Banking's Past, Present, and Future
Since the outbreak of the subprime meltdown, the Federal Reserve has shown itself ready, willing, and able to adopt unconventional monetary policies in order to reverse the downturn ushered in by the financial crisis. Recent Fed innovations have included quantitative easing in order to inject more money into the economy, intervention in the debt market … Read more
The Financial Times reported this week on a study by the Chartered Financial Analyst Society of the UK that argues that “financial amnesia” among institutional investors–particularly a failure to heed the lessons of past bubbles–has contributed to the global financial crisis. The answer, according to the Society’s report, is that the study of financial history … Read more
The Financial Times reports that Andreas Georgiou, the head of the independent Greek statistical agency Elstat, is facing a criminal investigation for allegedly inflating the scale of the country’s fiscal crisis and “acting against the Greek national interest.” Georgiou, who worked at the International Monetary Fund for 20 years, was appointed in 2010 by agreement … Read more
Writing in Thursday’s Financial Times, Pimco chief executive and chief investment officer Mohamed El-Erian argues that Europe’s first order of business should be to recapitalize its banks. It is hard to argue with this prescription. With the finances of Greece, Portugal, Spain, and Italy in dire straits and banks across the continent up to their … Read more
Winston Churchill said that democracy is the worst form of government except all those other forms that have been tried. The financial crisis has tested Churchill’s assertion. In Greece, the austerity measures imposed on the country by the EU and the ensuing domestic unrest led Prime Minister George Papandreou to call for a referendum to … Read more
Remember when “liberal” became the insult of choice among Republicans? Apparently, “Keynesian” has now taken on that status for Republican economists. Never mind that Keynesian is ill-defined (old Keynesian? new Keynesian? the Keynesian part of the neoclassical synthesis?)–making Keynesian a dirty word and applying it to those with whom you disagree has become the tactic … Read more
British clothing retailer Simon Wolfson (known to his friends in the House of Lords as Baron Wolfson of Aspley Guise) announced several days ago the establishment of the Wolfson Economics Prize (read the press release here). The prize, worth a cool £250,000 (about $400,000)–second only to the Nobel Prize in Economics, in terms of … Read more
When you teach economics, you spend a fair amount of time dwelling on the distinctions between the short run and the long run. If a firm is not making a profit but is meeting its short-run costs (e.g., wages, utilities), microeconomic theory says that the firm should continue in business rather than shut down. In … Read more
The sub-prime crisis and the ensuing economic slowdown have led many to question some widely held economic tenets, particularly the belief that unfettered markets inevitably lead to the best of all possible outcomes. Writing in yesterday’s Wall Street Journal, University of Chicago economics professor and Nobel laureate Gary Becker whines about this assault on the … Read more
Writing in today’s Wall Street Journal, WSJ op-ed board member Stephen Moore offers a variety of dubious–and at least one outrageous–opinion on the economy and economic policy. (1) The economy would be in better shape today in the absence of the economic stimulus. No, it wouldn’t. Even fellow WSJ contributor Ed Lazear believes that the … Read more