Until last September, when the banking industry came crashing down and depression loomed for the first time in my lifetime, I had never thought to read The General Theory of Employment, Interest, and Money, despite my interest in economics. I knew that John Maynard Keynes was widely considered the greatest economist of the twentieth century, and I knew of his book's extraordinary reputation. But it was a work of macroeconomics--the study of economy-wide phenomena such as inflation, the business cycle, and economic growth.
In the comments to my latest post on strategic defaults, rhubarbs make some very solid points: I'm sympathetic to your reading of this methodology. However, paying consumer-credit bills and not paying one's mortgage is a choice, and thus a strategic allocation of resources. The fact that this behavior is more prevalent in areas where housing values have dropped, and thus mortgages are more likely to be underwater, tends to reinforce the notion that this is a form of strategic default. Why have these people made this particular choice among which bills to pay?
Yes! Steve Weisman over at The Peterson Institute posted a nice riff yesterday about James Stewart's recent New Yorker piece reconstructing the week Lehman collapsed. His (and Stewart's) conclusion? Hank Paulson screwed up massively: My takeaway is that while Lehman executives were oblivious to the warning signs over the imminent failure of their storied investment firm, Treasury Secretary Henry Paulson may have increased the odds of a Lehman collapse by taking a hard line opposing a government role in its rescue.
It looks like the G20 on Friday will emphasize its new “framework” for curing macroeconomic imbalances, rather than any substantive measures to regulate banks, derivatives, or any other primary cause of the 2008-2009 financial crisis. This is appealing to the G20 leaders because their call to “rebalance” global growth will involve no immediate action and no changes in policy--other than in the “medium run” (watch for this phrase in the communiqué). When exactly is the medium run? That’s an easy one: It’s always just around the corner. Not today, of course; that would be short run. And not in 2
Fed may be preparing markets for the beginning of a wind-down. NYC charter schools are closing the Scarsdale-Harlem achievement gap. Thanks to industry vigilance, credit scores can suffer even without missed payments. Will job growth be here sooner than we think? More doubts about the universality of the Long Tail theory. Why the dollar might be not replace the yen as the carry trade currency of choice.
In my cranky item yesterday arguing against a proposal for consumer financial regulation being floated by a group of Blue Dog Democrats, I mentioned the problem with combining consumer regulation and safety and soundness regulation of banks (that is, the status quo the Blue Dogs basically want to preserve), and with putting a big council of regulators rather than a single agency in charge of the former (that is, the way the Blue Dogs want to make the status quo much worse). It turns out that, over the weekend, a group of prominent consumer law professors sent a letter to the leadership of the
I've gotten a handful of e-mails from wonks and fellow journalists today protesting (graciously, of course) my piece on Obama and protectionism. They almost all make some variation of the point that, whatever you think of Obama's tire tariff (and most concede it was disappointing but not egregious), he still loses out in the comparison to George W. Bush, whom, they say, evinced more free trade passion even as he was slapping tariffs on steel. Dan Drezner--so far as I can tell, the only one of my correspondents who's blogged his response--sums it up thus: Hmmm........
A new paper on walk-aways (i.e., defaulting on a mortgage whose payments you can still afford because it exceeds the value of your home) has been making the rounds, which means another opportunity to wheel out those debunking skills. The study -- a copy of which I've read but haven't seen on the web anywhere -- was conducted jointly by credit bureau Experian and consultancy Oliver Wyman and claims to use "extremely stringent" criteria in identifying strategic defaults, i.e.
Did ratings agencies know they would trigger AIG's meltdown? State gambling revenues fall for first time in three decades. Despite recent positive housing numbers, delinquencies are still a problem. Non-renewable sources of energy get more tax breaks than green ones. Foreigners can't get enough of those American Treasuries. Will an intergalactic economy eventually stop growing?