Previously on MoreLiver’s:
ECONOMICS
Panic Spreading Across Nations Outranks Trade:
Cutting Research – BB
The large losses of leveraged financial institutions
and associated decline in credit were not directly responsible for the Great
Recession. Rather, a deterioration of macroeconomic fundamentals, such as a negative
credit shock, contributed to a panic by generating conditions that made
self-fulfilling beliefs, which otherwise would not have existed, feasible.
What’s the use of
economics? – voxeu.org
The
economic crisis has thrown the inadequacies of macroeconomics into stark
relief. This column argues that the narrow conception of the macroeconomy as a
system in equilibrium is problematic. Economists should abandon entrenched
theories and understand the macroeconomy as self-organising. It offers detailed
suggestions on what alternative ideas economists can teach their future
students that better reflect empirical evidence.
Admit economic ignorance – Reuters
Here are
six crucial questions which professionals should stop pretending they can
answer
Global Trade
Imbalances Matter – CFA
Institute’s Blog
Containing the damage of the inexorable rebalancing of
current large trade deficits requires global cooperation in devising a credible
fiscal plan to reduce deficits in an orderly fashion
(audio) BizDaily: Inflation: past, present and
future? – BBC
(mp3)
How rising
prices have defined out history and could shape our future. Armand D'Angour,
Professor of Classics at Oxford University explains how inflation played a key
role in the demise of the Roman Empire. Justin Rowlatt talks to economist Steve Hanke about Iran's inflation problem. Plus former
government advisor to George W. Bush Pippa Malmgren tells us why she thinks we
need to start preparing for rising prices now.
Crisis Spotting,
Czech style – alphaville
/ FT
Forty years of crises across 36 EU and OECD countries.
They found that while house and share price falls offer a ‘late” early warning
of the onset of a crisis, the best leading crisis indicator is “growth in
domestic credit to the private sector”.
Euro area labour
markets and the crisis – ECB (pdf)
Testing the Economic
Value of Asset Return Predictability – FED (pdf)
Self-Fulfilling
Credit Cycles – FED (pdf)
Macroeconomic Effects
of Federal Reserve Forward Guidance – FED
CENTRAL
BANKING
Memo to Central Banks: You’re debasing more
than our currency –
John
Mauldin / The Big Picture
SocGen’s
client note.
Shifting the
inflation target – Buttonwood’s
/ The Economist
Pradhan of Morgan Stanley has an interesting note
(privately circulated, so no link) on the current dilemmas facing central
banks.
The Fed’s Response to
the Financial Crisis: What It Did and What It Should Have Done – FED (pdf)
Inflation, QE and forcing the banks to lend – Buttonwood
/ The Economist
FISCAL
POLICY
A Note On the Effects of the Higher National Debt
On Economic Growth
– SIEPR
(pdf)
Michael
Boskin: Failing to rapidly begin bending the long-run debt-GDP curve down risks a growth disaster,
whose severity could be much worse even than the recent deep recession and tragically
anemic recovery. Left unchecked, it eventually risks a lost generation of
growth, a long-run growth depression.
Fiscal Closing Time? – Project
Syndicate
Economists may not be able to pinpoint the precise
economic impact of fiscal retrenchment. But, by improving their methods and
collecting new data, they can tell us with much greater accuracy than ever
before when and how consolidation should be carried out.
Gauging the
multiplier: Lessons from history – voxeu.org
The size of
the fiscal policy multiplier – and thus the impact of austerity on GDP – has been a contentious issue
since the crisis started. The IMF recently revived the debate by suggesting
that the multiplier is much higher than previously thought in the current
policy environment. This column discusses independent empirical research that
confirms the IMF’s view – the authors’ estimate of the multiplier is in the
range of 1.6.
