Prieur’s readings (February 25, 2009)
This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.
• Sewell Chan (The New York Times): Bernanke expects extended low rates, February 24, 2010.
Ben Bernanke, the Federal Reserve chairman, told Congress on Wednesday that the central bank did not intend to start raising short-term interest rates anytime soon, saying the economic recovery would remain halting for many more months.
• The Economist: Debate: Ross Levine vs Joseph Stiglitz, February 23, 2010.
Does financial innovation boost economic growth?
• Peter Boone and Simon Johnson (Vox): The doomsday cycle, February 22, 2010.
Over the last 30 years, the US financial system has grown to proportions threatening the global economic order. This column suggests a “doomsday cycle” has infiltrated the economic system and could lead to disaster after the next financial crisis. It says the best route to creating a safer system is to have very large and robust capital requirements, which are legislated and difficult to circumvent or revise.
• Matthew Bishop and Michael Green (Forbes): Learning to love the bubble, February 24, 2010.
• Irrational exuberance is one of the prices we pay for progress.
Shannon Harrington and Abigail Moses (Bloomberg): Swaps show European contagion won’t hit US, February 24, 2010.
The risk that a government funding crisis in Europe will spread across the Atlantic Ocean is declining, bolstering corporate bond markets in the US, credit-default swaps show. Since Feb. 10, the day before European Union President Herman Van Rompuy pledged to safeguard financial stability in the euro region, the cost to protect company debt in America from default has dropped 7.6 percent, while it fell 2.4 percent in Europe. In the five weeks before the statement, prices moved almost in lockstep, with swaps climbing 34 percent in the US and 35 percent in Europe, according to CMA DataVision.
• Gary Gensler (Financial Times): How to stop another derivatives inferno, February 24, 2010.
Chicago was rebuilt with new rules to limit the risk of fire. Likewise, the public needs protecting against the risks of over-the-counter derivatives.
• Eric Dezenhall (The Daily Beast): Who is really behind Toyota’s crisis? February 23, 2010.
As Toyota faces Congress this week, the company will be walking a fine line between protecting itself legally by characterizing carefully what it sees as its responsibility, and proving that it is addressing the serious integrity allegations against its brand.
• David Pilling (Financial Times): South Korea is no longer the underdog, February 24, 2010.
An economy that in the 1960s had a per capita income on a par with sub-Saharan Africa is now snapping at the heels of Britain and France.
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