Felix Salmon

Never mind Michael Lewis. The most interesting and provocative thing to be written of late about financial innovation in general, and high-frequency trading in particular, comes from Joe Stiglitz. The Nobel prize-winning economist delivered a wonderful and fascinating speech at the Atlanta Fed’s 2014 Financial Markets Conference today; here’s a shorter version of what Stiglitz is saying. Markets can be — and usually are — too active, and too volatile. This is an idea which goes back to Keynes, if not earlier. Stiglitz says that in the specific area of international capital flows, “there is now a broad consensus that unfettered markets are welfare decreasing” — and certainly you won’t get much argument on that front from, say, Iceland, or Malaysia, or even Spain.

http://blogs.reuters.com/felix-salmon/

Eurozone Crisis: In the Eye of the Storm The Eurozone crisis has been in retreat since the introduction of the European Central Bank’s (ECB) three-year long-term refinancing operations (LTROs) in late December 2011. At the European Council Meeting in early March, journalists who cover the crisis fretted that boredom loomed. The current lull does not indicate that the Eurozone is in the clear, but rather it is simply in the eye of the storm, and more drama inevitably awaits. Extend and pretend So far, there are three key mechanisms the troika — the European Commission, International Monetary Fund (IMF) and ECB — has employed to buy time for the Eurozone’s weaker countries to regain competitiveness and return to growth.

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