Monthly Archives:

September 2008

On banks, and monetary policy mistakes

Many people blame the banks’ woes on a lack of regulation of the banking industry and the leverage that banks have built up over the past few years. This is certainly an important factor, but is only part of the story.

Conventional wisdom says that the mess that the banks are in is due to a lack of regulation, which meant that banks did things that they shouldn’t really have got involved with….

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Deleveraging and asset prices – the ‘Minsky moment’ revisited

I think it’s worth looking back at a comment I wrote in November last year on how the global economy had reached a ‘Minsky moment’. In brief, economist Hyman Minsky unerringly predicted the boom and bust of tech stocks, and events of the last few years have followed the same classic Minsky pattern. Minsky argued that periods of stability breed periods of instability, where prolonged economic st…

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'Reality leaves a lot to the imagination' John Lennon

Lunch yesterday with a member of the ECB, who will have to remain nameless, was an interesting affair. The usual hawkish noises around inflation remaining stubbornly high, the need to avoid second round effects and the damage to the Eurozone that would be borne out of an inflationary spiral were entirely expected. Indeed I have some sympathy with the ECB. Their mandate, as I’ve mentioned before… Read the article

Letter from Washington DC

Our chief economist, Steven Andrew, and I are just back from a research trip to Washington. To some extent our visit was overtaken by this weekend’s events and the government bailout of the GSEs (Freddie Mac and Fannie Mae), but there was tangible nervous excitement in the air that anticipated that something big was about to happen – plus we’d had the shocking rise in US unemployment out on Fri…

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"Arguably the worst they’ve been in 60 years"

Three quick things this morning. 

1) Putting aside the question of why on earth would Alistair Darling publicly predict the worst economic downturn for sixty years, the more interesting question is how does he come to that conclusion? No other forecaster is predicting such a disaster, and they all have exactly the same economic inputs as the Chancellor (he might get the official statistics a co…

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