Category Archives: The dismal science

On Traders Behaving Badly and Cognitive Bias

The Jim Cramer chatter precipitated by his Daily Show appearance included some links to an infamous interview Cramer gave in 2007, where he discussed how he would, as a hedge fund manager, push the prices of stocks he was short down via the futures market. It was arguably a public admission of market manipulation. What […]

Is the Treasury Planning on a Near Term Recovery in Bank Stocks?

Reader M&M called my attention to a Bloomberg story I was really hoping to avoid, “U.S. Sets a Six-Month Deadline for New Bank Capital“. The opening: The government set a six-month deadline for the biggest 19 U.S. banks to raise any new capital deemed necessary after a mandatory review of their balance sheets. The regulators […]

"We Are Threatened by a Veritable Disaster"

I must confess to having read only a bit of economist Axel Leijonhufvud’s writings, but what I have seen, I have liked very much. Leijonhufvud’s current post at VoxEU does a very good job of looking at the economic mess the US is in and assesses policy options. It is a remarkably straightforward piece. Most […]

Irving Fisher’s Debt Deflation Theory and Its Relevance Today

I’m sure readers have noticed that talking about the global economic downturn as a depression is suddenly respectable. A mere three months, use of that term would have gotten one branded as a alarmist (even Nouriel Roubini, who has a taste for drama, often used the code of “L shaped recession”). As a result, economists […]

Steve Keen: "The Roving Cavaliers of Credit" (or Why Ben’s Helicopter Will Fail)

Readers responded with great enthusiasm the last time I hoisted a big chunk of material from Australian economist Steve Keen’s blog (see “Bernanke an Expert on the Great Depression?” )I was therefore quite gratified when he wrote asking me to cross post his latest piece. Keen is a fiercely independent thinker, and has other qualities […]

Willem Buiter: Mismanagement by the Officialdom Can Produce a Depression

To be fair, Willem Buiter’s latest post strives for a bit of gallows humor via its title, “YES WE CAN!! have a global depression if we really continue to work at it…,” before getting down to serious business, namely, that the powers that be risk missing the opportunity to salvage the global economy. What makes […]

"The Tarp is a fiscal straitjacket"

This comment by Jeffrey Sachs in the Financial Times is broader than its title suggests. It says that the US should not run willy-nilly into enacting massive spending plans in haste. Sachs makes two core points: a lot of compromises are being made that will render big chunks of the plan ineffective and/or wasteful, and […]

"Bernanke an Expert on the Great Depression??"

One of the reasons I am partial to Australians is that they are critical thinkers, not easily cowed by authority or conventional wisdom. In the US, one of the reasons that Fed chair Ben Bernanke is given so much deference (aside from the fact that we treat people in positions of power with kid gloves) […]

Krugman Runs Stimulus Numbers and Finds Obama Plan Wanting

Many readers are not keen about the idea of a fiscal stimulus program (I presume they are of the Austrian view, that taking the pain, no matter how bad, is the better course of action. And your humble blogger believes that stimulus without cleaning up our broken financial system is likely to have blunted impact). […]

Willem Buiter Calls for Less US Stimulus, Expects Collapse in Price of Dollar Assets

I am a big fan of Willem Buiter, even on those rare occasions when he is wrong. He is unusually blunt for a Serious Economist, and is willing to take on orthodox views and institutions frontally. He has, for instance, been quite critical of the Fed. He created a firestorm at its last conference in […]

Woefully Misleading Piece on Value at Risk in New York Times

The New York Times Sunday Magazine has a long piece by Joe Nocera on value at risk models, which tries to assess how much they can be held accountable for risk management failures on Wall Street. The piece so badly misses the basics about VaR that it is hard to take it seriously, although many […]

New York Times Gives Pride of Place to Economists Who Badly Misread Downturn

This is the sort of post Dean Baker often writes, “New York Times features economists who missed the housing downturn,” although this time, the subject is the outlook for 2009. Now in fairness, the author, Louis Uchitelle, puts in far more caveats than one normally sees in this sort of piece. In fact, it could […]

Disingenuous New York Times Story on Global Imbalances

Since I am endeavoring to spend some time with my family, forgive me for dispatching this New York Times story, “Dollar Shift: Chinese Pockets Filled as Americans’ Emptied.” The article buys, hook, line and sinker, then- Fed-governor Ben Bernanke’s depiction of so-called global imbalances (the US borrowing from abroad to fund overconsumption; Japan, China, Taiwan, […]