Robert Waldmann John Q. Policymaker is driving a minivan. Maynard Keynes is in the passenger seat, Ed Prescott and Robert Lucas are in the second row of seats and Eugene Fama and John Cochrane are in the back seats. John Q: We are heading for a cliff !Maynard: slam on the brakes. Prescott: I don’t […]
Robert Waldmann Isaac Newton inspired many people to try to be the Newton of various fields. Unfortunately many tried the shortcut of using the same words as Newton but changing their meanings. This meant that those words had high status, because of Newton, but nothing to do with Newton’s success in fitting facts. One such […]
Robert Waldmann I don’t agree with the title of this post and one sentence, but the rest of the post is reasonable, and the data it discusses are very alarming. Todd Zywicki wrote Some of the results in this new article by Zeljka Buturovic and Dan Klein in Econ Journal Watch (a peer-reviewed journal of […]
Jacob Weisberg wrote The assumption that the rating agencies knew their business, a key enabler of the subprime meltdown, is analogous to the view before the Iraq war that Saddam Hussein had WMD. There are a lot of people now who scoff about what an obvious fallacy that was and not many who can point […]
Robert Waldmann An earlier post on this topic seems to have been eaten by blogger (update it’s back). This post is roughly half roughly retyping. I have two proposals (last time I only had one). One is to give up on the ratings agencies. They were geese that laid golden eggs providing an immensely valuable […]
Robert Waldmann Douthat is worried about the Republican information cocoon. He thinks that conservatives should not rely so much on Fox News and should be open to media which they consider unfriendly (such as his employer the New York Times). He argues that Republicans achieved more back before FoxIn the age Before Fox News, on […]
One of the many causes of the financial crisis was excessive reliance on excessively generous ratings of novel financial instruments. There are proposals to change the incentives faced by the bond rating agencies to prevent them from being so lax. I don’t think that any such reform is likely to be successful. I think it […]
Robert Waldmann Kevin Drum tries to list all proposed explanations for the financial crisis. I see if I can add others after the jump. The Drum roll 1. Housing bubble (i.e., the pure mania aspect of the thing). 2. Massive increase in leverage throughout the financial system. 3. Global savings glut/persistent current account deficits. 4. […]
Robert Waldmann Goldman Sachs accused of (civil) Financial Arson I don’t want to bore readers so I’ll just mention, again, that this wouldn’t have been possible if cash settlement CDS were not allowed. In all other cases it is not legal to insure against a risk that one doesn’t bear. A simple law which says […]
Robert Waldmann A year and a half ago I speculated as to how Lehman had managed to get it’s unsecured debt to be worth only 12 cents on the dollar. With my tinfoil hat firmly on, I wondered if they had written CDS on themselves. I may just be demonstrating my ignorance of the law […]