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Back to BlogsAlan Johnson, home secretary, has recently admitted that the government has been “maladroit” in its handling of immigration. This is British understatement. It has been dishonest: it has pursued a radical policy, with profound consequences, on weak grounds, without serious debate. That is why the British National party is on BBC television. Continue reading "Time for a debate on immigration"
Further reading: Evolving economies, governments’ role in crisis and ‘too big to fail’
November 5, 2009 12:10pm | Comment
From the FT:
Inequity injection - Editorial
Chaotic evolution defines the market economy - John Kay
Lending must support the real economy - Dirk Bezemer
From elsewhere:
What Would Have Happened If World Governments Had Washed Their Hands of the Financial Crisis? - Brad DeLong
‘Tax cuts and recoveries’ - Mark Thoma, Economists’ View
The roots of the coming crash - Felix Salmon, Reuters
The satisfied Fed - The Economist’s Free Exchange
Aristotle as an IMF economist: Asia’s difficult balancing act - Anoop Singh, IMF Direct
Too-big-to-fail: Regulatory reforms of systemically important institutions - Elisa Parisi-Capone, Nouriel Roubini’s EconoMonitor
Private behaviour will shape our path to fiscal stability
November 4, 2009 12:53am | Comment
If we are to understand where we are, we must understand where we have
been. This is particularly true if we are to escape from the huge
fiscal deficits being run by many governments. These deficits are not
the result of government stupidity; they are mainly a consequence of –
and response to – private behaviour. We must not ignore this connection. Continue reading "Private behaviour will shape our path to fiscal stability"
Further reading: Roubini, capitalism and the puzzle of Asia
November 3, 2009 3:06pm | Comment
From the FT:
Mother of all carry trades faces an inevitable bust - Nouriel Roubini
A fruitless clash of economic opposites - Edmund Phelps
Tame the markets to make capitalism ethical - Ken Costa
We must not be too late with starting the Big Exit - Wolfgang Münchau
Capital controls - Krishna Guha, FT Money Supply
From elsewhere:
How to live in a bubble - The Economist’s Free Exchange
The Puzzle of Asia’s Rapid Rebound - Anoop Singh via IMFdirect
What rebalancing of Chinese and American consumption? - Michael Pettis
Bullish data, recoveries, crashes and the psychology of forecasting redux - Edward Harrison of Credit Writedowns via Naked Capitalism
Government guarantees on bank funding: Should we extend them into 2010 despite the improved bank profitability and the schemes’ distortionary effects? - Aviram Levy and Fabio Panetta via VoxEU
Further reading: The renminbi, Switzerland, inflation, fiscal stimulus
October 30, 2009 12:50pm | Comment
From the FT:
Why the renminbi has to rise to address imbalances - Martin Feldstein
Close the funding gap for smaller businesses - Nigel Rudd
King’s proposal provides stability in banking sector - Nigel Collin
Goodbye to the pre-crisis trend line - Samuel Brittan
From elsewhere:
Selling stocks short: Ever controversial - Gerald P. Dwyer, Federal Reserve of Atlanta
Swiss Banking Is Finished - Joe Weisenthal, BusinessInsider
Can We Fix Too Big to Fail Without Shrinkage? - Noam Scheiber, The New Republic
What’s so bad about inflation? - David Blanchflower New Statesman
Sustainable Growth? - Tim Duy’s Fed Watch, Economist’s View
Design and effectiveness of fiscal-stimulus programmes - Robert Barro and Charles Redlick, VOXEU
Scientist Monkeys Around With The Economy - NPR audio on primate economics
Further reading: Capital controls, global imbalances, China, Turkey, Goldman
October 29, 2009 1:33pm | Comment
From the FT:
How to avoid a repeat of the Great Crash - Peter Clarke
Goldman: reasons to be wrathful - Chris Gradel
A three-way split is the most logical - John Gapper on ‘too big to fail’
Russia’s unsustainable energy model - David Clark
From elsewhere:
A Balanced Global Diet - Nouriel Roubini, RGE Monitor
Chinese railways and speculating pig farmers - Michael Pettis , China Financial Markets
Efficient Market Theory and the Crisis - Jeremy J. Siegel
Futures As Predictors of Commodity Prices - Menzie Chinn, Econbrowser
Turkey Dumps US Dollar For Trade With Iran And China - Joe Weisenthal, BusinessInsider
