The reason to consider this more than just a statistical quirk, Mr. Crowe says, is that conservative Christianity teaches followers that God owns all worldly possessions. In practice, that means that unchecked greed and speculative frenzy are seen as undesirable in the evangelical community.
via Houses of God: Did Evangelicals Curb the Housing Bubble? – Economix Blog – NYTimes.com.
Against the dollar, the yen has risen 8 per cent since the collapse of Lehman Brothers in mid-September last year.
It’s rise against the higher-yielding New Zealand and Australian dollars has been more acute, rising 18 per cent and over 28 per cent respectively. But analysts say the rally in global equities has paved the way for investors to return to the carry trade.
This skepticism is valid if there are reasons for supply shocks:
Monetarists concede that central banks are printing money in vast amounts to stimulate their economies. This will not lead to inflation, they say. The newly minted cash is not being lent out but stored in bank vaults. The “money multiplier”, to use the technical term, has collapsed. It is no secret why this is happening. Households and businesses are over-stretched and fearful about the future. As a result, they are borrowing less and saving more. As long as such fears persist, according to monetarist logic, the Federal Reserve can carry on printing money with impunity.
This argument should be viewed sceptically. There are times when inflation and economic activity move in the opposite direction. For instance, periods of rising inflation and unemployment are relatively common during emerging market crises. The US witnessed something similar during the stagflation of the 1970s. Leading indicators suggest the US economy is set to decline sharply in the first quarter. The last time these indicators were so dire occurred in 1974. Yet there was no deflation in that year. Rather the inflation rate climbed to 12 per cent.
via FT.com / FTfm / Columnists – Inflation looms over deflation risk.
The shutdown of the shadow banking system, on the surface, seems to be a good thing. It was the engine of unchecked lending to consumers who couldn’t afford it that led the economy to blow up. Yet, without it, so much credit — more than $1-trillion (U.S.) — has disappeared from the U.S. economy in areas like auto lending and consumer loans that a recovery seems uncertain.
“At the end, the shadow banking system will have to come out of the shadows,” said David Dodge, the former head of Canada’s central bank.
He said regulators need to require standardization of lending and other products, and better underwriting standards.
“Because obviously the big change that’s going to come is that you’re not going to have a system where you can ignore the credit quality of the underlying assets,” he said.
But even if the system can be restarted and made safer, the fundamental economic questions remain. After all, it was reckless borrowing that got the U.S. in trouble, and now that many borrowers are in even worse shape than during the boom, shouldn’t lending actually be scaled back?
via reportonbusiness.com: Reviving the shadow banking system.
Tyler Durden has a scary post up, connecting banks’ profitability in January and February to the fact that those were the months when AIG Financial Products was unwinding an enormous number of its contracts en masse. These trades, initiated by AIGFP, were allegedly enormously profitable for the biggest banks in the CDS market:
via Who’s Gaining from the AIG Unwinds? – Finance Blog – Felix Salmon – Market Movers – Portfolio.com.
It was these mental processes that pushed the economy beyond its limits, and that had to be understood to see the reasons for the crisis.
Of course, forecasts based on a theory of mind are subject to egregious error. They cannot accurately predict the future. But the uncomfortable truth has to be that such forecasts need to be respected alongside econometric forecasts, which cannot reliably predict the future, either.
Hal varian:
I’ve weighed in on this debate in this essay. My thesis is that economics should not be compared to physics but to engineering. Or, alternatively, not to biology but to medicine. That is, economics is inherently a “policy science” where the value of an economic theory should be judged according to its contribution to economic policy.
There are many who disagree with this view, but hey, let a thousand flowers bloom.
Big companies are here to stay, and I suspect that any regulation stringent enough to keep banks small enough to fail won’t be sustainable.
via Marginal Revolution: Is there a big gain to keeping banks small?.
The NewsSift service shows promise as it attempts to extract key entities and phrases for a better search experience but this thing need more time in the oven before the FT can claim a win. There are many features that are badly needed, like sentiment analysis, but if the search results are noisy then you really can’t assign too much value to the extras.
NewsSift, First Impressions Matter in Search | Venture Chronicles.
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