Relevant and even prescient commentary on news, politics and the economy.

Notes Toward Modeling a Risk-Free Rate with Default Possibilities

Brad DeLong asks why it hasn’t been done, if it hasn’t been done.  The biggest problem I can see is that you don’t know how insane the participants are—and that will have a major effect on how much damage is done when. Don’t get me wrong; the damage is already being done; it has been […]

Modeling Sunshine and Shadows: Inequality, long hours and crisis

Tom Walker(aka Sandwichman at Ecological Headstand) Modeling Sunshine and Shadows: Inequality, long hours and crisis Alex Harrowell at A Fistful of Euros sees sunshine beaming from the IMF in a working paper by Michael Kumhof and Romain Rancière that identifies income inequality as a potential source of financial crisis. No shit, Sherlock! Outside of the […]

To send money is not to spend money

Robert Waldmann Atrios vs Bernanke. OK so I agreed with Atrios about Greenspan (just below). Now I disagree with him about Bernanke. He equates loans with gifts. He equates worse than optimal with worse than nothing (dealing with free market fanatics can cause one to overlook the difference). Bernanke could have sent money from the […]

Only that which is rational is real

CNBC reports Greenspan … added that the financial crisis could not have been foreseen. “It is just not feasible to forecast a financial crisis,” he said. “A financial crisis by definition is a sharp abrupt, unexpected decline in asset prices.” Notice that he says if it is unexpected, then it *can’t* be forecast. That is […]

hundreds of billions = 0 ?

Robert Waldmann The Headline and abstract person has outdone himself or herself writing CBO sees debt estimates soar Analysts say health law has not improved budget and Obama’s tax agenda will make things worse. Lori Montgomery As Kevin Drum says always click the link. Lori Montgomery actually wrote President Obama’s overhaul of the health-care […]

Peanut Butter Regulations

by Rusty Rustbelt PEANUT BUTTER REGULATIONS Watching people spread peanut butter is interesting. I am a semi-neurotic peanut butter spreader, I try to cover most of the bread and try to get the thickness close to even, but I am not a perfectionist-neurotic spreader. There are also slap-and-eat messy spreaders. Having dealt with a wide […]

Nick Rowe asks if new Keynsian models make sense

Robert Waldmann Nick Rowe asks a very interesting question. After the jump I attempt an answer Please read Rowe’s post first. The following will make no sense at all if you don’t (note reading Rowe’s post is a necessary not a sufficient condition for it to make sense). The short explanation is that Rowe finds […]

Those Low Rates

Via (what else?) Alea’s Twitter feed, John Taylor defends himself against Ben Bernanke: “The evidence is overwhelming that those low interest rates were not only unusually low but they logically were a factor in the housing boom and therefore ultimately the bust,” Taylor, a Stanford University economist, said in an interview today in Atlanta. It’s […]

Today in "Economists Are NOT Totally Clueless" (Part 3 of 4)

Pete Davis: Treasury Secretary Hank Paulson initially sold Congress in the fall of 2008 on emergency intervention to purchase “toxic assets,” but quickly reversed course in favor of direct capital injections. Those favored financial institutions revived more quickly than most thought possible and most of those injections have already been paid back. However, most of […]