by Taiki Murai and Gunther Schnabl[*] In the second half of the 1980s, 13 Japanese city banks climbed into the group of the world's largest banks, boosted by a domestic speculation boom. With the bursting of the Japanese financial “bubble” in the early 1990s, a gradual decline followed. Since then, the Japanese city banks have … Continue reading The Bank of Japan Creates a State-Led Monopolistic Banking System
by Jerry O’Driscoll The monetary analysis of the housing bubble focuses on the impact of low – even negative – real rates of interest on housing demand. That theory suggests the Fed must be inflating new bubbles with its continued policy of a near-zero federal funds rate. Skeptics ask where are the bubbles? In today’s … Continue reading Where is the Bubble?
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
by Jerry O’Driscoll In Tuesday’s Wall Street Journal, George Melloan makes the case that savers and investors lose under the Fed’s low-interest policy. He also argues that the policy leads to greater risk-taking by those pursuing yield. Presumably it is leading to the next asset bubble. But where?
by Roger Koppl At the Cobden Centre's website (and here), Steve Baker discusses recent Fed signals in the context of Big Players theory. The more active the Fed (or other central bank), the greater the fraction of entrepreneurial attention devoted to Fed watching rather than productive activity. As Baker says, “traders must pay attention to the … Continue reading Bleeding the Economy
by Thomas McQuade In looking back over the many excellent posts and comments that have graced ThinkMarkets in its first year, I was struck by the fact that, while many of the literary virtues have been displayed, there has been – surprisingly – nothing that could pass as poetry. I hope to be forgiven the … Continue reading A Sad, Sorry Song
by Mario Rizzo In the course of doing some research about the late economist Charles Kindelberger I came across an obituary article in The Economist dated July 17, 2003. The article made reference to the question whether the Fed’s policies after the then-recent dot com bubble simply saved us from recession or laid the ground … Continue reading Retrospect Is Prospect?
by Chidem Kurdas “A just war” is how Treasury Secretary Timothy Geithner describes the movement to expand financial regulation. “It's a war of necessity, not a war of choice,” he is reported as saying about the battle to impose greater government control on the financial sector. This is the man who presided over the New … Continue reading Regulatory War of Choice
by Mario Rizzo The New York Times had a very interesting article recently on the demise of the efficient markets hypothesis. The proximate cause of this demise is the failure of the hypothesis to explain the recent financial meltdown. It has been standard for Austrians to say – not just recently but over many years … Continue reading Some Thoughts on Efficient Markets
by Chidem Kurdas After causing a debacle by flooding the system with oodles of easy money, the Federal Reserve is to morph into the enforcer of systemic prudence. We’re told that Treasury secretary Tim Geithner wants to create a single systemic risk regulator to oversee the whole financial system and the Fed will probably … Continue reading Rewarding the Punch Provider