Category Archives: The dismal science

“Searching for international contagion in the 2008 financial crisis”

An interesting post at VoxEU by Andrew K. Rose and Mark M. Spiegel does a series of analyses looking to explain how the crisis evolved internationally, but the obvious connections don’t provide an answer: The 2008 financial crisis is sometimes characterised as one where financial difficulties in the US spread to the rest of the […]

Guest Post: Simon Johnson – “If Everyone Involved Is Using the Same Roadmap of Risks, We Will All Drive off the Cliff Again Together”

(I was going to take a week off, but Yves suggested I post this.) By George Washington of Washington’s Blog. We have to change our risk models, and not just defer to the big banks’ inaccurate models which got us into this mess. Says who? Nassim Taleb: I have been fighting risk models both as […]

Steve Keen: we need a “debt jubilee”

Submitted by Edward Harrison of Credit Writedowns Last week, I highlighted some of the ideas of Australian economist Steve Keen in my post, “Politics and reform: Say I’m a politician….” Keen is of the Minsky camp and he believes that an unsustainable debt bubble has build up in the industrialized world which can only be […]

Guest Post: “Assessing the Recent Performance of the Fed”

By Richard Alford, a former economist at the New York Fed. Since them, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side. Evaluating the recent performance of the Fed is not a straight forward exercise. The turmoil in the financial system, […]

Stiglitz Doubts Recovery Can Be Sustained

Joseph Stiglitz takes issue with the view of economists (well, economists surveyed by Bloomberg and the Wall Street Journal, which not surprisingly have a Pollyannish optimistic streak) that the economy is in or on the verge of a recovery. The real issue is the ongoing con job. Team Obama has made it clear that it […]

Twenty-Five Years to Work Off the Debt Overhang?

T. S. Eliot was right. Human beings cannot stand very much reality. As much as I have an appetite for bearish views (I figure the optimist case gets disproportionate air time), the headline of Ambrose Evans-Pritchard’s latest piece, “Our quarter-century penance is just starting,” is grim even by the standards of the bearish faithful. Evans-Pritchard, […]

Party Time! Wall Street Back to Its Old Highly Levered Ways

Bloomberg reports that Wall Street is back to its free-wheeling, high-levered ways. This is a classic example of moral hazard in action. Why worry about blowing up the bank when you know the taxpayer will bail you out? From Bloomberg (hat tip DoctoRx): Banks are increasing lending to buyers of high-yield company loans and mortgage […]

Will The Old Consumer "Normal" Come Back?

Reader John O passed along this Bloomberg chart du jour (click to enlarge) which effectively argues that the consumer has gone down so far she has nowhere to go but up: The related article argues: ….these so-called discretionary goods and services accounted for a smaller percentage of consumer outlays last quarter than at any other […]

Guest Post: Review of Walter Bagehot’s Lombard Street

By Robert P. Baird of digital emunction When, back in March, the Bank of England announced that it was adopting a program of quantitative easing, The Economist reported the news with some trepidation. While recognizing that the threat of deflation was real and imminent, the magazine gave voice to the fear that “that the border […]

Is Finance Inefficient or Too Efficient?

I have a good deal of respect for Gillian Tett, but I disagree with her analysis in a Financial Times piece today: A decade ago, it was fashionable for Western consultants, bankers and business people to decry Japan’s domestic service industry. For Japanese business sectors, ranging from milk production to financial broking, have long been […]

Guest Post: Why the Austrian, Keynesian, Marxist, Monetarist, and Neo-Liberal Economists Are All Wrong

Served by Jesse of Le Café Américain US Personal Income has taken its worst annual decline since 1950. This is why it is an improbable fantasy to think that the consumer will be able to pull this economy out of recession using the normal ‘print and trickle down’ approach. In the 1950’s the solution was […]

Rogoff Shreds "When in Doubt, Bail It Out" Policy

Grr. It was so obvious and it never occurred to me…:”When in doubt, bail it out.” I am jealous. Kenneth Rogoff, who among other things has (with Carmen Reinhart) has created a large dataset on financial crises through history, today takes on the exceedingly permissive posture the US has adopted to the banking industry, simply […]