by Edward Chancellor The collapsed UK construction firm’s problems may look idiosyncratic. But its problems with “onerous contracts” were exacerbated by a balance sheet stuffed with intangible assets and ultimately shaky assumptions. These issues are not peculiar to Carillion. Large corporate failures provide interesting insights into what’s been going on in the business world. Enron, … Continue reading Bankrupt(cy) Thoughts: Carillion’s Flaws Are Common to Many
by Chidem Kurdas The Fukushima Daiichi nuclear threat and the sinking of the Titanic are both disasters caused by acts of nature – earthquake and tsunami in one case, an iceberg in the other – interacting with technology. Yet they have radically different implications. The Japanese incident has made nuclear power less acceptable, whereas the … Continue reading Japan Nuclear Crisis vs. the Titanic
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
By Chidem Kurdas Media coverage compounds the confusion about financial problems. Take a recent piece by Floyd Norris, probably the best informed of the New York Times finance columnists. “Credit-default swaps are, in reality, insurance,” he writes in “Naked Truth on Default Swaps”. The seller of a credit default swap pays the buyer of the … Continue reading Naked Truth on NYT Finance Column
by Chidem Kurdas Former Federal Reserve chief Paul Volcker and President Obama want to force banks to get rid of their proprietary trading operations, hedge funds and private equity funds. There is more to this policy initiative that meets the eye at first glance. Mr. Volcker in effect gives two unrelated rationales. One is that … Continue reading Three Aspects of the Volcker Rule
by Chidem Kurdas A surprising new Small-Is-Beautiful movement is afoot. Mario Rizzo, Jerry O'Driscoll, Harry Kaufman and others make a case for breaking up too-big-to-fail financial institutions. As Mr. Kaufman puts it, otherwise those companies will become financial public utilities backstopped by the government. It’s not likely that the 2008 crisis would have been prevented … Continue reading Big Bad Bank and Little Red Trustbuster
by Chidem Kurdas Vanity Fair is not a magazine I follow, so I was taken aback when I flipped through an issue someone left behind at a café. According to the Editor’s Letter, “the chain of catastrophic bets made over the past decade by a few hundred bankers may well turn out to be the … Continue reading Fashionable Fictions
by Mario Rizzo Some business forecasters with a not-too-bad record are predicting that the recession will be over by the end of the year. (NBER dates the beginning to December 2007.) Of course, the recovery in terms of real output from the Great Depression began in the 3Q of 1933 and that did not preclude … Continue reading What Ended The Great Recession?
by Sandy Ikeda MSNBC reports that "Evidence mounts that recession may be ending". At the same time, in the Wall Street Journal: [T]he central bank has been buying mortgage-backed securities and Treasurys. Through programs announced since last fall, it has bought more than $460 billion of mortgage-backed securities and more than $125 billion of Treasury … Continue reading OK, it’s “later” now
by Mario Rizzo My long-time friend and coauthor, Jerry O’Driscoll, has an excellent post at Cato-at-Liberty on TARP. In a relatively few words he gets to the heart of the matter. Take a look here.
by Mario Rizzo Reality is more complex than our models. Free-market forces are asserting themselves but the Fed is also intervening and trying to affect those forces. Real-world data is the result of both factors. The Commerce Department has issued some new data showing that house sales are rebounding (but still off their … Continue reading The Fed Against Equilibration
by Mario Rizzo In an under-appreciated book, The Foundations of Morality (1964), the Wall Street Journal and New York Times economic journalist, Henry Hazlitt, wrote that the price system does not send accurate signals in the absence of private property rights. “It is important to insist that private property and free markets are not separable … Continue reading The Quality of Price Signals