Narrow banking is not the answer to systemic fragility

October 28th, 2009 6:02pm

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

October 20th, 2009 5:53pm

From FT:

Time for the ECB to get serious about the overvalued euro - Willem Buiter

Why the euro is not the next global currency - Jean Pisani-Ferry and Adam Posen

Safe as houses - FT editorial on new mortgage regulation

From elsewhere:

The global crisis and central banks in Latin America: Breaking with the past - Luis I. Jácome H., VOXEU

The secret Paulson-Goldman meeting - Felix Salmon, Reuters

Why Is The Chamber Of Commerce Defending Big Banks? - Simon Johnson, Baseline Scenario

So Now We Know Why Lehman Went Under - Naked Capitalism

Further reading

October 19th, 2009 1:29pm

From the FT:

Goodbye, Macroeconomics - Eli Noam

The travesty of the commons - Christopher Caldwell on the field of Nobel winner Elinor Ostrom

The free market is not up to the job of creating work - Mort Zuckerman on US unemployment

Countdown to the next crisis is already under way - Wolfgang Münchau

Down but not out - Krishna Guha on the dollar

Elsewhere:

Cognitive Dissonance and Global Macroeconomics - James Kwak on rhetoric and reality in the global imbalances debate, at Baseline Scenario

Escaping the state should cost Lloyds - Peter Thal Larsen, Reuters

Herbert Hoover and the start of the Great Depression - Lee E. Ohanian on history VOXEU

No L - James Hamilton on having avoided an ‘L-shaped’ recovery, at Econbrowser

Goldman Turns Into a Financial Frankenstein While the Fed Snoozes Away - Huffington Post

A reflection on the G20 (The question never asked to Mr Zoellick) - Biagio Bossone on the legitimacy of the G20 for small nations, at VOXEU

Don’t give up on quantitative easing: We can have our cake and eat it too

October 16th, 2009 12:37pm

By Roger E. A. Farmer

According to a widely-held consensus view, the world is slowly emerging from the Great Recession of 2008. Growth in China is projected to top 8 per cent in 2009. Australia raised the interest rate on the Australian dollar last week and the US and UK economies are showing signs that unemployment growth has slowed even though the unemployment rates in both countries are very high. Sometime soon, perhaps in the spring of 2010, perhaps earlier, the Fed, the European Central Bank, and the Bank of England are likely to respond to the perceived global recovery by reducing the sizes of their balance sheets and raising interest rates on overnight loans. Continue reading "Don’t give up on quantitative easing: We can have our cake and eat it too"

Global macroeconomic imbalances: G20 leaders must back up their rhetoric with deeds

October 13th, 2009 10:03am

By Eswar Prasad

The financial crisis has taught us a painful lesson that global macroeconomic imbalances can wreak enormous damage on the world economy. Indeed, the centrepiece of the recent G20 Summit in Pittsburgh was agreement on a framework for balanced and sustainable growth to forestall a resurgence of imbalances as the economic recovery gets underway. At the recent IMF-World Bank annual meetings, G20 leaders gave the IMF a mandate to manage this framework by providing hard-nosed evaluations of their countries’ macroeconomic policies. Continue reading "Global macroeconomic imbalances: G20 leaders must back up their rhetoric with deeds"

FT video: Martin Wolf discusses the winners of the Nobel Prize for economics

October 12th, 2009 5:19pm

Nobel Prize for economics - Elinor Ostrom and Oliver Williamson

October 12th, 2009 3:45pm

Elinor Ostrom and Oliver Williamson won the prize today for their work on how economic transactions operate outside markets in common spaces and within companies. Prof Ostrom is the first woman to win the prize.

Further information on the winners:

The Prize in Economics 2009 - Official press statement with links to information on the economists and their recent work.

Nobel economics prize for governance duo - FT.com, with profiles

Elinor Ostrom at Indiana University

Oliver Williamson at UC Berkeley

What This Year’s Nobel Prize in Economics Says About the Nobel Prize in Economics - Steven D. Levitt at NYT Freakanomics blog.

Further reading: The US economy

October 12th, 2009 2:50pm

From the FT:

Wolfgang Münchau: Making the case for a weaker dollar

Alan Rappeport: US trade gap unexpectedly narrows in August

Editorial comment: US jobs subsidies

Roger Altman: How to avoid greenback grief

John Authers: Manufactured surprises will keep stocks rolling

Elsewhere:

James Hamilton, Econbrowser: Will stimulating nominal aggregate demand solve our problems?

Brad Delong on the wisdom of more fiscal stimulus

Paul Krugman, NYT: The madness of the monetary hawks

James Kwak, Baseline Scenario: “What’s wrong with a phone call?” - How Wall Street influences Washington

Alan S. Blinder, VOX EU: 25 per cent of US jobs are offshorable

A second Great Depression is still possible

October 11th, 2009 4:37pm

By Thomas Palley

Over the past year the global economy has experienced a massive contraction, the deepest since the Great Depression of the 1930s. But this spring, economists started talking of “green shoots” of recovery and that optimistic assessment quickly spread to Wall Street. More recently, on the anniversary of the Lehman Brothers crash, Ben Bernanke, Federal Reserve chairman, officially blessed this consensus by declaring the recession is “very likely over”. Continue reading "A second Great Depression is still possible"

This time will never be different

October 2nd, 2009 6:24pm

The four most dangerous words in finance are “this time is different”. Thanks to this masterpiece by Carmen Reinhart of the university of Maryland and Kenneth Rogoff of Harvard, no one can doubt this again.

As the authors note, “If there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by government, banks, corporations or consumers, often poses greater systemic risks than it seems [to do] during a boom”. Continue reading "This time will never be different"