"Cyclically-adjusted
deficit" is not a macroeconomic concept – Worthwhile
Seeing Our Way Through The Crisis: Why We Need
Fiscal Transparency
– iMFdirect
BANKING & REGULATION
Three banks lose systemic bad boy shirt – alphaville
/ FT
Regulatory reforms –
incentives matter (can we make bankers more like pilots?) – BIS (pdf)
Wayne Byres, Secretary General of the Basel Committee
on Banking Supervision to the Bank of Portugal conference on Global Risk
Management: Governance and Control Lisbon, 24-Oct 2012
The Perils of Feeding a Bloated Industry – NYT
It is worth
remembering that the credit crisis and ensuing economic downturn followed a
spectacular expansion in the financial business, compared with other industries
The Growth of Modern Finance – HBS
(pdf)
The U.S. financial services industry grew
from 4.9% of GDP in 1980 to 7.9% of GDP in 2007. A sizeable portion of the growth can
be explained by rising asset management fees, which in turn were driven by
increases in the valuation of tradable assets, particularly equity. Another
important factor was growth in fees associated with an expansion in household
credit, particularly fees associated with residential mortgages. This expansion
was itself fueled by the development of non-bank credit intermediation (or
“shadow banking”). We offer a preliminary assessment of whether the growth of
active asset management, household credit, and shadow banking – the main areas
of growth in the financial sector – has been socially beneficial.
Haldane on why King Kong & Godzilla, like
big banks, are inefficient structures – alphaville
/ FT
There is no
longer evidence of economies of scale at bank sizes above $100 billion. If
anything, there is now evidence of diseconomies which rise with bank size,
consistent with big banks becoming “too big to manage”. …Subtracting this
subsidy, removing the state crutch, would suggest a dramatically lower
socially-optimal banking scale.
Erkki Liikanen: On the structural reforms of
banking after the crisis – BIS (pdf)
Speech by
Mr Erkki Liikanen, Governor of the Bank of Finland and Chairman of the
High-level Expert Group on reforming the structure of the EU banking sector, at
the Centre for European Policy Studies, Brussels, 23 October 2012.
Too Big To Handle – Simon
Johnson / Project Syndicate
In the
discussion of whether the largest US financial institutions have become
too big, a sea change in opinion is underway. Indeed, the only people still
arguing that these organizations can be managed in a way that generates
sustainable value for shareholders and keeps taxpayers out of harm’s way tend
to work for them.
What the Banks
contribute to GDP – Golem
XIV
This article takes a short critical look at the
figures the banks use in order to say how vitally important they are. As we all
know it has been, throughout the bank debacle, important to the Banks that they
be able to say how central they are to the economy of every nation. It forms
the first line of defence in arguments over the bail outs.
A leaf being turned – BIS (pdf)
Speech by
Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England,
to Occupy Economics, "Socially useful banking", London, 29 October
2012.
If Banks Can’t Overcharge You For Trading, How
Can They Afford To Bring You More Overpriced IPOs? – Dealbreaker
Do Fund Managers
Manipulate Prices? Say it ain’t so! – Turnkey
Analyst
A Year After MF Global's Collapse, Brokerage
Firms Feel Less Pressure for Change – DealBook
/ NYT
The MF
Global bankruptcy prompted federal authorities to immediately bear down on the
brokerage firm and the broader futures trading industry.
Prudential regulation - challenges for the
future – BIS (pdf)
Andrew
Bailey, Executive Director of the Bank of England, at the University of Edinburgh Business School, Edinburgh, 4 October
2012.
Andrew
Bailey, Executive Director of the Bank of England, at the British Bankers'
Association Annual Banking Conference, London, 17 October
2012.
Shadow Banking: A Review of the Literature – N.Y. FED
‘Too Big to Fail’
Remains Very Real – Economix
/ NYT
The Future of Computer Based Trading – Magic,
Maths and Money
Finance is
critical to society, as we have all found out recently. We should be debating finance with the vigour
and passion that we debate climate change, GMOs, nano-technology, energy and so
on. Without this debate we cannot
establish the values upon which the evidence base, which informs the
regulations, is built. I feel that the
Report misses making this point clearly, and so cannot really address the issue
in hand.