vimothy
yurp
The Fed is at it again with the anti-inflation chatter -- aaargghh!
global financial crash yay!
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vimothy
yurp
"Hawkishness Dominates", Tim Duy
Good analysis of recent contractionary sentiment from the Fed. I strongly suspect that central banks are going to overcompensate, raise rates at the first opportunity and plunge us all back into a global recession. The Fed certainly looks game. The BoE and ECB have never been anything but. Frankly, I think that the obssession with inflation is fucking ridiculous in a tentative jobless recovery from a massive depression-sized downturn. It's actually a shame Greenspan isn't around any more. But there we go.
Good analysis of recent contractionary sentiment from the Fed. I strongly suspect that central banks are going to overcompensate, raise rates at the first opportunity and plunge us all back into a global recession. The Fed certainly looks game. The BoE and ECB have never been anything but. Frankly, I think that the obssession with inflation is fucking ridiculous in a tentative jobless recovery from a massive depression-sized downturn. It's actually a shame Greenspan isn't around any more. But there we go.
Tax day for off shore accounts !
Tax day's a bit different this year , for some ...
http://www.nytimes.com/2009/10/13/business/13irs.html?_r=1&partner=rss&emc=rss
Tax day's a bit different this year , for some ...
http://www.nytimes.com/2009/10/13/business/13irs.html?_r=1&partner=rss&emc=rss
vimothy
yurp
Along with having a great time knocking POTUS for his Nobel Peace Prize, the conservative blogregore is going nuts about the dollar. Nuts. For example,
As in, the dollar decline is not a function of the stabilisation of the global economy (i.e. a reverse of the earlier flight to quality), it's not a good thhing that will help to rebalance the US economy and boost domestic demand and job growth--it's actually a kind of vote of no confidence in the Obama admin!
“The greenback’s continuing slide makes it a handy metric that neatly encapsulates America’s current economic troubles and possible long-term decline. . . . And that’s the political problem for the Obama administration. Its benign neglect of the dollar is another example of an economic policy — along with TARP and the $787 billion stimulus — that the White House thinks is helping the economy, but many Americans find wrongheaded.”
As in, the dollar decline is not a function of the stabilisation of the global economy (i.e. a reverse of the earlier flight to quality), it's not a good thhing that will help to rebalance the US economy and boost domestic demand and job growth--it's actually a kind of vote of no confidence in the Obama admin!
vimothy
yurp
I think it's even more stupid than that. Because the semoitics of foreign exchange describes currencies that are high in value relative to other currencies as "strong", and because being "strong" in general is thought to be good, having a strong currency must also be good. Even though objectively it is certainly not a good thing for the American economy.
vimothy
yurp
Reviewing the recession: Was monetary policy to blame?, by David Altig, Macroblog
slightly crooked
Active member
It shows just how far the Labour party has gone from it's traditional base when the governer of the BOE is a more outspoken critic of banking practices than any of their major figures...
vimothy
yurp
For instance, I've been having a long and laboured debate with the peeps at Samizdata here and in some other threads. They are deeply unhappy about the bailout because it involves government intervention in markets. Greenspan recently said that banks that are too big to fail should be chopped up until they are small enough to fail. I don't think that you can associate criticism or support per se with political leaning.
slightly crooked
Active member
Fair point. I probably didn't phrase that too well - I guess I have an element of disappointment at just how toothless and unimaginative the attitude of most government ministers has been since the crisis and the fact that King is far less scared to speak out just hammers that impression home.
slightly crooked
Active member
No doubt. The squeals of indignation from within said sector at any concrete reform proposals probably won't help either.
slightly crooked
Active member
Sorry, Vim, wasn't ignoring the question...
I will confess to being spectacularly out of my depth when it comes to economics, so the following is largely based on vague intuitions and political inclinations.
I certainly think there's a lot of mileage in the argument that banks being too big to fail makes them too big, full stop. It also seems that the UK economy has become unbalanced wrt the overall influence of finance compared with other sectors, meaning that credit bubbles are more likely to go unchecked due to their effect upon overall economic figures.
