Daily Archives: December 3, 2008

By Jonathan B. Berk

In any financial crisis, it is possible with 20/20 hindsight to identify the specific proximal causes. Armed with this knowledge, legislators are invariably tempted to outlaw specific activities. Read more

The world has run out of willing and creditworthy private borrowers. The spectacular collapse of the western financial system is a symptom of this big fact. In the short run, governments will replace private sectors as borrowers. But that cannot last for ever. In the long run, the global economy will have to rebalance. If the surplus countries do not expand domestic demand relative to potential output, the open world economy may even break down. As in the 1930s, this is now a real danger. Read more