Summer Reading III

by Jerry O’Driscoll According to Reinhart and Rogoff, “for the advanced economies during 1800-2008, the picture that emerges is one of serial banking crises.” In This Time is Different, the authors bring us up to the present by examining the history of banking crises. Banking crises are not only frequent , but often accompanied by … Continue reading Summer Reading III

Connecting Dots to Financial Crisis

By Chidem Kurdas There are enough books about the events of 2008-2009 to fill a library. Nevertheless, there is no coherent framework that integrates the various factors in the dramatic boom-and-bust cycle that goes back to the late 1990s and may still be with us yet.  Bruce Yandle offers a welcome synthesis in the Independent … Continue reading Connecting Dots to Financial Crisis

Understanding Efficient Markets

By Chidem Kurdas Headline topics like derivatives are part of the larger issue of how markets function.  About this big question there’s been profound confusion in the past two years.  Peter Boettke's article in the Winter 2010 issue of the Independent Review clarifies the muddle. A particular mathematical interpretation of what an efficient market is … Continue reading Understanding Efficient Markets

Goldman Sachs Hate Week

by Chidem Kurdas George Orwell’s classic novel, Nineteen Eighty-Four, describes a political ceremony called the Two Minute Hate, featuring Public Enemy Number One, a reprobate named Goldstein. People attend official rituals to work up a frenzy of hatred against Goldstein and love for their protector, Big Brother, or B-B. To quote Orwell, at the climax … Continue reading Goldman Sachs Hate Week

The Price You See is Not Always the Price that is Relevant: The Housing Bubble

by Mario Rizzo   To argue successfully that a low Fed interest rate policy was the fundamental cause of the housing boom-bubble is not a slam dunk. A relatively small reduction in the mortgage rates available at the time should not alone have a generated so much of a boom.   Casey Mulligan has a very interesting post … Continue reading The Price You See is Not Always the Price that is Relevant: The Housing Bubble

Just What We “Need”

by Mario Rizzo Investors' eagerness to invest in mortgage debt helped drive mortgage rates to all-time lows this week, Freddie Mac said. The average rate on 30-year fixed-rate mortgages was 4.78%, the agency said Wednesday, matching a record low set in April. That was down from 4.83% from the previous week and 5.97% a year … Continue reading Just What We “Need”

Pain in the Fannie

by Chidem Kurdas As Fannie Mae goes for its next withdrawal from the $200 billion kitty the US Treasury graciously made available to this government-created and -sustained mortgage financer, it may be useful to look beyond the current housing slump and consider what it augers for the future. Having made yet another loss, the government-sponsored … Continue reading Pain in the Fannie

Behold: The Recovery Is At Hand

by Mario Rizzo   The Gross Domestic Product (GDP) is growing again at an annual 3.5% rate for the third quarter of 2009. Some people say this means that the recession is over. Apart from the much-touted stubborn unemployment problem, does this make sense?  The government is spending and will be spending massively. Some of that … Continue reading Behold: The Recovery Is At Hand

Reflating the Bubble, Part II

by Mario Rizzo In a recent post I criticized the extension of the Fed's policy of buying mortgage-backed securities. Then I was told by a quite-knowledgeable economist that I may have misread the report in the Wall Street Journal. The first sentence states: The Federal Reserve, in a move aimed at keeping interest rates low … Continue reading Reflating the Bubble, Part II

Reflating the Bubble?

by Mario Rizzo   The Fed has decided to extend, at least through early next year, its program of purchasing mortgage-backed securities. The Wall Street Journal reports:   “The Fed's action signals its belief that the economy, while in recovery, remains fragile and that housing, which has seen some improvement in recent months, has only started to … Continue reading Reflating the Bubble?