News/Op-Eds John Cochrane News/Op-Eds John Cochrane

Unraveling the Mysteries of Money

An extensive interview by Gideon Magnus of Morningstar, with Harald Uhlig. What is money, fiscal theory of the Price Level, European debt crisis, and more. The Video; a cleaned-up magazine article (pdf) (html)

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An extensive interview by Gideon Magnus of Morningstar, with Harald Uhlig. What is money, fiscal theory of the Price Level, European debt crisis, and more. The Video; a cleaned-up magazine article (pdf) (html)

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News/Op-Eds John Cochrane News/Op-Eds John Cochrane

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)

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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)

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News/Op-Eds John Cochrane News/Op-Eds John Cochrane

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.

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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.

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News/Op-Eds John Cochrane News/Op-Eds John Cochrane

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

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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

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News/Op-Eds John Cochrane News/Op-Eds John Cochrane

Hedge Funds

Slides for talks about hedge funds. Returns, alphas and betas, performance, fees, how to form portfolios of hedge funds.

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Slides for talks about hedge funds. Returns, alphas and betas, performance, fees, how to form portfolios of hedge funds.

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News/Op-Eds John Cochrane News/Op-Eds John Cochrane

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?

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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?

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News/Op-Eds John Cochrane News/Op-Eds John Cochrane

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.

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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.

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News/Op-Eds John Cochrane News/Op-Eds John Cochrane

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.

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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.

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News/Op-Eds John Cochrane News/Op-Eds John Cochrane

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.

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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.

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News/Op-Eds John Cochrane News/Op-Eds John Cochrane

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)

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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)

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News/Op-Eds John Cochrane News/Op-Eds John Cochrane

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"

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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"

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News/Op-Eds John Cochrane News/Op-Eds John Cochrane

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.

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Joural of Finance 66, 1047-1108 (August 2011). The video (including gracious roast by Raghu Rajan). The slidesData 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.

Read More >

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News/Op-Eds John Cochrane News/Op-Eds John Cochrane

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.

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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.

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News/Op-Eds John Cochrane News/Op-Eds John Cochrane

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.

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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.

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