Salz Review of Barclays’ Business Practices. Euro zone clamor drowned out Cypriot bank warnings. TPSI_009_Perfect_Storm_009. IS U.S. GOVERNMENT DEBT DIFFERENT? Debt-Deflation Theory of Great Depressions. Antonio Damasio: INET Keynote Address "Human Decisions" If We Don’t Measure Leverage, We Risk More Crises. You can’t control what you don’t measure. In engineering, control theory is all about using information gained by measuring a system to plan and carry out intelligent actions that will control it. Ideally, it leads to desirable outcomes, such as a nuclear reactor that doesn’t melt down, or a robotic arm that does precisely what it is supposed to do.
In the case of the economy, we might not be measuring everything we need to achieve control. For at least half a century, policy makers seeking to control inflation and unemployment have typically focused on managing interest rates. The U.S. Where does leverage currently fit in the equation of macroeconomic stability? For 15 years, Yale economist John Geanakoplos has argued that policy makers should pay more attention to leverage. Independent Quantity Importantly, leverage isn’t a fixed quantity. The core of his argument rests on a common-sense insight: An increase in leverage generally leads directly to an increase in prices.
Leverage Cycle. Fcic_final_report_full. Is Shadow Banking Really Banking? The Regional Economist | October 2011 By Bryan J. Noeth and Rajdeep Sengupta The term "shadow banking" has been attributed to 2007 remarks by economist and money manager Paul McCulley to describe a large segment of financial intermediation that is routed outside the balance sheets of regulated commercial banks and other depository institutions. Shadow banks are defined as financial intermediaries that conduct functions of banking "without access to central bank liquidity or public sector credit guarantees. " As shown in Figure 1, the size of the shadow banking sector was close to $20 trillion at its peak and shrank to about $15 trillion last year, making it at least as big as, if not bigger than, the traditional banking system. Given its size and role in the financial crisis, it would be useful to understand the mechanics of shadow banking.
Figure 1 Click to enlarge SOURCE: Federal Reserve Board/Haver Analytics and calculations from Adrian, Ashcraft, Boesky and Pozsar. Figure 2 Conclusion. “Misunderstanding Financial Crises”, a Q&A with Gary Gorton. I have unfortunately not yet read Prof. Gorton's book, so my comments below are on the Q&A in FT Alphaville. I'm grateful to a friend who called my attention to it asking for comments because there is nothing like commenting on other people's work to focus one own's thoughts. Hurried readers may jump to the conclusions below.
" Of great interest, for the deep misunderstandings that I think underpin the thinking of such authoritative author. Here are my thoughts on the issues: Gorton assumes money is on one side, collateral on the other. This is wrong and misses the key point.