended period of backlog management. When the pandemic has passed, hospital administrators must be encouraged to reopen community pediatric services amid the related financial pressures.10

Divergent Performance and Shifting Alliances in a Deglobalizing World

There is a significant probability that the world economy is about to stumble into a period of financial dislocation. Exacerbated by political tensions partly as a consequence of an untethered American foreign policy, the unwillingness and/or inability of the major economic powers to confront the imbalances that led to the financial crisis of 2007-8 have laid the basis for a historical repetition. The danger is that the confluence of slow real growth, low productivity increases, inflated asset prices (notably real estate) and higher public debt in some of the major Group of 20 (G20) economies cannot be sustained much longer. The Bank for International Settlements (BIS), among others, has been expressing its concerns that collectively we have been unable to constrain the buildup of financial imbalances, leading to a progressive narrowing of policy options. Not only are debt levels higher but we have unwittingly helped to entrench the concentration and power of large banks, spurred the development of shadow banking, encouraged a massive misallocation of capital and exacerbated income inequality via financial repression and productivity-sapping bailouts to crippled firms, which have the side effect of perpetuating unsustainable asset bubbles. It hardly seems surprising that deglobalization has become a factor in the internal politics of too many countries. It could well be that in retrospect the past 10 years will seem like a lost opportunity to address serious crisis prevention. Despite efforts to strengthen global governance over these past 10 years, the economic foundation has little resilience.

On the Shock-Absorbing Properties of a Banking Union: Europe Compared with the United States

This study investigates the shock-absorbing properties of a banking union by providing a detailed comparison between the way regional financial shocks have been absorbed at the federal level in the United States, but have led to severe regional (national) financial dislocation and tensions in the euro area. The extent to which the institutions of the banking union, which is now emerging in the euro area, should increase its capacity to deal with future regional boom and bust cycles is also discussed. Cross-border capital flows in the form of equity appear to be much more stable than those taking the form of credit, especially inter-bank credit. Moreover, credit booms and bust leave a debt overhang and losses can materialise only via insolvencies, whereas equity flows absorb automatically losses in case of a bust and provide the cross-border owner with incentives to continue to provide financing even during a crisis. It follows that cross-border banks can absorb regional shocks. Of course, there is no free lunch: large cross-border banks pose the ‘too big to fail’ problem, and they also propagate shocks, especially if they originate in large countries, to the entire area.

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Power Relationships and the Political Economy of Global Imbalances

Large global economic and financial imbalances have already contributed to the global financial crisis and the euro zone crisis. A substantial retreat into protectionism may be generated. Huge current account surpluses and deficits have caused economic and financial dislocations in both emerging and advanced economies. In this paper, we argue that such global problem is a result of domestic political pressures that generate strong incentives for governments to postpone needed policy adjustments and the inability of international power relationships to force such adjustments prior to the outbreak of crises. Our analysis leads to the pessimistic conclusion that the pressures from both the public and private sector to bring about substantial policy adjustments before a crisis breaks out are quite weak. In the case of U.S.-China economic imbalances, we find that although China does not have a major policy objective to maintain large current account surpluses as would be implied by the frequent charges that China is practicing mercantilism, political polarization in the USA might make it almost impossible to secure agreement on effective actions. In the case of euro crisis, nor are we optimistic that euro zone will undertake any time soon the types of forceful policy actions necessary to bring the euro crisis under control.

When do voters actually think “It’s the Economy”? Evidence from the 2008 presidential campaign

Studies linking election outcomes to economics frequently assume that the economy’s salience is constant. This study shows that the economy’s salience systematically fluctuates. The number of voters focused on economic issues shifted dramatically throughout the 2008 campaign as the recession worsened and this change occurred well before the financial markets collapsed in September 2008. However, even during the recession substantial numbers of individuals said their vote was based on non-economic issues and for these individuals there was no relationship between their assessment of the economy and their electoral choice. Consistent with extant theories of issue attention, citizens who were the hardest hit by the recession and those who had the most anxiety about suffering a financial dislocation in the future were most likely to consider economic performance electorally important while secure voters were less likely to be economic voters.

