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
This Week's Mediscare
September 25, 2009
The Republican grandstanding on Medicare during Finance Committee hearings this week hasn't been surprising, I suppose. But the audacity is still pretty breathtaking. As you may have heard or read by now, the Republicans are angry over proposed cuts to Medicare Advantage, the private insurance alternative to traditional Medicare. The insurers who offer Medicare Advantage plans receive a flat fee for every senior that signs up.
Palin Talks Economics in Hong Kong. Really.
September 23, 2009
Let me start by saying that if you write a blog about finance and economics, then newspaper headlines don't really get much better than, "Palin Addresses Asian Investors," which, as luck would have it, appears on the Wall Street Journal site today. Judging from the piece, Palin's speech was basically a lot of granular investment advice--as you'd expect: "We got into this mess because of government interference in the first place," the former Republican U.S. vice presidential candidate said Wednesday at a conference sponsored by investment firm CLSA Asia Pacific Markets.
September 21, 2009
We’ve heard Glenn Beck’s rants on Fox and read Sarah Palin’s posts on Facebook. We’ve watched LaRouche supporters disrupt town hall meetings and seen teabaggers descend upon Washington. We’ve talked about immigrants, abortion, and death panels--and listened to a woman named Betsy McCaughey explain why reform will mean pulling the plug on grandma. But, at the end of the day, the central challenge in crafting health care reform remains exactly what it’s always been: Coming up with the money to pay for it.
How Much Will Wall Street Shrink?
September 18, 2009
Today's Journal story on the declining allure of a finance career has some interesting numbers: Although the biggest banks are showing a revived appetite for risk taking and certain exotic instruments such as credit derivatives, many of the vanished jobs aren't expected to be back soon. The White House Council of Economic Advisers expects finance and insurance jobs to decline to 4.1% of the work force in 2016 from 4.8% at the end of last year, a point at which many were already gone. ... Harvard's 2009 graduating class shows the shift in career directions.
This Giant Isn't Sleeping
September 17, 2009
It’s now widely believed that the global recession is coming to an end, but the path out has been far from typical: This time around, China, not the U.S. has led the global recovery. With its $600 billion stimulus package and with banks lending with abandon, China has become the engine of global manufacturing and industrial activity.
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.
UPDATED: Rockefeller Says "No Way" on Baucus Framework
September 15, 2009
Senator Jay Rockefeller, speaking Tuesday afternoon on a conference call co-sponsored with the Campaign for America's Future: I have sat besides Max Baucus for 22 years on the Finance Committee. ... I'm probably one of his best friend among Democrats. But I cannot agree with him on this bill. ... There is no way in present form I will vote for it.
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
What You Need to Know About the State of Our Financial System
September 14, 2009
Financial markets have stabilized--people believe that the U.S. and West European governments will not allow big financial institutions to fail. We have effectively nationalized any banking system losses, but we’ll let bank executives enjoy the full benefits of the upside. How much shareholders participate remains to be seen; there will be no effective reining in of insider compensation (my version; Joe Nocera’s view). Small and medium-sized banks, however, will continue to fail as problems in commercial real estate continue to mount.