Sunday, October 19, 2008

Reads of the day

Tyler Cowen gives three main underlying causes of the crisis: Global savings glut, greater willingness to take on risk and weak governance & oversight. Well, actually three and a half: There was also some bad luck involved, as these three combined to create the financial mess we are in.

Some weekend gossip: This time, it's the IMF. Felix Salmon had warned on Srauss-Kahn's lower back problem more than a year ago. Interesting side point: The WSJ article and a blog piece by Felix Salmon were the only articles on the issue I stumbled upon in in the international news sphere, whereas it made headlines in all the major newspapers in Turkey. Do Turks, being the Fund's best customer in the last few years, follow the fund too closely? Or do they just love gossip?

There is anecdotal (chats with bankers) as well as hard (latest CBT actions) that Turkish banks are scrambling for FX liquidity. You can almost hear them screaming: Where is my swap line? Brad Setser goes on to discuss the broader implications of unlimited liquidity.

Mark Tahoma summarizes the argument that has been going on between New Keynesians and neoclassical economists (or at least one neoclassical economist) on using fiscal spending to simulate the economy- would be a very good case study in an Introductory Macro class as some of the main conceptual differences between the two camps are revealed.

One of the interesting results of the predictions markets literature has been confirmed: Manipulation, by letting the wisdom of the crowds take advantage of the manipulator, can actually improve the efficiency of prediction markets- see also my recent post on prediction markets

Leading indicators and consumer sentiment are at all time lows- and not just for the US. I've been wondering whether this shift reflects the recession or is simply a side product of the recent financial turmoil. News n Economics argues convincingly that it is the former.

Nice summary of where we stand on LIBOR from FT Alphaville- also has links to many of the interesting writings of the week on the subject.

Crowding in or crowding out, that's the question- whereas the first article argues that capital injections to banks will enable banks to attract more capital, Casey Mulligan applies Ricardian equivalence to argue for the opposite.

A new working paper, discussed in Odd Numbers argues that lending standards did not decrease in the subprime market after all. But an IMF working paper had reached the opposite conclusion. I wish I had time to go over both and decide for myself...

Fed's response to the crisis, in chronological order.

One of the leading experts on US housing argues against policies aimed at trying to stop house prices falling further.

The week in pictures from Econompicdata

Death of an theorem

CDOs and CDSs explained

To close with a lighter tone: Research of the week, dedicated my buddy Hakan.

No comments: