Economy

Worth Reading
September 28, 2009

NY Mag profiles the founder of conspiracy-theory mongering blog Zero Hedge. On the search for fraudulent pollsters. Cleveland Fed says end of Treasury support for Fed won't be inflationary. Robert Shiller defends financial innovation. A case against mortgage securitization. How the Fed's plan to drain reserves could go wrong.

Tim Geithner as Leading Economic Indicator
September 28, 2009

Or would that be a lagging indicator? Whatever the case, John Harwood reports in his NYT "Caucus" column that: [S]igns that economic growth is resuming have eased the sense of crisis surrounding Mr. Geithner’s work. The economic 'message' meetings in Mr.

Was the G20 Summit Actually Dangerous?
September 26, 2009

It is easy to dismiss the G20 communique and all the associated spin as empty waffle. Ask people in a month what was accomplished in Pittsburgh and you’ll get the same blank stare that follows when you now ask: What was achieved at the G8 summit in Italy this year? Perhaps just having emerging markets at the table will bring the world closer to stability and more inclined towards inclusive growth, but that seems unlikely. Should we just move on--back to our respective domestic policy struggles? That’s tempting, but consider for a moment the key way in which the G20 summit has worsened our pre

Wall Street's Growth: Like a Big Tumor
September 26, 2009

This chart from Princeton's Hyun Shin is the best illustration I've seen of the unsustainability of the boom in the securities sector: In absolute terms, most sectors grew by a factor of 80 between since 1954. But, at its peak, the non-commercial-bank financial sector had grown by a factor of 800. From Shin: The greater detail afforded by the chart in log scale reveals that the securities sector kept pace with the rest of the economy until around 1980, but then started a growth spurt that outstripped the other sectors.

Worth Reading
September 25, 2009

Could the Dems lose the House in 2010? Keynes' "General Theory" was all about rational expectations. And he was right that you could spend your way out of a recession. Significant outflows from mutual funds even as stock prices rise. A primer on how insurance companies make money. Death bonds ain't no mortgage-backed securities.

Obama v. Bush on Protectionism, Cont'd.
September 25, 2009

Just wanted to follow up on my earlier comparisons of Obama and Bush's approaches to trade with two more data points. Both come care of this sober-minded look at recent tariff trends from the DLC. First, if you look at all the temporary tariffs (i.e., the kind Obama just announced for Chinese tires) imposed in the world between 2000 and 2008, you see that the number in 2008 was well below the average across all those years (155 versus 189). Not so in the United States, though.

How to Fix the IMF
September 25, 2009

The headline news from the G20 summit in Pittsburgh is that progress has been made on "IMF reform," meaning increased voting power for emerging markets relative to rich countries--remember that West Europeans are greatly overrepresented at the IMF for historical reasons. But further change in a sensible direction is being blocked by the U.K.

Securitization Is to Blame, Just Not the Way You Think
September 25, 2009

Felix Salmon calls me out for arguing that securitization might not be to blame for the decline in lending standards. If lending standards dropped at the same time as the securitization rate soared, I’d say there’s a strong correlation between the two, and a pretty good prima facie case for a causal relationship too. I actually agree with Felix here. As I'll explain, it's hard to argue that lending standards didn't decline because of the introduction of securitization.

How to Get the Consumer Agency Through Congress
September 25, 2009

I've spent part of the week complaining about the way community banks are trying to gut the administration's consumer financial regulatory agency even though, in principle, they stand to benefit. (Short explanation: Community banks excel at getting to know their customers, building relationships with them, and vetting their loan applications carefully, not by trying to screw them.

Worth Reading
September 24, 2009

Treasury inspector general says unlikely that U.S. will profit from bailouts. Volcker criticizes Obama finacial regulation plan. Prepared testimony from Volcker, Cochrane, Levitt and others on House hearing on systemic risk. Business school applications are levling off this year. Why there might not be a jobless recovery. The inequity of Congress's plan to extend jobless benefits.

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