Marshall Auerback: When is a Bubble a Bubble?
Bubbles have become a major focus of discussion in today’s financial markets. But very few people actually define what they mean when describing this financial phenomenon.
Read more...Category Archives: Market inefficiencies
Servaas Storm: Secular Stagnation, Green Shoots or What?
The Obama administration and the mainstream media are now talking up an imminent recovery, perhaps even a modest boom. There is no reason why we should be optimistic now.
Read more...Amar Bhidé on How Following Hayek Leads to Regulating Banks Like Utilities, Looking Askance at Liquidity and Securitization
I highly recommend this short interview by John Authers of the Financial Times with Amar Bhidé, a professor at Tufts, in which he argues that a proper reading of Friedrich Hayek would lead to considerable skepticism about whether most of the changes in finance over the last three decades actually represent progress.
Read more...Why You Should Learn to Love the Brave New World of Low Liquidity
The Financial Times reported earlier this week (hat tip Scott) how banks are cutting the size of corporate bond trading desks and reducing the size of trading inventories, all as a result of big bad regulations. As a result, the banks would like us to know, investors might be hurt by a lack of liquidity! Horrors!
Read more...Stephanie Kelton: Reading Between the Lines – A Memo from Fed Chairman Marriner Eccles
Stephanie Kelton does an important service in discussing a memo from the Fed chairman during the Roosevelt Administration, Marriner Eccles. I was reminded of Eccles’ a fine appreciation for how the real economy worked and how government actions affected business. This keen eye for the fundamentals is sorely absent among most macroeconomists and policy experts today.
Read more...Why It’s Absurd that America Doesn’t Tax Wall Street’s Transactions
Yves here. The post below from Paul Buchheit makes a persuasive layperson’s case for a financial transactions tax. There is an equally sound case to be made from a financial markets viewpoint.
Read more...David Dayen: A Revealing Episode in DC Groupthink
So this week I got an education in the mentality of “official” Washington.
Last week I was asked by a DC-based publication to give a comment on Corker-Warner, the flavor-of-the-month proposal to abolish Fannie and Freddie and reform mortgage finance. I basically take the same position as Yves on this issue: all of these GSE 2.0 plans assume a private label MBS market the way the proverbial economist on a desert island assumes a can opener.
Read more...Vale David Hirst
Yves here. Steve Keen sent this note along with his post:
The journalist David Hirst was both one of the few to warn of the crisis, and someone who became a good friend. He died last week, as a long term consequence of internal injuries sustained about ten years ago in the USA, when he tried to stop a woman being bashed.
His spouse asked me to see if I could get the attached published on NC, which was one of his favourite sites.
If you know David’s writing, you’ll understand what a loss this is. And if you missed his prescient and incisive commentary before and during the crisis, I hope you’ll sample his work below and get a sense of what a talent he was. Either way, I trust you’ll join me in sending condolences to David’s widow and his family, as well as to Steve.
Read more...Are Flagging Productivity Gains a Sign of a Played-Out Economy?
Bloomberg flagged that productivity gains in the US are tepid, and that’s a sign of economic weakness:
Read more...New Paper Links Food Price Inflation to the Power of “Agro-Trader Nexus” (ie, Monsantos + Cargills)
Joseph Baines’s new article, “Food Price Inflation as Redistribution: Towards a New Analysis of Corporate Power in the World Food System” is a must read if you care to understand how major corporations exercise hidden influence on our daily lives.
Read more...Beware Bait and Switching WP Engine! A Case Study in Devolution
One of my side projects is keeping tabs on devolution, which I first discussed in January in Devolution: Welcome to the World Where Things Don’t Work Well.
Read more...Cathy O’Neil: Black Scholes and the normal distribution
By Cathy O’Neil, a data scientist. Cross posted from mathbabe
There have been lots of comments and confusion, especially in this post, over what people in finance do or do not assume about how the markets work. I wanted to dispel some myths (at the risk of creating more).
Read more...Pettis: China and the History of US Growth Models
Yves here. This is an important piece, in that it bucks conventional wisdom about growth and economic development in several ways.
Read more...Mirabile Dictu! Finally, Someone (Amar Bhide) Questions Benefits of Mortgage Securitization
A major intellectual blind spot in academia and among policy makers is the belief that making markets more liquid is always and ever a good thing.
Read more...Risk and Reward in High Frequency Trading
A new paper that analyzes the activities and effects of high frequency trading reaches some damning conclusions.
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