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The Evolution of Banking and Financial Intermediation

"Orphan Ideas" by Luigi Zingales "Orphan Ideas" by Luigi Zingales Exit from comment view mode. Click to hide this space CHICAGO – Since the United States Supreme Court’s “Citizens United” decision, which prohibited the government from restricting independent political expenditures by corporations and unions, concern about business interests’ influence over US elections has been growing. But political contributions are only one reason why business interests have so much power. When it comes to lobbying, money is not everything: ideas play a big role, too. Unfortunately, rather than leveling the playing field, the battle of ideas may skew US politics even further in favor of big business.
Understanding modern banking & finance

Last quarter, upon the release of the Q4 2011 Z.1 (Flow of Funds) report, we penned "The US Deleveraging Is Now Over", because, well, it was: all the categories tracked by the Fed's Credit Market Debt Outstanding series posted a sequential increase over Q3. Most importantly, there was an increase in the net debt held by the US Household Sector: this was only the first time after 14 quarters of declines, that US consumers had levered up. Sure enough, many took this as an indication that the economy was now fixed, and that with everyone levering up, inflation was sure to follow, and the virtuous cycle was back (also leading to the scare when the yield on the 10 year spiked, however briefly, to the mid 2% range). The US Deleveraging Has Resumed The US Deleveraging Has Resumed
Forecasting. Doesnt. Work.

Game theory?

Occupy Economics?: A Report Back from the Nerdiest Protest I’ve ever been to. « Ph.D. Octopus By Peter I just got back from Chicago, where, along with attending the American Historical Association, I participated in a series of protests held by Occupy Chicago, along with CACHE (Coalition Against Corporatization of Higher Education) that targeted the American Economics Association (AEA). Its not everyday that the worlds of street protests and academic conferences blend so well. But then again, part of the point was to “puncture the bubble,” that academic economists live in. Occupy Economics?: A Report Back from the Nerdiest Protest I’ve ever been to. « Ph.D. Octopus
MF’s Missing Money Makes You Wonder About Goldman: Jonathan Weil Illustration by Nick Lu Close Close Related MF’s Missing Money Makes You Wonder About Goldman: Jonathan Weil
Do Investors Stifle Innovation? (Part II) : Planet Money Do Investors Stifle Innovation? (Part II) : Planet Money Istvan Bara/Getty Images Note: This is the second of two related posts. In his latest New York Times Magazine column, Adam Davidson writes, "from a C.E.O.'s perspective, long-term R. and D. is a lousy investment...the C.E.O. of DuPont who retired three years ago, told me that it's tough to get investors to think more than two years ahead — at most.'" To continue the discussion, we asked two economists on different sides of the debate - Baruch Lev of New York University and Shivaram Rajgopal of Emory University - to answer the following question: Are investors pressuring CEO's to cancel long-term R&D projects?
Debates: Inflation: Statements I am happy to take the "No" position on this debate topic, because I believe that the proposal for central banks to raise their inflation targets from (approximately) 2% to 4% per year is a very poor one. The idea behind the proposal is, of course, that the difficulty of providing additional monetary stimulus to an economy when the policy interest rate is at its zero lower bound (ZLB) makes it desirable to keep the average rate somewhat higher so that this bound will be encountered less frequently—even though the extra inflation that would result is itself unwelcome. In the process of studying this topic for a professional conference a few months ago I was surprised to find how firmly the technical literature comes down on the "No" side of this proposal. A summary of the technical analysis as reviewed in my paper can be presented briefly, as follows. Debates: Inflation: Statements
Is Any CEO Worth $189,000 Per Hour?
The Destruction of Economic Facts The Destruction of Economic Facts During the second half of the 19th century, the world's biggest economies endured a series of brutal recessions. At the time, most forms of reliable economic knowledge were organized within feudal, patrimonial, and tribal relationships. If you wanted to know who owned land or owed a debt, it was a fact recorded locally—and most likely shielded from outsiders. At the same time, the world was expanding. Travel between cities and countries became more common and global trade increased.
A year ago, it was hardly unthinkable that a math wizard like David X. Li might someday earn a Nobel Prize. After all, financial economists—even Wall Street quants—have received the Nobel in economics before, and Li's work on measuring risk has had more impact, more quickly, than previous Nobel Prize-winning contributions to the field. Today, though, as dazed bankers, politicians, regulators, and investors survey the wreckage of the biggest financial meltdown since the Great Depression, Li is probably thankful he still has a job in finance at all. Not that his achievement should be dismissed. He took a notoriously tough nut—determining correlation, or how seemingly disparate events are related—and cracked it wide open with a simple and elegant mathematical formula, one that would become ubiquitous in finance worldwide. Recipe for Disaster: The Formula That Killed Wall Street Recipe for Disaster: The Formula That Killed Wall Street
Rational Irrationality: Inside George Soros’s “Monstrous Monkey House” Rational Irrationality: Inside George Soros’s “Monstrous Monkey House” Snow-capped peaks; nightcaps with Larry Summers; discussions of complexity theory over breakfast; Tennyson quotations from Gordon Brown at lunch. No it’s not Davos—it’s Bretton Woods, New Hampshire, where over the weekend the Institute for New Economic Thinking (INET), which George Soros set up in the wake of the financial crisis, held its second annual conference. Last year’s inaugural get-together was held at King’s College, Cambridge, the home of Keynes. This year’s location also had a strong link to J.M.K.
Amar Bhidé: In Defense of Human Judgment In a recent highly publicized game of Jeopardy, two of the game’s greatest past champions were beat by Watson, an IBM computer whose intelligence was based on algorithms. It was hailed as the latest example of how software could outperform human beings. In the latest INET interview, Amar Bhidé, the author of the new book A Call for Judgment, counters that argument with a strong defense of the primacy of human judgment – at least when it comes to overseeing the economy and navigating the world of finance. Amar Bhidé: In Defense of Human Judgment
by Umair Haque | 2:36 PM July 28, 2011 The monsters, they say, come out at night. And right now, we’re in a long, dark night of the economy. How Our Economy Was Overrun by Monsters and What to Do About It - Umair Haque
cgasmediatvdrama.blogspot.comThis is a lengthy, highly provovative article illustrating in explicit detail my thoughts on how America's inferior education system made the Great Recession not only a foregone conclusion of indoctrinated GroupThink, but prevents a true recovery from recovery due to the abject fear of price clearing. You may need to put your thinking caps on and exercise some patience and restraint with this one. I am going to follow it up with an explcit example of said groupthink by going against the conventional grain (yet again) and pointing out what many in the mainstream consider to be the most likely threat to economic prosperity in 2012 (and no, Iran is not even in the running on this one). I blame indoctrinated GroupThink for the inability of Wall Street to see the excessive coniferous expanse due to treebark blindness! Until the next post, though... How Inferior American Education Caused The Credit/Real Estate/Sovereign Debt Bubbles and Why It's Preventing True Recovery