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

Dropping $100 Bills on the Sidewalk, or Even More on Excess Reserves

The sarcasm of the title of my recent post notwithstanding, there are some things economists understand to be true that are. Among those: People respond to incentives As with the Supreme Court, economists extend this principle to organizations, on the (generally correct) idea that organizations are made up of people who act in their own […]

I Do Not Think "Tool" Means What You Think It Does

Dear Brad, Do you want to reconsider the title of this post in the context of this article? An examination of Mr. Geithner’s five years as president of the New York Fed, an era of unbridled and ultimately disastrous risk-taking by the financial industry, shows that he forged unusually close relationships with executives of Wall […]

Back-of-the-Envelope: Making Sense of TARP

Suppose I told you that there was a crisis with a stock, say, GE. That the price of the stock had dropped around 75% in the past year. And you responded, “But the problem is solved; the prices of long-term Call Options (say, the January 2011 20s) has gone up, as has their Open Interest. […]