Economists v. Stock Analysts on the Recovery
September 08, 2009

Bloomberg's Eric Martin and Michael Tsang have a good story on the big difference between economists and stock market analysts over 2010's growth forecasts: Never before have Wall Street stock analysts diverged more with economists at their own firms over the outlook for earnings in the Standard & Poor’s 500 Index. Profits for companies in the S&P 500 will rise 25 percent next year, according to the average estimate of more than 1,500 equity analysts tracked by Bloomberg.

Low Expectations for the G20 and IMF
September 08, 2009

As we wade through a long line of international economic meetings--G20 ministers of finance last week, G20 heads of government in Pittsburgh coming up, IMF-World Bank governors meeting in Istanbul early October (and all the associated “deputies” meetings, where the real work goes on)--it seems fair to ask: Where is regulatory reform of our financial system heading? Long documents have been produced and official websites have become more organized. Statements of principle have been made. And the melodrama of rival reform proposals has reared its head: continental Europeans for controlling pay

Good Finance Gone Bad
September 08, 2009

As the Lehman anniversary approaches, defenders of the financial sector struggle into position--partly in response to your comments (also here). They offer three main points: We need finance to make the economy work. Financial innovation delivers value, although it’s not perfect (but what is?). Don’t kill the goose that laid the golden egg. Point #1 is correct, but this does not necessarily mean we need finance as currently organized. The financial sector worked fine in the past, with regard to supporting innovation and sustaining growth. Show me the evidence that changes in our financial str

The Next Financial Crisis
September 08, 2009

It's coming—and we just made it worse.

Is Krugman Too *Optimistic* About the Economics Discipline?
September 07, 2009

So I think I agree with pretty much every point Paul Krugman makes in yesterdays' Times magazine about where economics went off the rails. Including his big prescriptive point: Economics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system. If the profession is to redeem itself, it will have to reconcile itself to a less alluring vision — that of a market economy that has many virtues but that is also shot through with flaws and frictions. The good news is that we don’t have to start from scratch.

Worth Reading
September 07, 2009

How did certain economists spot the bubble in advance?  WaPo: "90 percent of all new home loans are funded or guaranteed by taxpayers". UK was this close to shutting down troubled banks' ATMs during height of crisis. Recession may be ending, but credit crunch is still here. Better late than never? Greenspan says banks need higher capital requirements.

What Was Sheila Bair Getting At?
September 06, 2009

I'm coming a little late to Sheila Bair's intriguing Times op-ed from last week, but I think Tim Fernholz basically got it right over at The Prospect: Bair wasn't kvetching about the administration's regulatory proposals--the kind of thing that got her in Tim Geithner's crosshairs a few weeks back. She was taking aim at even more radical proposals for regulatory consolidation, like what Sen. Mark Warner lays out here.  Basically, the administration wants to fold the underwhelming Office of Thrift Supervision (OTS) into the Office of the Comptroller of the Currency--the two agencies that regula

The Times Calls Them 'Exotic.' I Call Them 'Ghoulish.' The Counting Houses Will Sell Investors Other Peoples' Life Insurance
September 06, 2009

It's big news. The top news in the Sunday Times, columns five and six right under the logo. No, the banks have not been chastened. And Jenny Anderson's article tells you just how little they have learned. This is a traffic in the odds of death. Or the odds on the proximity of death. Ms. Anderson has a very clear description: The bankers plan to buy 'life settlements,' life insurance policies that ill and elderly people sell for cash—$400,000 for a $1 million policy, say, depending on the life expectancy of the insured.

What to Like About the Geithner Plan
September 06, 2009

Treasury's proposal to increase capital requirements on banks around the world won't be loved by the financial sector, but the rest of us should give it strong consideration. There's little chance more capital would have prevented the crisis, but it would have made the ride down a lot less bumpy.

A Consumption Orgy That Wasn't
September 04, 2009

Matt Yglesias and Karl Smith question Bill Galston's claim that the 1980's to the mid-2000's was a period which saw an orgy of personal consumption. From large flat-screen TVs and i-phones to furniture and foreign cars, Americans spent as though there were no tomorrow, until tomorrow came. Galston bases his argument on the much repeated statistic that personal consumption is 70% of GDP.