Weekend's reading package on Economics and Regulation, have fun!
Previously on MoreLiver's:
ECONOMICS
Conducting monetary policy - rules, learning
and risk management
– BIS (pdf)
William C Dudley, President and Chief Executive
Officer of the Federal Reserve Bank of New York, at the C Peter McColough
Series on International Economics, Council on Foreign Relations, New York, 24
May 2012.
The nationalisation of markets: The rise of the
financial-political complex – The Economist
Each step taken by the authorities over the
past five years has been designed to prop up the economy and save the financial
system. But the cumulative effect has been the creeping nationalisation of
markets.
State Dependence and Fiscal Multipliers – Econbrowser
impact of fiscal policy on economic activity
varies with the business cycle and that the effect of fiscal policy on output
is nonlinear. Average fiscal multipliers in G-7 countries are significantly
larger in times of negative output gaps than when the output gap is positive
Fiscal cliffs, multipliers, and the myth of
central bank independence – The
Economist
Plenty of
budget cuts coming at the end of the year…Fed independence is at any time
little more than a useful illusion; it is only independent to the extent that
its actions don't provoke government intervention.
What Bagehot said… – alphaville
/ FT
Bagehot never argued that central banks should
lend only against good collateral. Bagehot was subtler than that, and less
exclusive. What he argued was that central banks should lend against collateral
that would be good “in ordinary times”.
Humbler horizons – The Economist
America’s economy is growing at an unimpressive rate. It may not be able to go
much faster
Why can’t people understand national
accounting? – Credit
Writedowns
The real policy question should be how to
eliminate the malinvestment and reallocate capital investment to useful
productive enterprises without creating a deflationary spiral…debts that can’t
be repaid, won’t be. Rather than resist this process, policy makers should
embrace it and mitigate the downside.
Leveraging expectations through monetary policy – Macro
Matters
the need for a credible nominal anchor for a
central bank to target, even if policy making bodies such as the ECB, Fed and
BoE were to adopt an alternative mantra to the current pure inflation or
flexible inflation targeting regimes. The reasons why this is necessary are
different across the three central banks named above.
Anonymous: The Fable of “Moral Arithmetic” – naked
capitalism
Warren Mosler applies simple arithmetic to
numerical relations that have a $ sign (or € sign), and explains clearly how a
money economy works.
China’s failed gamble for growth – ASA
So the wish that domestic demand will grow sustainably is not realised despite throwing in huge amount of money, and the rest of the world has not recovered according to plan. Worse still, by throwing in that much money to stimulate investment, China has committed a huge error in that it has built even more production capacity on top of the over-capacity that was probably present before the massive stimulus.
So the wish that domestic demand will grow sustainably is not realised despite throwing in huge amount of money, and the rest of the world has not recovered according to plan. Worse still, by throwing in that much money to stimulate investment, China has committed a huge error in that it has built even more production capacity on top of the over-capacity that was probably present before the massive stimulus.
Here we go again. Another sharp sell-off of Macau gaming shares on China slowdown fears.
Industry forecasts have always underestimated Chinese high-rollers’ propensity
to gamble, so are the latest prediction of gloom to be trusted?
REGULATION
Whom Should We Prevent From Blowing Themselves
Up, And Why? – Dealbreaker
So thinking that bringing back Glass-Steagall
would do much to prevent future crises requires you to basically think that
non-banks don’t matter that much: that only commercial banks like JPMorgan are
“gambling with taxpayers’ money” or whatever and so need to be cut off from
nefarious goings-on like whatever is somewhat more nefarious than the London
whale’s doings.
FDIC Rule Change Ends Too Big to Fail – The
Big Picture
…all it would take is the right person (with
the support of their board) sending a simple letter…Here is that letter from
the office of the Federal Deposit Insurance Corporation’s chairman, circa 2015:
Stop the Big Banks Before They Can Lend Again – View
/ BB
Pressing the more- regulation default button
creates the impression that human beings can anticipate the next new product,
asset class or financial innovation and write rules to prevent the next blowup.
It also ends up deflecting attention from the real goal of financial
regulation, which is not to protect the banks but to shield taxpayers from the
cost of any institutional failure.
Regulatory Capital: Size And How You Use It
Both Matter – TF
Market Advisors
After JPM’s surprise loss this month, the
debate over the proper regulatory framework and capital requirements will reach
a fever pitch. That is great, but maybe
it is also time to step back and think about what capital is supposed to do,
and with that as a guideline, think of rules that make sense.
How to Fix Banking – naked
capitalism
the world of finance does appear to be unable
to accept reality – the bigger financial institutions, the SIFI’s, almost feel
like they are trading to their heart’s content in the knowledge that they are
simply too big to fail and someone else will pick up the tab if they get it
wrong.
Random regulation – an interesting but
dangerous idea – Deus Ex Macchiato
…impose one policy approach randomly on some
members of the population, but not on others, to determine whether the policy
meets its goals.