Larry Summers had “lunch with the FT” (p.3 in the Life and Arts section today) – although unfortunately the paper does not report when this happened; a week or two makes quite a difference these days. Putting this next to his April speech to the IDB, Summers’ view of the way forward has a few … Continue reading Larry Summers’ New Model: Details, Contradictions, And Odd Assumptions
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Larry Summers spoke on Friday afternoon at the InterAmerican Development Bank in Washington DC. As he was addressing a group with much experience living through and dealing professionally as economists with major crises, he spoke the “language of economics” (as he called it) and largely cut to the analytical chase. Summers made five points that reveal a great deal … Continue reading Larry Summers’ New Model
In a memo to Congress on Tuesday, Larry Summers – the head of the White House National Economic Council – laid out his view of where we are and what is likely to happen next in our economic recovery. His tone was more upbeat than we’ve heard in recent utterances, although he has been heading … Continue reading Larry Summers, Economic Recovery, And Ben Bernanke
There are three kinds of “bubbles” – a term often used loosely when asset prices rise a great deal and then fall sharply, without an obvious corresponding shift in “fundamentals“. A short-run bubble. Think about 17th century Dutch Tulip Mania: spectacular, probably disruptive, but not a major reason for the decline of the Netherlands as a global power. … Continue reading After Peak Finance: Larry Summers’ Bubble
By Simon Johnson On Friday, Senator Bob Corker (R, TN) took to the Senate floor to rebut critics of big banks. His language was not entirely senatorial: “I hope we’ll all come to our senses”, while listing the reasons we need big banks. And Senator Chris Dodd (D, CT) rose to agree that (in Corker’s … Continue reading Why Do Senators Corker And Dodd Really Think We Need Big Banks?
On PBS this evening (first airs at 9pm eastern; on the web from about 10pm), Bill Moyers, Rep. Marcy Kaptur, and I discuss where we stand – and what we’ve learned – a year after the US financial system almost collapsed. There’s a detailed preview on Bill’s website – our conversation moved back-and-forth between people … Continue reading Tonight On Bill Moyers Journal, This Morning On NPR, And Louis Brandeis
This weekend’s New York Times Magazine has the 7,000-word article about the state of macroeconomics that Paul Krugman has been hinting at for some time now. It’s a well-written, non-technical overview of the landscape and the position Krugman has been presenting on his blog, which for now I’ll just summarize for those who may not … Continue reading Krugman on Economics
Firefighter arson is a serious problem. The U.S. Fire Administration, part of Homeland Security, concluded in 2003, “A very small percentage of otherwise trustworthy firefighters cause the very flames they are dispatched to put out” (p.1). Illustrative and shocking anecdotes are on pp. 9-15 of that report, as well as here and here. Macroeconomic policy … Continue reading Firefighter Arson And Our Macroeconomic Policymakers
Matt Taibbi has rightly directed our attention towards the talent, organization, and power that together produce damaging (for us) yet profitable (for a few) bubbles. Most of Taibbi’s best points are about market microstructure – not the technological variety usually studied in mainstream finance, but more the politics of how you construct a multi-billion dollar opportunity so that … Continue reading How To Blow A Bubble
If you are in charge of monetary policy in an up-and-coming Asian economy (say India, China, or Korea), you have a problem. The world’s financial markets have decided that Asia is rebounding more quickly than most other parts of the world, and capital is rushing to get into those countries before asset prices rise too … Continue reading The Case for Capital Controls, Again
Slides for speech to World Bank conference (Lessons from East Asia and the Global Financial Crisis), Tuesday in Seoul (1pm local time), are attached. This post summarizes my main points. There are two views of the global financial crisis and – more importantly – of what comes next. The first is shared by almost all … Continue reading What Next For The Global Crisis?
Our little Internet debate about reverse convertibles (my contribution here) prompted this post by Mike at Rortybomb. To simplify a little, some commentators defended reverse convertibles by saying, “it’s basically the same as writing a put option” – or, looking at it from the other side of the trade, “there are valid reasons to want … Continue reading Efficient Markets and Innovation
At 12:30pm on Wednesday at the White House (someone: please update the Treasury’s schedule of events), President Obama is due to “unveil” his proposals for reforming the functioning of our financial system. The content has already been foreshadowed in some detail, most notably by the Geithner-Summers op ed in the Washington Post on Monday, but what … Continue reading President Obama’s Regulatory Reforms Announcement: A Viewer’s Guide
I took three points away from yesterday’s hearing in the House of Representatives. We need layers of protection against financial excess. Think about the financial system as a nuclear power plant, in which you need independent, redundant back-up systems – so if one “super-regulator” fails we don’t incur another 20-40 percentage points in government debt through direct … Continue reading Consumer Protection When All Else Fails (Written Testimony)
The Department of Justice seems to thinking, at least in principle, about potential antitrust action in and around banking. Assistant Attorney General Christine Varney spoke about this yesterday, but her exact wording is open to interpretation, “”I have to ask if too big to fail is a failure of antitrust enforcement.” (The press release was uninformative … Continue reading Antitrust For Banks? Ask Carl Shapiro