Forget about the mandate
Bloobmerg Business Class. The health law debate needs to stop worrying about legalities. The mandate was never the central economic problem. A reminder of all the other problems, and alternatives to the health care law. (local html)
Bloobmerg Business Class. The health law debate needs to stop worrying about legalities. The mandate was never the central economic problem. A reminder of all the other problems, and alternatives to the health care law. (local html)
What to do on the Day after Obamacare
Wall Street Journal Local pdf. Deregulation and competition. Yes, it can work, even in health insurance. Mostly aimed at the widespread and incorrect view that markets can't provide health insurance.
Wall Street Journal Local pdf. Deregulation and competition. Yes, it can work, even in health insurance. Mostly aimed at the widespread and incorrect view that markets can't provide health insurance.
Austerity or Stimulus: What we need is Growth
IGM/Bloomberg Business Class series. Austerity of high taxes is hurting Europe. Lack of spending isn't their problem. Get rid of the distortions, now, is the only answer. Local pdf
IGM/Bloomberg Business Class series. Austerity of high taxes is hurting Europe. Lack of spending isn't their problem. Get rid of the distortions, now, is the only answer. Local pdf
Hedge Funds
Slides for talks about hedge funds. Returns, alphas and betas, performance, fees, how to form portfolios of hedge funds.
Slides for talks about hedge funds. Returns, alphas and betas, performance, fees, how to form portfolios of hedge funds.
The Real Trouble With the Birth-Control Mandate
Wall Street Journal. Local pdf. Critics complain that religious institutions have to buy health insurance that covers birth control. They're missing the point. Why does health and human services mandate that any and all of us have to buy health insurance that covers regular predictable expenses?
Wall Street Journal. Local pdf. Critics complain that religious institutions have to buy health insurance that covers birth control. They're missing the point. Why does health and human services mandate that any and all of us have to buy health insurance that covers regular predictable expenses?
The Fed's Mission Impossible
Wall Street Journal. (Local pdf) A review of the Fed's (the press release here, the proposal -- old link, broken -- vanished off the Fed's website) to regulate big banks -- and, soon, everyone else.
Wall Street Journal. (Local pdf) A review of the Fed's (the press release here, the proposal -- old link, broken -- vanished off the Fed's website) to regulate big banks -- and, soon, everyone else.
A continent of bad ideas
Bloomberg.com Business Class. Local pdf. Latest on the euro. "... by artful application of bad ideas, Europe has taken a plain-vanilla sovereign restructuring and turned it into a banking crisis, a currency crisis, a fiscal crisis, and now a political crisis.." Italian version, thanks to Duccio Gasparri.
Bloomberg.com Business Class. Local pdf. Latest on the euro. "... by artful application of bad ideas, Europe has taken a plain-vanilla sovereign restructuring and turned it into a banking crisis, a currency crisis, a fiscal crisis, and now a political crisis.." Italian version, thanks to Duccio Gasparri.
What Political Compromises Could Create Jobs?
Planet Money Blog Post. Nothing coming out of Washington has a hope of "creating jobs" in the next year.
Planet Money Blog Post. Nothing coming out of Washington has a hope of "creating jobs" in the next year.
Last Chance to Save the Euro
Wall Street Journal (WSJ link, requires subscription.) The ECB is buying PIGS sovereign debt, and lending massively to banks who are buying sovereign debt, taking same debt as collateral. Current proposals essentially expand this bond buying a lot, but with smoke and mirrors so you don't see it. When defaults come, Germany will either have to pour euros into the ECB, validating the fait-accompli bailout, or watch the euro inflate. Everyone thinks that the euro can't survive sovereign default. No, allowing sovereign default is the way to preserve the euro.
Wall Street Journal (WSJ link, requires subscription.) The ECB is buying PIGS sovereign debt, and lending massively to banks who are buying sovereign debt, taking same debt as collateral. Current proposals essentially expand this bond buying a lot, but with smoke and mirrors so you don't see it. When defaults come, Germany will either have to pour euros into the ECB, validating the fait-accompli bailout, or watch the euro inflate. Everyone thinks that the euro can't survive sovereign default. No, allowing sovereign default is the way to preserve the euro.
