John At The Center

But the takeaway lesson from the crisis, he said, was that “In the end, Fed officials decided not to intervene in the banking crisis.”

“The experience of the Depression helped forge a consensus that the government bears the important responsibility of trying to stabilize the economy and the financial system, as well as of assisting people affected by economic downturns,” he said.

Global Financial Market Turmoil:
A Panel Discussion
Thursday Oct. 2, 2008
Noon-1:45 pm
Booth Auditorium, UCB School of Law

UC Berkeley Speakers:

George A. Akerlof (Moderator)
Koshland Professor of Economics
2001 Nobel Laureate in Economics

Brad DeLong
Professor of Economics

Aaron Edlin
Professor of Law and Economics

Barry Eichengreen
Professor of Economics and
Political Science

John Quigley
Interim Dean, Richard & Rhoda Goldman
School of Public Policy

Nancy Wallace
Professor, Haas School of Business
(Free and open to the public)

Sponsored by the IGS Center on Institutions and Governance &
The Berkeley Center for Law, Business & Economy
University of California, Berkeley

Libor: 6.88%

Are you in any way reassured by the dead cat bouce in various global stock markets? Don’t be. This is a credit crisis, remember, not a stock-market crisis: the impact on stocks is just collateral damage. And this morning, overnight Libor was fixed at 6.88%, up from just 2.57% on Monday.

http://www.portfolio.com/views/blogs/market-movers/2008/09/30/libor-688?tid=true

Stocktwits, a service that aggregates the stocks people are talking about on Twitter, has raised an unspecified angel round from various investors including NYC-based Betaworks, and individuals like Howard Lindzon and Roger Ehrenberg. The opt-in service scans users who put a $ sign in front of a stock ticker. In a Betaworks blog post, the firm explains the notion of social media producing “data exhaust” that can potentially be quite useful. Note that Betaworks is also an investor in Twitter itself, by virtue of the shares it received when Twitter acquired Summize.

The U.S. has a capitalist system that depends on “credit, and credit depends on confidence. What we have in front of us is a lack of both,” Josten said. Regalia said if lawmakers fail to pass legislation on a rescue package, the economy will likely slip into a “deep recession” and will face a hard recovery.

A credit crunch does exist in the sector of the market based on short-term, asset backed securities. In addition, interbank lending is unusually risky. But in light of what I have just said the “credit crunch” takes on a new meaning and potential new solutions are suggested. The first question I have is this. Investment banks were selling these securities and using the money to lend to whom? I do not know the answer. But let’s suppose that the money being raised in these markets was being lent to productive businesses. If so, then any solution should focus on feeding those businesses that are starved for credit.

Academic economists don’t like the Treasury plan, but nearly all of the Wall Street economists are for it. You don’t have to be all that cynical to say that the Wall Street economists are talking their book. But I’d like to think that there is at least in part a sense in which they are more attuned to the reality of the situation in credit markets — that last week we were a day or two away from a breakdown of the financial system.

Here are three common critiques from the academics and journalists and what they are missing:

This isn’t Jeremy Siegel, Wharton professor; it’s Jeremy Siegel, the “wizard of Wharton”, and a man who is utterly unafraid to make a complete fool of himself so long as he gets paid lots of money for his appearance.

For the week ended Sept. 24, the size of the U.S. commercial paper market, a vital source of short-term funding for daily operations at many companies, shrank by $61.0 billion to $1.702 trillion, from $1.763 trillion the previous week, Federal Reserve data showed.

International news service Reuters has set up shop on HubDub, a prediction market on topics ranging from politics to technology. The new partner section of the site will feature standard HubDub surveys, as well as a selection of top Reuters stories and widgets. You can access the Reuters portal here.