Looking into a Distant Mirror: The 1870s

This article examines the financial dislocations that were occurring at the time of the iconic Edgar Degas 1873 painting, “The Cotton Exchange at New Orleans” and draws parallels to financial events of the 21st century. One can find some potentially useful historical lessons to draw on from that era. The article concludes that there is much to learn from the 1870s, whether it is (a) in how to anticipate financial dislocations, or (b) in how to avoid social disruptions that have historically followed financial dislocations, or (c) in how to persevere amidst adverse economic conditions.

A Monetary Policy Strategy in Good and Bad Times: Lessons from the Recent Past

We evaluate the ECB's monetary policy strategy against the underlying economic structure of the euro area economy, in normal times and in times of severe financial dislocations. We show that in the years preceding the financial crisis that started in 2007 the strategy was successful at ensuring macroeconomic stability and steady growth despite shocks to the supply side and to the transmission mechanism which complicated the policy process. Emphasis on monetary indicators in the ECB's monetary policy strategy JEL Classification: E31, E44, E51, E58

Monetary Ease: A Factor behind Financial Crises? Some Evidence from OECD Countries

AbstractThis paper addresses the question of whether and how easy monetary policy may lead to excesses in financial and real asset markets and ultimately result in financial dislocation. It presents evidence suggesting that periods when short-term interest rates were persistently and significantly below what Taylor rules would prescribe are correlated with increases in asset prices, especially as regards housing, though no systematic effects are identified on equity markets. Significant asset price increases, however, can also occur when interest rates are in line with Taylor rules, possibly associated with periods of financial deregulation and/or innovation. Finding also some support for a link of countries’ pre-crisis monetary stance with the extent to which their financial sectors were hit during the recent crisis, the paper argues that accommodating monetary policy over the period 2002–2005, probably in combination with rapid financial market innovation, would, in retrospect, seem to have been among the factors behind the run-up in asset prices and financial imbalances—the (partial) unwinding of which helped trigger the recent financial market crisis.

Contract Enforceability During Economic Crisis: Legal Principles and Drafting Solutions

The recent economic crisis, now commonly called the Great Recession, has caused huge financial dislocations. One aspect of the crisis is the effect on contractual obligations: Can a contractual obligation be avoided because of fundamental disruptions in the relevant market? This paper first looks at the common law; there, major market changes are rarely, if ever, the basis of avoidance of a contractual obligation. Restatement and UCC provisions also reflect this “principle of market risk.” While case law dealing with the effect of the economic crisis on contracts is thin, the few reported decisions are quite uniform in applying the market risk principle to deny relief.The second part of the paper considers the extent to which international contract law as reflected in the Principles of International Commercial Contracts (the UNIDROIT Principles) and the Convention on the International Sale of Goods (CISG) provides relief from fundamental market disruptions. Article 6.2.1 of the UNIDROIT Principles recognizes that when supervening circumstances lead to a fundamental change in the equilibrium of the contract, relief on the ground of hardship may be available. A few cases have granted relief under this provision, but they are rare. In addition, arbitration panels are divided on the question of whether hardship is part of the general commercial law, the lex mercatoria.Article 79 of the CISG provides for relief due to an “impediment” beyond the control of a party that the party could not reasonably have been expected to take into account. Controversy exists as to whether the concept of impediment encompasses economic hardship due to market change. The paper examines the contending arguments and case law on this issue.Because both common and international law rarely provide relief from market change, a party who wishes to have protection against market disruptions should provide for this contingency by contract. The final section of the paper, with no intent of being complete, suggests various types of clauses for the parties to consider incorporating into their contracts to deal with market change: whereas clauses; express conditions; MAC (market adverse condition) clauses; expanded force majeure clauses; hardship clauses; renegotiation and adjustment clauses; choice of law, forum, and arbitration clauses; Take-or-Pay and Hell-or-High-Water clauses. The fundamental message of the paper is that the parties should address relief from market changes in the negotiation of the contract. If they choose not to do so, they cannot expect to obtain relief from courts or arbitrators.