Inflation and Debt
National Affairs 9 (Fall 2011). html An essay summarizing the threat of inflation from large debt and deficits. The danger is best described as a "run on the dollar." Future deficits can lead to inflation today, which the Fed cannot control. I also talk about the conventional Keynesian (Fed) and monetarist views of inflation, and why they are not equipped to deal with the threat of deficits. This essay complements the academic (equations) "Understanding Policy" article (see below) and the short Why the 2025 budget matters today WSJ oped (see below)
National Affairs 9 (Fall 2011). html An essay summarizing the threat of inflation from large debt and deficits. The danger is best described as a "run on the dollar." Future deficits can lead to inflation today, which the Fed cannot control. I also talk about the conventional Keynesian (Fed) and monetarist views of inflation, and why they are not equipped to deal with the threat of deficits. This essay complements the academic (equations) "Understanding Policy" article (see below) and the short Why the 2025 budget matters today WSJ oped (see below)
Bubble trouble
Bloomberg View. local pdf. Part of Booth's "Business Class" series. High price-dividend ratios mean low returns and vice versa. The "bubble" argument is only about understanding why risk premia vary over time. A short oped based on "Discount Rates"
Bloomberg View. local pdf. Part of Booth's "Business Class" series. High price-dividend ratios mean low returns and vice versa. The "bubble" argument is only about understanding why risk premia vary over time. A short oped based on "Discount Rates"
Discount rates
Joural of Finance 66, 1047-1108 (August 2011). The video (including gracious roast by Raghu Rajan). The slides. Data and programs (zip file).
My American Finance Association Presidential Address. Discount rate variation (equivalently expected returns, risk premiums) are now at the center of asset pricing questions, from bubbles to the nature of the crash. I survey theory and empirical work, and offer some hope that "macro" theories are relevant to big recent events. It's an article, and extends some of the other themes here.
Joural of Finance 66, 1047-1108 (August 2011). The video (including gracious roast by Raghu Rajan). The slides. Data and programs (zip file).
My American Finance Association Presidential Address. Discount rate variation (equivalently expected returns, risk premiums) are now at the center of asset pricing questions, from bubbles to the nature of the crash. I survey theory and empirical work, and offer some hope that "macro" theories are relevant to big recent events. It's an article, and extends some of the other themes here.
In Defense of the Hedgehogs
Cato Unbound. Local Pdf. A short essay on forecasting in economics and finance. Why "we can't forecast" doesn't mean "we don't know anything." The difference between unconditional forecasting -- "what will happen?" which we are not very good at, and conditional forecasting or "what will be the effect of x policy" which we are pretty good at. Most of all a defense of "hedgehogs" like Milton Friedman and Ronald Reagan, whose conditional forecasts stuck to a few clear core principle, as opposed to heterodox "foxes." It's a "reaction essay" to Dan Gardner and Philip Tetlock's essay in the July 2011 Cato Unbound.
Cato Unbound. Local Pdf. A short essay on forecasting in economics and finance. Why "we can't forecast" doesn't mean "we don't know anything." The difference between unconditional forecasting -- "what will happen?" which we are not very good at, and conditional forecasting or "what will be the effect of x policy" which we are pretty good at. Most of all a defense of "hedgehogs" like Milton Friedman and Ronald Reagan, whose conditional forecasts stuck to a few clear core principle, as opposed to heterodox "foxes." It's a "reaction essay" to Dan Gardner and Philip Tetlock's essay in the July 2011 Cato Unbound.
The More Capital, The Safer the Bank
Wall Street Journal. Local pdf. This piece counters many arguments for low bank capital requirements. Capital is not reserves, the required return on equity is lower for better capitalized banks. (Modigliani and Miller work at least a bit.) And no, Dodd-Frank does not mean banks are forever more free of risk.
For more on bank capital requirements, see Anat Admati's Stanford website. Here's the source for quoting Dan Tarullo on more capital. The other side that I was making fun of: JP Morgan testimony and The Clearing House Open Letter. Here is the New York Times mixing up capital with reserves and stating as a fact -- not a quote, not a theory, not an opinion, just a undeniable fact -- that higher capital requirements mean less lending.
Wall Street Journal. Local pdf. This piece counters many arguments for low bank capital requirements. Capital is not reserves, the required return on equity is lower for better capitalized banks. (Modigliani and Miller work at least a bit.) And no, Dodd-Frank does not mean banks are forever more free of risk.
For more on bank capital requirements, see Anat Admati's Stanford website. Here's the source for quoting Dan Tarullo on more capital. The other side that I was making fun of: JP Morgan testimony and The Clearing House Open Letter. Here is the New York Times mixing up capital with reserves and stating as a fact -- not a quote, not a theory, not an opinion, just a undeniable fact -- that higher capital requirements mean less lending.
Europe's Greek Stress Test
Wall Street Journal, with Anil Kashyap. Local pdf. Why is Europe so scared to let Greece reschedule just a bit? Answer: because their banks holding Greek debt. Greece isn't being bailed out -- they'd rather defaut than work a year and a half just to pay off old debts. Bondholders are being bailed out, and those are mostly banks. So much for the wonders of bank regulation. Europe needs to fix its banks pronto, because the sovereigns will default. The default doesn't have to imply a financial crisis.
Wall Street Journal, with Anil Kashyap. Local pdf. Why is Europe so scared to let Greece reschedule just a bit? Answer: because their banks holding Greek debt. Greece isn't being bailed out -- they'd rather defaut than work a year and a half just to pay off old debts. Bondholders are being bailed out, and those are mostly banks. So much for the wonders of bank regulation. Europe needs to fix its banks pronto, because the sovereigns will default. The default doesn't have to imply a financial crisis.