Tensions between economic (and financial) efficiency and democratic accountability are still unresolved http://t.co/RyBOzLEChL
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United States Channel: Latest Posts
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Finance & Markets
George Bush’s Final Christmas Present
The President’s lifeline to the auto industry includes the provision Senate Republicans were insisting on last week, which scuttled the deal — cuts in UAW wages and benefits to make them comparable with wages and benefits in non-union automakers’ plants (all owned by foreign automakers, all mostly in the South). Last week, Bush lobbied against this provision. Now he’s adopted it, without any legislation at all.
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Finance & Markets
Credit Crunch or Not
One of the debates regarding the current financial crisis is whether in fact there is a crisis, or whether in fact the financial system is operating normally. I’ve been skeptical myself of the “times are normal view”, but here is some evidence that the credit crunch is real. The findings also reinforces my view that un-nuanced reliance on highly aggregated volume statistics (e.g., Chari et al. 2008) is likely to result in misleading inferences (See the rejoinder from the Boston Fed’s economists). From the conclusion to Tong and Wei (2008):
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Finance & Markets
Situation report: global economy, December 2008
`This is a situation report on the global economy. Speculation, attempting to find order from the confusing and rapidly-changing datastream. -
Finance & Markets
Balance Trade with Healthcare
If President-elect Barack Obama and his advisors want to promote bipartisanship to achieve economic progress at a time of crisis, we have a compelling suggestion for an area in which common ground is not only possible but necessary: trade. Take it from two people who, in normal times, are more likely to disagree than agree on large parts of trade policy.
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Emerging Markets
Blackouts and Cascading Failures of the Global Markets
The global economic crisis is akin to a power blackout. In both cases, a disturbance in one part of a complex “tightly coupled” system results in a cascade of failures through an entire network. In the case of a power blackout, a single downed power line or transient overload causes power to be shunted to another part of the grid, which in turn leads to new overloads, more shunting and ultimately to a cascade of failures that pushes a region into darkness. Similarly, in the current economic crisis, a U.S. banking emergency caused by worsening U.S. market forces has sent shock waves through the world’s financial system, causing a global banking crisis that now threatens to lead to a global economic downturn.
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Finance & Markets
Greenspan and Democracy
Alan Greenspan, writing in the current issue of the Economist, argues that in the future banks will need more of a capital cushion than they needed before the crisis because holders of bank liabilities will require them to hold more capital. “Today, fearful investors clearly require a far larger capital cushion to lend” to financial intermediaries. In other words, there’s no need for additional regulations requiring banks to have more capital. The financial market will take care of itself. Greenspan has learned nothing at all.
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Finance & Markets
The Demand For Risk And A Macroeconomic Theory of Credit Default Swaps: Part 1
A Higher Plane In this article, I will return to the ideas proposed in my article entitled, “A Conceptual Framework For Analyzing Systemic Risk,” and once again take a macro view of the role that derivatives play in the financial system and the broader economy. In that article, I said the following: -
Finance & Markets
It Tolls for Thee
It’s probably fair to say that, at this very moment, many of you are looking for an easy resolution, something that would enable you to move on, to accept the unacceptable. You are wondering how the devil we got here, how we could possibly “lose” so much so quickly. The obvious answer to this rhetorical question is that “we” have lost nothing, for one can only lose what one truly has in the first place.
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Finance & Markets
The other shoe begins to drop
Chrysler LLC, awaiting a federal rescue as its cash dwindles, will shut all 30 of its plants for at least a month starting Dec. 19 as unsold cars and trucks pile up at showrooms.
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Finance & Markets
Clawing Back at Exec Comp (part II)
The NYT hits upon a subject we have discussed repeatedly in the past: Why are CEOs allowed to keep bonuses based on profits that were ephemeral, false or even fraudulent?