Monetary Policy, Market Excesses and Financial Turmoil

This paper addresses the question of whether and how monetary policy ease may lead to excesses in financial and real asset markets and ultimately result in financial dislocation. It presents evidence suggesting that periods when short-term interest rates have been persistently and significantly below what Taylor rules would prescribe are correlated with increases in asset prices, especially as regards housing, though no systematic effects are identified on equity markets. Significant asset price increases, however, can also occur when interest rates are in line with Taylor rules, associated with periods of financial deregulation and/or innovation. The paper argues that accommodating monetary policy over the period 2002-2005, in combination with rapid financial market innovation, would seem in retrospect to have been among the factors behind the run-up in asset prices and consequent financial imbalances -- the (partial) unwinding of which helped trigger the 2007 financial market turmoil. Moreover, the paper points out that in certain situations policy rates may be a rather blunt tool for dealing with both the build-up and aftermath of financial imbalances, raising the question whether “macro-prudential” regulation could be useful. Politique monetaire, exces des marches et troubles financiers Dans quelle mesure la politique monetaire a-t-elle pu conduire a des exces dans les marches d'actifs reels et financiers et in fine mener aux recentes perturbations financieres ? Cette etude aborde cette question en fournissant des elements qui laissent a penser que, lorsque les taux courts se trouvent de maniere durable nettement au-dessous de ce que prescrirait une regle de Taylor, les prix des actifs, notamment immobiliers, ont tendance a s'elever (hormis ceux des actions). D'importantes augmentations des prix des actifs sont aussi observees lors des periodes de deregulation ou d'innovation financieres. Cette etude avance des arguments selon lesquels le relâchement monetaire observe en 2002-2005, se combinant a une rapide innovation financiere, apparait retrospectivement comme l'un des facteurs ayant contribue a l'envolee des prix des actifs et au gonflement des desequilibres financiers qui en a resulte, un processus dont la resorption a alimente les troubles financiers de 2007. En outre, cette etude souligne que, dans certaines situations, les taux directeurs sont un instrument peu adapte pour repondre a la formation et au degonflement de desequilibres financiers, ce qui souleve la question de savoir si la reglementation « macro-prudentielle » ne serait pas alors plus utile.

Monetary Ease: A Factor Behind Financial Crises? Some Evidence from OECD Countries

This paper addresses the question of whether and how easy monetary policy may lead to excesses in financial and real asset markets and ultimately result in financial dislocation. It presents evidence suggesting that periods when short-term interest rates have been persistently and significantly below what Taylor rules would prescribe are correlated with increases in asset prices, especially as regards housing, though no systematic effects are identified on equity markets. Significant asset price increases, however, can also occur when interest rates are in line with Taylor rules, associated with periods of financial deregulation and/or innovation. The paper argues that accommodating monetary policy over the period 2002-2005, in combination with rapid financial market innovation, would seem in retrospect to have been among the factors behind the run-up in asset prices and financial imbalances -- the (partial) unwinding of which helped trigger the 2007/08 financial market turmoil.

Financial Crises: Plus ça Change, plus c'est la Même Chose

During recent decades most financial crises were caused by excessive public‐sector expansion. The current Asian crisis, however, had its roots in private‐sector over‐expansion. In this respect it had more in common with the pre‐1914 crises. In this paper we compare and contrast these two sets of financial crises. Many of their initial features – a toppling investment boom, widespread bank failures, financial dislocation and withdrawal of prior capital inflows – were common and prevalent in both eras. We focus here on the differences between the two cases and this centres on the external exchange‐rate regime. Prior to 1914, the regime encouraged large‐scale gold inflows in the aftermath of crisis, a re‐liquification of the economy and interest rates returning rapidly to low levels. Stabilizing expectations are harder to encourage in current circumstances; in their absence the essential alternative is to reduce the burden of foreign debt.

Deposit Insurance: Do We Need It and Why?

