Economy

Call of the Wolf
September 16, 2009

Long before Martin Wolf became the chief economics columnist for the Financial Times, he wrote the newspaper letters--lots and lots of letters. It was the early 1980s, the height of the Thatcher era, and Wolf was running research at a think tank in London that was sympathetic to the government's pro-trade agenda.

The Paradox of the Paradox of Thrift
September 16, 2009

Keynes' paradox of thrift holds that if everyone tries to save at the same time during a recession, then the economy continues to contract due to a fall in demand. This sends incomes lower and gives people less money to sock away, so that total savings actually fall instead of rising. The implication for our times is that a new era of frugality might not be what the economy needs. But in a new IMF paper, Yasser Abdih and Evan Tanner argue that Keynes' paradox might not apply after a financial crisis. In normal times, companies can finance investment through their own savings.

Worth Reading
September 15, 2009

Bernanke joins the "recession is over" crowd. Fed unlikely to cut back on mortgage purchases. Does Krugman's target Robert Lucas actually agree with Krugman? John Cochrane and Luigi Zingales say gov't indecision created post-Lehman crisis. Fed study: 33% of companies issuing short-term debt experienced runs on it beginning in Aug '07. Noam looks at how China keeps tabs on its biggest investment: the U.S.

The Chinese, Their Dollar Reserves, and Our Trade Scuffle
September 15, 2009

The good news is that the Chinese have decided to try to resolve the dispute between our two countries over their tire exports at the World Trade Organization, meaning "the disagreement may be containable," as the Journal puts it today.

Judge Rakoff's Rejection of the SEC-Bank of America Settlement
September 15, 2009

Bank of America and the SEC were blasted on Monday in a ruling issued by a Federal District Judge. The two parties had proposed a settlement deal over bonuses that had been paid to Merrill Lynch last year. The judge, Jed Rakoff, not only rejected it; he criticized the ethics of the proposal: "the proposed Consent Judgement is neither fair, nor reasonable, nor adequate. It is not fair, first and foremost, because it does not comport with the most elementary notions of justice and morality," The entire (shockingly bold) ruling has been posted below.

Obama and the Ghost of Louis Brandeis
September 15, 2009

President Obama’s speech yesterday was disappointing. As a diagnosis of the problems that let us into financial crisis, it was his clearest and best effort so far. He didn’t say it was a rare accident for which no one is to blame; rather he placed the blame squarely on the structure, incentives, and actions of Wall Street. But then he said: Our regulatory reforms will fix that. This is hard to believe. And even the president seems to have his doubts, because he added a plea that--in the meantime--the financial sector should behave better. The audience was composed of our financial elite, but

Two Cheers for Obama's Wall St. Speech
September 15, 2009

A couple quick points about Obama’s Wall Street reform speech yesterday: 1.) While you never know how the politics are going to play out until the legislative fight gets going, it looks like the administration has a pretty good handle on where the major PR battle will be and is preparing accordingly (unlike, say, health care and death panels). That’s the consumer financial products regulator, of course.

Goolsbee's Subtle Stimulus Point
September 15, 2009

White House economist Austan Goolsbee made a great point about the stimulus yesterday at our financial crisis conference in Washington. I don’t have a transcript yet, but the gist was: One reason it’s wrong to dwell on the fraction of stimulus money that’s been distributed so far is that it misunderstands the difference between obligation of money for a project and actual payment for the project.

Peking Over Our Shoulder
September 15, 2009

Our Chinese shareholders get nosy.

Better Regulate Than Never
September 15, 2009

The national ideological tilt has shifted fast, away from libertarianism and toward broad support for interventions like the new federal "pay czar," who will oversee banker compensation for bailout recipients. Such a sudden and dramatic reversal suggests that ideology has not been moored to steady principles. Instead, we have grasped too quickly at ephemeral data points and permitted our worldview to be shaped by panic. In this haze of hyperbole, we have an obligation to discern the more modulated truth.

Pages