October 14, 2009

By Paul Feinberg

Kyle Martin ('97) believes that President Barack Obama's "top down" approach to fixing the national economy is a problematic continuation of the Bush-TARP approach, mainly bailing out banks and other financial institutions, and he likens the approach to President Ronald Reagan's "trickle down" economics.

In a well-received paper titled, "The Rise and Fall of Artificial Wealth" which has generated a great deal of media attention and appeared first on the much-read The Huffington Post blog, Martin and co-author Michael Intriligator, a UCLA professor of economics, political science, and public policy and a senior fellow at the Milken Institute, advocate two "bottom-up" policy initiatives. Instead of pumping billions of dollars into large financial institutions and waiting for the trickle down benefits, they believe that implementing benefits that directly affect millions of middle-class Americans will be a more effective way of speeding our economic recovery. (A version of their paper on artificial wealth, complete with new commentary and aimed at the UCLA Anderson audience is scheduled to appear in the upcoming issue of Anderson Assets.)

First, Martin and Intrilligator make the case that, "In the short-term, Americans would have more ability to spend money if the government would pass a bill that would give homeowners the opportunity to convert their current mortgages to interest-only for some duration of time, e.g. one, two, or three years. This could put several hundred dollars of disposable income back into the hands of consumers every month during the duration of the program."

Their second suggestion is for the government to facilitate the creation of new jobs by participating in new venture initiation through matching investment in venture capital funded start-ups in high-tech, biotech, and alternative energy. "There are many start-ups currently seeking to raise capital," Martin and Intrilligator opine. "There are interested investors; however, all that's needed is an entity to lead the round. If the government would take the lead on strategic investments, a multitude of companies would be created which would add wealth to America in the long term."

Martin's macroeconomic work came about almost by accident. He was, most currently, a vice president with Pulselink, a company specializing in semi-conductors. Previously, Martin's career, both before and after earning his MBA, was almost exclusively spent in similar, high-tech ventures. But when Pulselink did not receive the capital expansion it sought, Martin turned to consulting with investors in the high-tech space (including staying on in that capacity with Pulselink) and dabbling in stock trading to make ends meet for himself and his family. To facilitate these endeavors, he began developing macro-economic models that tapped into the finance education he received at UCLA Anderson.

A chance meeting with Intrilligator led to a discussion of the concepts Martin was working on and eventually the pair began to collaborate. "I thought about it, discussed it with Prof. Intrilligator and we decided to look at the vacuum caused by the fall of artificial wealth and to try and predict what type of recovery we could expect and to look at its shape in terms of GDP and employment," said Martin. "We believe it's going to be a slow recovery, not a V-shaped recovery, as some economists have predicted."

Since the publication of their first paper, Martin and Intrilligator, along with new co-author Jud Ireland, have published "Stemming the Rising Tide of Foreclosures Plaguing the Middle-Class With a guaranteed Mortgage Assistance Program (gMAP)," also on The Huffington Post. In their paper, they propose that the government grant 10-year loans to homeowners to help pay their mortgages in the form of a guaranteed Mortgage Assistance Program (gMAP). These loans would be fully repaid, the authors believe, "because they can be secured in the same fashion as a tax lien, so the program is deficit neutral, and hence at no cost to the government."

Martin says he is finding this macroeconomic work particularly rewarding and now hopes to parlay it into new ventures.  After spending his career working with high tech startups from Asia to the Silicon Valley, he hopes now to transition the experience he's gained in consulting with institutional investors in the high-tech space to securing a full-time career as a tech-sector analyst. "I want to couple my passion for investments and macroeconomics with my being a veteran of the tech sector and merge those two as an analyst for an institutional investment firm," said Martin. In the meantime, he and Intrilligator plan to continue their collaborations.

Read The Rise and Fall of Artificial Wealth at The Huffington Post

Read Stemming the Rising Tide of Foreclosures Plaguing the Middle-Class With a Guaranteed Mortgage Assistance Program (GMAP) at The Huffington Post

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