Given all the news that pension reform is making in Eastern European countries, it’s easy to mistakenly believe that the problem is simply a holdover from ex-Communist pension systems. While their public pension systems certainly don’t help the cause, the real problem goes much deeper. Eastern Europe is unique as an emerging market as its … Read more
It must be Groundhog Day. Events in Libya have pushed world oil prices over $100 a barrel yet again. Retail gasoline prices, usually low this time of year, are at an all-time seasonal high. Are we in for another round of the same-old, same-old? A replay of Jimmy Carter pledging, “Never Again!” and then doing … Read more
Will monetary policy, once again, be unable to count on fiscal policy’s support to combat inflation? Two weeks ago, the government trumpeted a R$ 50 billion “cut” in the 2011 budget, which the Minister of Finance called “fiscal consolidation”. We are still awaiting details. Since the announcement of this positive – albeit undefined – initiative … Read more
The assumptions of the efficient market hypothesis and self equilibrium, previously widely acclaimed, led to unsound economic decisions. They created an intellectual complacency that overlooked the risks behind the ongoing structural crisis. New concepts should guide our future analysis and build the foundations of a new economic and financial theory. Most importantly, new methodologies … Read more
United States Bankruptcy Judge Robert Grossman has ruled that MERS’s business practices are unlawful. He explicitly acknowledged that this ruling sets a precedent that has far-reaching implications for half of the mortgages in this country. MERS is dead. The banks are in big trouble. And all foreclosures should be stopped immediately while the legislative branch … Read more
As the federal budget season moves into full swing, infrastructure is not only on the table, but in the center of the table. The Obama administration budget, which would cut some areas of spending and freeze others, calls for more infrastructure spending, including high-speed rail, wireless Internet, and modernization of the electric grid. Across the … Read more
As the US economy struggles to recover from recession and cope with a budget crisis, all past policies must be put on the table for review and revision. Even the sacred cows. Even the mortgage interest deduction. A new report from the OECD, which deserves more attention than it has been getting, explains the role … Read more
(Yes, I know that isn’t saying much.) Most people think that Fannie Mae and Freddie Mac had something to do with the financial crisis. Some people think that they were the major reason the crisis happened, which (to them) proves that activist government policy was the cause of the crisis. Other people, including me, think … Read more
More than three years into the most significant structural crisis of modern history, the flaws that caused it are still looming around like the strokes of midnight in a horror movie. A main problem is Moral Hazard. Some banks have reached such a big size that their failure would jeopardise society. Thus, these Banks enjoy … Read more
Three years into this epochal crisis and still not much light at the end of the tunnel. The “advanced economies” of the Western world have imploded. The celebrated concept that market forces would balance things out, the “efficient markets hypothesis”, is no longer working and proved to be unsound. Same for the other pillar of … Read more