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Sunday, May 20

20th May - Weekender: Economics

Weekend's linkfest on Economics. Downturns everywhere, but an interesting point for investors: mergers are coming. Better load up on those takeover targets.  Follow ‘MoreLiver’ on Twitter or Facebook

Previously posted:

The Death of Inflation TargetingProject Syndicate
Jeffrey Frankel: Inflation targeting by central banks, a hugely popular monetary-policy anchor around the world, died in September 2008, when it became clear that those who had been relying on it had not paid enough attention to asset-price bubbles. But its death was never announced, owing to uncertainty over what should succeed it.

Crumbling BRICs... And Why The Developed World Is Not "Taking Off" EitherZH
What does this mean? That the world is slowing down everywhere. And since conventional theory means that much, much, more debt will soon be unleashed to restart growth, and since everyone already is full to the gills with debt, the only realistic buyers remain central banks. And they know it.

The dogma of ‘credibility’ endangers stabilityJohn Kay
The elevation of credibility into a central economic doctrine has turned a sensible point – that policy stability is good for both business and households – into a dogma that endangers stability.
Merger waves, state subsidiesFree exchange / The Economist
A shock is needed to create weak and strong companies. Availability of easy financing helps. End result is larger company size that creates ‘too big to fails’ – that then earn government subsidies.

Liquidity Risk and Credit in the Financial CrisisThe Big Picture
As we have seen, deposits no longer bring liquidity risk. In fact, they insulate banks from such risk because deposits flow into banks when markets dry up. Thus, moving away from required reserves makes sense. What doesn’t make sense is not replacing required reserves with another form of protection.

The Economic Implications Of Quantifying Policy UncertaintyThe Capital Spectator
Authors constructed an index to measure policy uncertainty and compare it to stock prices and employment figures.

What Makes Countries Rich or Poor?The New York Review of Books
Jared Diamond reviews the ‘Why Nations Fail’.

What Economists Get Wrong About Science and TechnologySlate
Trying to quantify research's effects on the economy always fails.

Fiscal spending and growth: More
It is not just the OECD countries where fiscal policy is the subject of fierce debate. This column presents results from an “event analysis” carried out on a database of 140 countries over the period 1972-2005. It suggests that, for developing countries at least, a fiscal stimulus can be effective – provided the rest of the economy is stable and the fiscal deficit is low.

dance of the heavyweightsthe research puzzle
Daniel Kahneman and Eugene Fama appeared a day apart at the conference and were obviously worlds apart in their theories of economic decision making.

In the Balance: Collective MemoryBBC (mp3)
In the Balance gets to grips with why businesses DON'T learn the lessons of the past. Why for example banks like JP Morgan make huge trading losses. What's happened to the collective memory of organisations? And once the mistakes are made - what about the blame game - should it be the boss or the underlings who take the rap when it all goes pearshaped?

The Paradox of China’s ReformProject Syndicate

China’s Misrule of LawProject Syndicate

China's property market correction is in full swingSober Look

Finance and the Good SocietyLSE
The reputation of the financial industry could hardly be worse than it is today with the ongoing financial crisis. Robert Shiller is no apologist for the sins of finance…However in his new book, he argues that, rather than condemning finance, we need to reclaim it for the common good. He makes a powerful case for recognizing that finance, far from being a parasite on society, is one of the most powerful tools we have for solving our common problems and increasing the general well-being.