Credit Writedowns » Greenspan Put

Readers of this blog expect the recession to last redux

Edward Harrison — Fri, 15 Jan 2010 15:48:19 +0000

Back in June I asked you all “When will the U.S. economy recover?.” The response was basically either “there will be no recovery to speak of” or “recovery is a long way off.” The poll results are embedded below. [poll id="9"] I asked a similar question as the new year began since arguably a ‘technical

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On kleptocracy and the sense that we have a one-party system

Edward Harrison — Tue, 05 Jan 2010 22:08:24 +0000

As a writer, Matt Taibbi is a lot more vitriolic than I am. He curses, makes some pretty over-the-top personal attacks, and divines a policymaker’s intent where I don’t think he can. But, this goes mostly to style. Substantively speaking, he has a lot to say and we should take notice. I wanted to highlight

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Obama forgot Samuelson when he told fat cats to start lending

Edward Harrison — Tue, 15 Dec 2009 03:00:45 +0000

There has been quite a lot of hub-bub today about President Obama’s fat cat remarks and his meeting with bankers exhorting them to lend. Let me tie these events in with a few other themes into a comprehensive picture of what is happening in politics and banking. In a nutshell, we are getting a bunch

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Reaching for yield in the post-TARP era

Edward Harrison — Fri, 04 Dec 2009 14:28:17 +0000

When I read Yves Smith’s recent comments on Bank of America’s repayment of its TARP funds, I couldn’t help but think of a post I wrote six months ago called "Asymmetric information and corporate governance in bank bailouts." The gist is of the post is about the same as Yves’ and it was inspired by

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All bubbles are equal, but some bubbles are more equal than others

Edward Harrison — Tue, 10 Nov 2009 14:30:59 +0000

Columbia University Professor and former Federal Reserve official Frederic Mishkin wrote a much-discussed Op-Ed in the Financial Times yesterday. In it, he asks Are potential asset-price bubbles always dangerous? He answers this question with a no, noting that some asset bubbles are more dangerous than others because of their connection to debt and credit. I

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Did Gordon Gekko inspire Wall Street or the other way around?

Edward Harrison — Sat, 24 Oct 2009 13:34:52 +0000

This contribution from Daniel Berger is a letter to Michael Smerconish in response to a commentary Smerconish wrote on 10 May 2009 in the Philadelphia Inquirer “Head Strong: Did Hollywood inspire the meltdown men?” A shorter version of Berger’s piece appeared at New Deal 2.0 in July. Given my recent two posts on greed (“More

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The next crisis is already under way

Edward Harrison — Mon, 19 Oct 2009 21:52:06 +0000

Wolfgang Munchau of the Financial Times wrote a very important comment piece in today’s Financial Times. In it he said that central banks are targeting asset prices to avoid the brunt of cyclical downturns. This policy is inducing asset bubbles and creating a more volatile real economy with unpredictable negative consequences. I want to expand

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Federal Reserve’s Fisher says tightening will be aggressive

Edward Harrison — Tue, 29 Sep 2009 16:40:43 +0000

Marshall Auerback pointed out a statement from Dallas Fed Chief Richard Fisher today that is not getting a lot of attention despite its importance. He said: I expect that when it comes time to tighten monetary policy, my colleagues and I will move with an alacrity that, if needed, will be equal in speed and

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Is economic boom around the corner?

Edward Harrison — Fri, 11 Sep 2009 15:07:13 +0000

This September 2009 post still describes my general view on the U.S. economy. If I wrote it today, I would be more bearish medium-term because it is obvious that in 2010 fiscal and monetary policy will become less supportive of recovery. Political pressures to remove fiscal and monetary stimulus are too much to bear. As a result, I give a double dip recession slightly better odds than a multi-year recovery now. But the analysis framing my thinking is largely the same

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Stephen Roach: The case against Bernanke

Edward Harrison — Tue, 25 Aug 2009 19:21:13 +0000

While most economists have come out in favor of Barack Obama’s decision to re-appoint Ben Bernanke as Chairman of the Federal Reserve Board, Stephen Roach has penned an Op-Ed in today’s Financial Times which highlights the case against Bernanke. It is must reading. Roach has three main points. Before the Lehman bankruptcy, Bernanke was an

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A brief philosophical argument about the role of government, stimulus and recession

Edward Harrison — Fri, 12 Dec 2008 18:19:10 +0000

I was chatting with Marshall Auerback about some of my recent posts on Keynesianism and Austrian Economics -- Marshall is a Keynesian -- and he convinced me that my posts were somewhat misleading and that I had only presented half of the argument for stimulus. This led me to thinking about the role of government, stimulus and recession which I felt compelled to present here

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Barack Obama ushers in a new era in America

Edward Harrison — Wed, 05 Nov 2008 13:23:00 +0000

Barack Obama has won the U.S. presidential election in convincing fashion. While I am clearly not a liberal nor a Democrat, I am pleased with the election's outcome. It signals a new beginning - a new era in American politics and in American society that is much needed

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Charts of the day: US macro disequilibria

Edward Harrison — Fri, 17 Oct 2008 13:00:00 +0000

The United States had been living beyond its means for a very long time before the credit crisis finally hit. The truth of the matter is that U.S. monetary and fiscal policy rewarded risk-taking and leverage at the expense of prudence and saving. The goal of government it seemed was to avoid the pain of

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Global asset re-pricing

Edward Harrison — Fri, 10 Oct 2008 11:46:00 +0000

It’s about 7:45 AM ET as I write this and the overseas stock markets are getting hammered. I can’t say I don’t fear what is going to happen today because I do. We are witnessing a meltdown of unimaginable proportions that is not just limited to one asset class or one sector of the economy

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Low savings, high debt and interest rate policy

Edward Harrison — Thu, 17 Jul 2008 13:05:00 +0000

As you know, the CPI registered a whopping 5% yesterday. Year-on-year inflation hasn’t been this high since the Gulf War. So much for the ‘Great Moderation.’ But the increase in inflation begs another question: why are interest rates so low? The Fed Funds rate is 2%. While it is unlikely to hit the 1% level

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