Why Do Financial Crises Happen in the Fall? - Catherine Rampell, NYT Economix Blog
Are Capital Controls In Fashion Again? - Nouriel Roubini, Forbes
Raise interest rates to increase lending
October 29, 2009 6:00am | Comment
By Ronald McKinnon
This is an updated version of Liquidity traps and the credit crunch, published in this forum on August 13, 2009
Since the onset of the credit crunch and global downturn, governments everywhere have responded to the shortfall in aggregate demand in a textbook Keynesian fashion. They have adopted fiscal stimuli: ramping up government expenditures and cutting taxes. Central banks followed the lead of the Federal Reserve by driving down short-term interest rates toward zero: almost exactly zero for overnight interbank rates in the US, Japan, and Canada, and generally less than 1 per cent in Europe into the autumn of this year. Continue reading "Raise interest rates to increase lending"
Narrow banking is not the answer to systemic fragility
October 28, 2009 6:02pm | Comment
By Charles Goodhart
It is remarkable how powerful a well-turned phrase can be. There have been many such phrases generated in the course of this crisis, not all of them helpful, indeed in some cases misleading. Examples are: ‘Toxic assets’; ‘If a bank is too big to fail, it is too big’; and particularly relevant here: ‘Banks have become a combination of a casino and a utility.’ While I congratulate John Kay on his authorship of this last, arresting phrase, I am afraid that it is both misleading and wrong-headed. Continue reading "Narrow banking is not the answer to systemic fragility"
Further reading: ‘Too big to fail’, executive pay, stimulus
October 28, 2009 3:30pm | Comment
From the FT:
‘Too big to fail’ is too dumb an idea to keep - John Kay
Obama’s executive pay move is bad policy - Charles Calomiris
Speculators do drive prices, and it’s the developing countries that suffer - Andrew Mold
From elsewhere:
The Case for More Stimulus - New York Times editorial
Enablers of the Housing Bubble - Brad DeLong, with chart on non-agency securitisation, Economist’s View
Financial Crises are different! - Stephen Cecchetti, Marion Kohler, Christian Upper. VOXEU
Latin America and the Caribbean: Finding Space for Countercyclical Fiscal Policy - Nicolás Eyzaguirre, IMFdirect
The National Saving Identity: Private Saving, Household Saving, and Rebalancing - Menzie Chinn, Econbrowser
How mistaken ideas helped to bring the economy down
October 28, 2009 12:41am | Comment
How did the world economy fall into such a deep hole? It is recovering, but painfully, and after a deep recession, despite unprecedented monetary and fiscal easing. Moreover, how likely is it that a balanced world economy will emerge from this force-feeding? The very fact that such drastic action has been necessary is terrifying. The fact that there is little room for a policy encore is yet more terrifying. Most terrifying of all is that this is not the first time in recent decades the world economy has had to be guided through a post-bubble collapse.
In his latest book – a successor to Valuing Wall Street, which appeared in time to help alert readers avoid the 2000 meltdown – Andrew Smithers of London-based Smithers & Co, provides an invaluable guide to past errors of analysis and policy.* He is a rare guide – a man with a deep understanding of economics and a lifetime’s experience of financial markets. His work helps to explain the stock-market bubble of the 1990s, the fiscal errors of Gordon Brown and the recent credit excess.
The big points of the book are four: first, asset markets are only “imperfectly efficient”; second, it is possible to value markets; third, huge positive deviations from fair value – bubbles – are economically devastating, particularly if associated with credit surges and underpricing of liquidity; and, finally, central banks should try to prick such bubbles. “We must be prepared to consider the possibility that periodic mild recessions are a necessary price for avoiding major ones.” I have been unwilling to accept this view. That is no longer true.
The remainder of this article can be read here. Please post comments below.
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News, data and opinions on market-moving economics. Read posts from Chris Giles, the FT's economics editor, Krishna Guha, US economics editor and Ralph Atkins, Frankfurt bureau chief.