I mentioned on the BNP thread that I spent a couple of years working in housing market research. Even back then (4/5 years ago) I had a real sense that things were being allowed to develop in a highly unsustainable manner as lending practices were amended in more and more creative ways to keep pace with the booming market: increased salary multipliers, 100%+ mortgages, irresponsible use of self-certs etc. Equally, the reliance of certain parts of the market upon property investment, buy-to-let etc. was likely to amplify trends in prices and make a collapse in prices more precipitous. Obviously this is purely from the customer-facing side of lending - I had absolutely no knowledge of the various derivative products that were being used to parcel all this up, so no idea of how much such practices might affect the economy as a whole, figuring that there might just be a rather spectacular house price slump.
I guess my overall point in this is probably more political than economic. The whole New Labour project has really evidenced a consistent timidity in the face of public opinion, refusing to take unpopular decisions unless their hands are forced by circumstances. Hence, with a booming economy and national obsession with rising housing prices, the tendency was to revel in it rather than asking difficult questions or looking at long-term issues of stability. I guess the frustration I was trying to outline above is due to a nagging worry that a similar unwillingness to upset influential interests may be continuing to undermine the political will of the government. So, if the practices of political parties remain in such constant thrall to polling data, then it may be necessary for regulation to take up the task of ensuring the sustainability of lending practices/financial products.
Sorry if the above remains rather vague but, as someone studying political theory, I'm always far more at home with big questions than concrete specifics...
vimothy
yurp
Nice one for that reply. I guess I worry about an overcorrrection. Ex post, it's obvious that there was a huge and unsustainable housing bubble, just like it's obvious that tech stocks were overvalued in the ‘90s. So there does seem to be a good argument in favour of “taking away the punch bowl while the party’s still going” (or whatever the phrase is). However, there are some problems with this. The first problem is that no one knows what the fundamental value of an asset is. The second problem is that price movements can be socially beneficial. (For example, the tech boom probably enabled the rise in productivity in the last decade). And the third problem is that trying to predict fundamental values and the long term behaviour of prices and agents, and then to tighten on that basis, frequently causes painful economic contractions. The Great Depression is probably the most famous example of this.
That said, it’s clear that the current crisis is not very much fun for anyone, and it would be nice if we could avoid this in the future. I personally believe that monetary policy was tight in all advanced economies in 2008 and that it was this rather than the financial crisis / housing and credit bubble per se that is responsible for the Great Depression sized downturn. I would like to see more forecast targeting, more transparency from central banks, and less goddamn hawkishness. But the arguments against letting housing rise so far above trend are convincing, even after taking on board the above comments on fundamental values. Frydman and Goldberg have been advocating for some time support for intervention if asset values move out of predetermined bands, using open market operations to nudge prices back towards long term trend. Regulators could also use leverage and margin requirements to achieve the same effect. Regulation of the “leverage cycle” (i.e. equilibrium determines leverage, not just interest rates) would also be a good thing. And we need to think long and hard about our accounting regimes.
That said, it’s clear that the current crisis is not very much fun for anyone, and it would be nice if we could avoid this in the future. I personally believe that monetary policy was tight in all advanced economies in 2008 and that it was this rather than the financial crisis / housing and credit bubble per se that is responsible for the Great Depression sized downturn. I would like to see more forecast targeting, more transparency from central banks, and less goddamn hawkishness. But the arguments against letting housing rise so far above trend are convincing, even after taking on board the above comments on fundamental values. Frydman and Goldberg have been advocating for some time support for intervention if asset values move out of predetermined bands, using open market operations to nudge prices back towards long term trend. Regulators could also use leverage and margin requirements to achieve the same effect. Regulation of the “leverage cycle” (i.e. equilibrium determines leverage, not just interest rates) would also be a good thing. And we need to think long and hard about our accounting regimes.
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