Prieur’s readings (September 17, 2009)
This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.
• Brett Arends (The Wall Street Journal): What price suits gold?, September 16, 2009.
Gold bullion just crossed $1,000 an ounce. But what’s it really worth? Leading gold bugs see prices tripling someday, but others say its current level is about right.
• Willem Buiter (Financial Times): Expect little and you may yet be disappointed, September 15, 2009.
Until yesterday’s defeat of Roger Federer in the final of the US Open at Flushing Meadows, the most disappointing development this year was the performance of president Barack Obama and his administration – and my expectations were modest to begin with.
• Joseph Stiglitz (The Guardian): For all Obama’s talk of overhaul, the US has failed to wind in Wall Street, September 14, 2009.
With a blank cheque from taxpayers and no real reform the perverse incentives for risk-taking are bigger than ever.
• Edmund Andrews and David Sanger (The New York Times): US is finding its role in business hard to unwind, September 13, 2009.
One year after the collapse of Lehman Brothers set off a series of federal interventions, the government is the nation’s biggest lender, insurer, automaker and guarantor against risk for investors large and small.
• Nouriel Roubini (The Globe and Mail): Desperately seeking an exit strategy, September 16, 2009.
The crucial policy issue ahead is how to time and sequence the exit strategy from this massive monetary and fiscal easing. Clearly, the current fiscal path being pursued in most advanced economies – the reliance of the United States, the euro zone, the United Kingdom, Japan and others on very large budget deficits and rapid accumulation of public debt – is unsustainable.
• Adam Posen (Financial Times): How to prevent an unruly rush for the exit, September 16, 2009.
G20 leaders must shed the idea that all are best served by each country pursuing its own policy measures as though alone.
• William White (Financial Times): Some fires are best left to burn out, September 16, 2009.
Can macroeconomists learn from forest managers? For decades, successive economic downturns have been met with massive monetary and often fiscal stimuli. But did the policy reaction to each successive set of difficulties lay the foundations for the next one.
• Andy Kessler (Forbes): Lehman and meritocracy, September 14, 2009.
Part of the charm of Wall Street, and what scares most reasonable people away, is that it is as close to a meritocracy as exists on this earth. It’s dog eat dog. It’s sink or swim. You do a trade and it makes money, then you’re a hero (for a moment anyway) and deserve a bonus. You bring in a deal, you get paid. You lasso more clients’ assets under your firm’s roof, you’re a hitter.
• Scott Sumner (Cato): The real problem was nominal, September 14, 2009.
A recent series of articles in The Economist argued that the current financial crisis has exposed important flaws in modern economic theory. I will make a slightly different argument. The sub-prime crisis that began in late 2007 was probably just a fluke, and has few important implications for either financial economics or macroeconomics. The much more severe crisis that swept the entire world in late 2008 was a qualitatively different problem, which has been misdiagnosed by those on both the left and the right.
• Bank for International Settlements (via Fullermoney): BIS Quarterly Review – International banking and financial market developments, September 2009.
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