Depository institutions play a crucial role in an economy. They create assets to finance a portion of government spending, i.e. deficits, and to support private sector expenditures for everything from plant and equipment to consumer durables. They also and simultaneously serve as a repository for savings, providing a positive return as well as payment services to liability holders. However, these two functions create instability in the financial sector, because illiquid assets are financed by liquid liabilities. For this reason, governments throughout the world have established a financial safety net to insure the stability and integrity of the financial system. A central piece of any regulatory structure aimed at ensuring financial stability is the existence of some sort of deposit insurance structure. However, deposit insurance has its own set of problems. It encourages: (i) risktaking by insured institutions; (ii) neglect by depositors; (iii) intervention by regulatory agencies. Each can be explained as a rational response to the existence of government deposit insurance aimed at the lofty goal of financial stability. Depository institutions are encouraged to take risk because the costs of financing risky assets are unrelated to the probability of fault. With the government guarantee, some or all depositors are insured and care little about the assets their institutions hold or their likelihood of failure. Knowing this, regulators are forced to take on a more active role. In essence, they act as a proxy for the market in disciplining risk and encouraging prudence. In the end, the system diverges from its free market counterpart even as it attempts to obtain a socially desirable end. The problems associated with deposit insurance are even greater for Europe as it moves closer to financial integration. With continued movement toward a single currency and a single financial market, the difficulties associated with weighing and minimizing the cost of deposit insurance to achieve its desirable attributes becomes even more difficult. This is because the willingness of different societies to absorb the costs of such a system in order to obtain the benefits of financial stability and the willingness of financial institutions to bear risk will vary. Therefore, in isolation they would have had different types and levels of deposit insurance. However, in a united Europe a convergence will be forced upon them. Where this will all end is still a very open question. But, the potential for discord and financial dislocation is considerable.

Protecting assets during catastrophic illness through financial planning: the physician's role.

Patients requiring long-term institutional care face major financial dislocations that affect their families as well. While the issue of who should pay for long-term care, society or the individual, is still unsolved and controversial, lawyers specializing in welfare law can assist individuals in obtaining public entitlements and preserving private assets. Public awareness of such planning services is uneven. Physicians can make an important contribution to the welfare of their patients who are at risk by informing them of such services and of the problems they seek to address.

The efforts of the Truman administration to resolve the Arab‐Israeli conflict

A basic and virtually unquestioned assumption of the Truman administration was that economic aid could induce desired political results. The Marshall Plan stands out in this respect, but the favourable combination of enlighted self-interest and positive recipient motivation was not always to be found. In the Middle East, where the problem was to initiate economic development (unlike the European problem of recovery from war and financial dislocation), the political difficulties were unyielding and frustrating. Nevertheless the administration went to considerable lengths to prepare economic inducements which would be sufficiently attractive to create 'conditions favorable for a settlement'.' This approach was the hallmark of the New Deal inheritance, and was based on an optimistic view of society typical of the Democratic Party. As a tactic for dealing with Middle East conflicts, it provided a basis for a shrewd disengagement from political stalemate. The Truman administration realized nonetheless that a prime ingredient was necessary some willingness on the part of the recipients to accept responsibility for the refugee situation created by the 1948 Arab-Israeli war. Responsible and cooperative attitudes, however, were submerged beneath strong political emotions. The Saudi monarch Ibn Saud was paranoid in his fear of being surrounded by Hashemite enemies on the thrones of Iraq and Jordan. Egypt was profoundly suspicious of the British connections of the Hashemites, and of Abdullah's 'Greater Syria' ambitions which included the desire to annex Central Palestine. At the same time, the Iraq-Jordan rift intensified with the agitation for the unity of Iraq and Syria. Cutting across the rivalries and opposing ideological movements of the Arab world was a view of the new Jewish state as an alien intrusion rather than as a gallant testimony of creative survival. While in Israel itself, the fundamental commitment was to unlimited Jewish immigration despite its threat to blot out the country's prospects of economic viability. The Truman administration tried to convince the Arabs of American friendship, while at the same time working for a solution of the conflict. But sectarian misunderstanding was inherent in the situation. American support for Israel's application for membership of the United Nations, which was approved in May 1949, was resented. For its part, Israel accused the State Department of pro-Arab bias and saw its chief support in the White House. In turn, the executive denied that policy was determined on two different levels,2 and strove for a coherent and balanced approach. In response to misunderstandings about its intentions, and to maintain policy cohesiveness across a range of distant outposts, the State Department convened a meeting of Chiefs of Mission in the Near East at the end of

