Credit Crunch

The new generation of Neoclassical economists argue that serious policy mistakes on the “real side” of the economy, such as the deployment of major trade barriers, turned a cyclical downturn into the Great Depression, and that issues of price rigidities, demand failures, credit, or monetary policy are at best of second-order importance. Crisis lessons from Irving Fisher

The credit crunch may cause another great depression | vox - Res One of the most striking effects of the recent credit crunch is the huge surge in stock market volatility this has generated.

This article may be reproduced, in whole or in part, with appropriate attribution. The crisis of 2008: Structural lessons for and from economics |

But sterilization is becoming problematic for the PBOC. First, the process has not been fully effective. Money-supply growth accelerated from 14.6 percent in 2004 to 17.8 percent in 2008, pushing China to a peak inflation of 8.7 percent in 2008, far above the government's target of 4.8 percent. Foreign Policy: Why China's Currency Manipulation Doesn't Matter

Macro and Other Market Musings: It Was the Saving Glut? I further develop this point--and provide some evidence--in this article (see page 374).

Econbrowser: The paradox of thrift | Main | Kash Mansori on a home purchase tax credit »

The current crisis is decidedly global. Opinion: Expect a Prolonged Slump - WSJ.com - Mozilla Firefox

Mortgage Rates Likely Headed to 4.5%: Pimco's Gross - Economy * At the same time, he warned against government over-reaching that would lead to the nationalization of some of the nation's biggest banks, a move that would wipe out shareholder equity. "We need a clear plan tomorrow that moves away from nationalization, and private capital will come in," Gross said. That in turn would make commercial mortgage-backed securities an attractive investment, said Gross, head of the world's largest bond fund. Overall, Gross praised the way the Federal Reserve has taken substantial measures to stem the financial crisis. Looking ahead at the government initiatives he expects to see in an announcement Tuesday, Gross said the government likely will inject more capital into needy banks only.

Banks have two main risks: interest rate risks and credit risks. Since banks mostly borrow short and lend long, they are exposed to increases in short term interest rates, and this would lead to lower NIMs. The credit risk is that too many of those assets will go bad (more on credit risks in the next post). Calculated Risk: Bank Balance Sheet: Liquidity and Solvency, Par

Economics and the crisis of 2008 Many of the roots of the crisis are apparent today, but most of us did not recognize them before the crisis.

The figure also shows the ex-post real federal funds rate ( ffr ) relative to the Y/Y productivity growth rate. No, Greenspan Was Not Right

A New Depression? The Lessons of the 1930s | Jeff Frankels Weblo (ii) the spreading of the crisis from the financial sector to the real economy and throughout the world; and even

TheMoneyIllusion » Richard Rorty and the efficient markets debat The 2000 bubble seems about half way between 1929 and 1987, there were some fundamentals involved, and traders certainly were looking at firms where there was great uncertainty (unlike say GM or Ford in the 1950s and 1960s.) But even so, in retrospect the valuations look far to high at the peak. Once again, however, a cautionary note for the anti-EMH crowd.

Then the credit markets turned and both the borrowers and lenders were in deep trouble. Macro and Other Market Musings: Far From Over - Mozilla Firefox

The crisis and how to fix it: Part 1, causes | vox - Research-ba The financial losses are measured in trillions of dollars; elite financial institutions have fallen; fear and mistrust are widespread among investors and lenders; credit markets are not operating except for those with very short maturities; massive and unorthodox policy interventions are an every day occurrence; and we have been, and continue to be, on the verge of a global financial meltdown.

Edge: REFLECTIONS ON A CRISIS Daniel Kahneman & Nassim Taleb, Mo

Calculated Risk: Buffett's Letter to Shareholders

The First Global Financial Crisis of the 21st Century Part II: J

The crisis and how to fix it: Part 2, solutions | vox - Research

Choice under Risk and Uncertainty: Introduction

How We Were Ruined & What We Can Do - The New York Review of Boo

Empirical evidence on the monetary policy trilemma since 1970 |

An $800 Billion Mistake

Banks BalanceSheet graphs Bal Sheet Governance Securitisation Bonds etc Pubs [+]

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