Tuesday, January 6, 2009

Interesting Picks

Britain's Buffett on how to spot a market turning point.

Tim Duy's Fed Watch (via Mark Tahoma)

Top 10 reasons why economists got humbled and missed the crisis.

Brad Setser on why central banks aren't always a stabilizing presence in the market.

The article in the NYT on the role of Value at Risk (VaR) in the crisis has got a lot of attention, but as Yves Smith explains, the article never explains what's wring with such models in the first place. James Kwak, on the other hand, focuses on another deficiency of VaR: The real world changes. For an argument that VaR itself is harmless, see here. In a related article, Jon Danielsson argues that measuring risk is really a myth- on which Yves Smith comments.

I recently stumbled upon an Aleph Blog from 2007 on a bunch of indicators he is using- I liked the comprehensive list.

Rebecca Wilder questions using infrastructure projects to boost the economy. Her arguments certainly make sense to anyone familiar with economic theory, and there is some evidence that the infrastructure multiplier is not that high. I suspect one reason may be quickness. Anyway, thinking of an alternative, while a tax cut makes sense in some respects, Krugman offers a balanced view.

Speaking of a fiscal stimulus, Willem Buiter questions whether the US economy can afford a fiscal stimulus in the first place. Yves Smith goes over his main arguments, while Paul Krugman contends that it is not clear the alternative is better.

FT Alphaville returns to the yield curve debate I had featured just before the New Year.

Calculated Risk on the increasing correlation between new home sales and unemployment during recessions.

10 craziest days on Wall Street last year.

Price-level targeting to get the US off the liquidity trap- also a worthwhile take on the Krugman liquidity trap model.

A not-so-nice side product of zero rates: Incentives to fail in the repo market.

Trying to make sense of what the heck the Fed is doing- I sympathize with the guy, given I am as confused as he is on some of these issues.

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