The Workingmen's Party of California

IT IS WELL KNOWN that the fifteen years following the Civil War constituted a period of tension, unrest, and even of some modification of the basic character of American society. Outside the defeated South, the war brought a degree of prosperity, prosperity induced speculation, speculation bred corruption in government and in business, and this in turn led to financial dislocation, widespread disillusionment, and an increasingly vocal demand for reform in politics and in the economic structure of the nation. No section of the country was wholly immune to the currents of discontent which followed the exposure of corruption in government and the panic of 1873. It was the position of the workers, however, which caused the most comment and aroused the greatest fear, because their reaction was as unprecedented as, in some instances, it was violent.

Reform Versus Recovery

IN previous depressions recovery was natural process tolerably well understood. Nearly fifty years ago leading treatise widely used in colleges' pointed out financial or industrial shocks which checked production did not destroy our economic organization because some industries, especially those yielding the necessaries of life, will never be suspended. Depression might last considerable time, but was liable to be terminated, after longer or shorter period of suspense, by reviving courage and enterprise on the part of men of affairs, or through the stimulus to production administered from some quarter. The one essential condition was that speculation be initiated, men begin to look ahead, to anticipate demand, and to discount the future. Nowhere ought recovery to be more rapid than in the United States, because among no people is more of elasticity, greater alertness of action, more readiness to assume responsibilities and to run risks. Yet recovery begins cautiously and fearfully, and readily checked by misfortunes or continual apprehension of hostile or meddlesome legislation. In I857 nothing occurred to retard the process, and within a few months production was again at the limits of our capital power and labor power. But at other times the country had not always been so fortunate. When the whole body of business men are sore from disasters; when much of the industrial and commercial structure still lies in ruins, it takes but little to check the disposition again to adventure capital. That little abundantly supplied by the popular apprehension of legislation unfavorably affecting money and credit. One thing governments could always do if they chose, set their own houses in order; and this of course helped to restore confidence. They naturally found it necessary to increase outlays for poor relief, and sometimes instituted public works in order to provide employment;2 but such measures were probably regarded as mere palliatives. Industrial recovery was left to the forces naturally operating in private industry, and it never failed to occur. In the depression of I92I our national government, through the War Finance Corporation, intervened helpfully to repair some of the damage resulting from overexpansion which the war had occasioned in certain industries; but the recovery which began in I922 was almost wholly natural process for which governments, national and local, assumed little or no responsibility. Very different, of course, has been the history of the present depression. The panic of I929 brought the federal government into the field with measures designed to stimulate construction industries, support prices of agricultural products, and restore confidence. But the depression was world-wide, and had brought commercial and financial dislocations unlike any previously known except, perhaps, those which followed the long war which ended in i 8 I 5. After the drive against the dollar had been successfully met, natural recovery might have begun in the United States sometime in I932, just as it did begin in various other countries. But this was prevented by the refusal of Congress to set the government's house in order and by the development of strong sentiment in favor of inflation. Further banking difliculties inevitably developed, and these culminated in the general suspension which occurred in March I933. At this juncture the present Administration, supported by friendly Congress, took upon it. self responsibility for industrial recovery, and to this added an extensive program of reforms. Whether recovery or reform was intended to be the primary objective has never been clear. At some times the former and at other times the latter has seemed to have precedence, and the result has been unfortunate. In recent months emphasis has seemed to be shifting from reform to recovery; and for this reason especial significance probably attaches to the recent action of the Treasury in removing restrictions upon foreign exchange, and to the statement of the President there can be no security for the individual in the midst of general insecurity, and our first task to get the economic system to function so will be greater 'F. A. Walker, Political Economy (New York, i888), pp. I83-86. 2 A few municipalities, such as Rochester, New York, undertook such public works in the depression following the panic of 1837.