Prieur’s readings (July 23, 2009)

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This post provides links to a number of thought-provoking articles I have read over the past few days that you may also find interesting.

• Richard Bernstein (Financial Times): America is for now still blowing bubbles, July 20, 2009.
By preserving capacity to avoid taking pain today, the US is following the approach that led Japan into a lost decade.

• Kenneth Scott and John Taylor (The Wall Street Journal): Why toxic assets are so hard to clean up, July 21, 2009.
Despite trillions of dollars of new government programs, one of the original causes of the financial crisis — the toxic assets on bank balance sheets — still persists and remains a serious impediment to economic recovery. Why are these toxic assets so difficult to deal with? We believe their sheer complexity is the core problem and that only increased transparency will unleash the market mechanisms needed to clean them up.

• On the mend, July 21, 2009.
The Fed’s chairman talks up the economy

• Ben Bernanke (The Wall Street Journal): The Fed’s exit strategy, July 21, 2009.
My colleagues and I believe that accommodative policies will likely be warranted for an extended period. At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road. The Federal Open Market Committee, which is responsible for setting U.S. monetary policy, has devoted considerable time to issues relating to an exit strategy. We are confident we have the necessary tools to withdraw policy accommodation, when that becomes appropriate, in a smooth and timely manner.

• Michael Hirsh (Newsweek): The most misunderstood man in America, July 18, 2009.
Stiglitz may a prophet without much honor in Washington, but he seems to be determined to keep the prophecies coming.

• Simon Johnson (Baseline Scenario): Jamie Dimon vs Larry Summers, July 19, 2009.
Jamie Dimon has won big.  JP Morgan Chase now stands alone, both in financial position and political clout – including special access to the White House and, as explained in today’s NYT, Rahm Emanuel’s likely attendance at his next board meeting tomorrow.

•Elizabeth MacDonald (Fox Business): The case against Larry Summers, July 20, 2009.
… although Bernanke is winning kudos and praise for making brilliant moves to save the US economy, chatter on the cocktail party circuit in Washington, DC is that Bernanke may not get asked back as the world’s most powerful central banker when his term expires in January 2010, due to a variety of reasons. Word is that instead President Barack Obama may tap Lawrence Summers, director of the National Economic Council and former Treasury Secretary, as the next Federal Reserve chairman. But would Summers be the best choice to replace Bernanke as chairman of the US Federal Reserve?

• Daniel Gross (Newsweek): Why Japan isn’t rising, July 16, 2009.
It’s mellowing as its population ages.

• George Magnus (Financial Times): Older societies will have to retire later, July 20, 2009.
Unless we change our attitudes towards work, education and retirement, we run the risk of pensioner poverty and intergenerational conflict.

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