Motor City Meltdown

The financial crisis that began in 2007 has been persistently marked by muddled thinking and haphazard policymaking. Now, the United States Treasury is headed for a mistake of historic and catastrophic proportions by refusing to bail out America’s Big Three automakers.

Cut Interest Rates Again

The recent massive sell-off in global stock markets, despite an earlier coordinated half-point interest rate reduction in the U.S. and Europe, reflects the continuing failure of policy to come to grips with the scale of the problem. Policy has been consistently marked by “Too little, too late” – and in some instances there have been outright blunders, as in the U.S. Treasury’s decision to let Lehman Brothers fail.

Cut Interest Rates Again

The recent massive sell-off in global stock markets, despite an earlier coordinated half-point interest rate reduction in the U.S. and Europe, reflects the continuing failure of policy to come to grips with the scale of the problem. Policy has been consistently marked by “Too little, too late” – and in some instances there have been outright blunders, as in the U.S. Treasury’s decision to let Lehman Brothers fail.

Why Federal Reserve Policy Is Failing

The Federal Reserve and U.S. Treasury continue to fail in their attempts to stabilize the U.S. financial system. That is due to failure to grasp the nature of the problem, which concerns the parallel banking system. Rescue policy remains stuck in the past, focused on the traditional banking system while ignoring the parallel unregulated system […]

Why Federal Reserve policy is failing

The Federal Reserve and U.S. Treasury continue to fail in their attempts to stabilize the U.S. financial system. That is due to failure to grasp the nature of the problem, which concerns the parallel banking system. Rescue policy remains stuck in the past, focused on the traditional banking system while ignoring the parallel unregulated system […]

Saving the Financial System

A friend told me the economist Charles Kindelberger had two rules for a credit economy. Rule one was everybody should know that if they get over-extended they will not be bailed-out. Rule two was if everybody gets over-extended they must be bailed out. The U.S. economy has over-extended itself, triggering rule two. But that still […]

The Liquidation Trap

The U.S. financial system is caught in a destructive liquidation trap that has falling asset prices cause financial distress, in turn compelling further asset sales and price declines. If unaddressed, it risks sending the economy into deep recession – or even depression. Current conditions are the result of bursting of the house price bubble and […]

Speculators at the Pumps

Until a few weeks ago, while oil prices were surging, debate raged about the relative roles of economic fundamentals and speculation in boosting oil prices. Although oil prices have now fallen back from their peak, that debate must not be forgotten, for it has profound policy implications that government officials would be derelict to ignore. […]

Social Origins of the American Corporate Predator State

Jamie Galbraith’s recent book describes modern (Bush-Cheney) Republicanism as creating a “predator state”. Its predatory aspects are starkly visible in the gangs of corporate lobbyists who roam Washington DC, the Halliburton Iraq war procurement scandal, and the corruption and incompetence that surrounded the Hurricane Katrina relief effort. However, the broad concept of a predator state […]

Scapegoating Regulation

Many progressives now believe the age of Milton Friedman may be drawing to a close. Their hope is the current financial crisis has shown the costs and dangers of inadequate market regulation, thereby discrediting the anti- regulation philosophy of Milton Friedman and his Chicago School colleagues. Evidence of the changing times is supposedly provided by […]