In retrospect, it is easy to see why most observers didn’t see the crisis coming. The crisis was a stress test of shadow banking, “money market funding of capital market lending”. In most universities, including mine, monetary economics and financial economics are separate fields with their own specialized language and faculty, and the regulatory apparatus is similarly bifurcated. But the
Read moreThe BIS and the IMF have each weighed in from the center, representing the perspectives of central banks and central Treasuries respectively. (Interestingly, they don’t agree, see here for a recent sample of the debate.) Now comes the periphery. The new Trade and Development Report of the United Nations Conference on Trade and Development is titled “Making the international financial architecture work
Read moreGoldman Sachs takes “A Look at Liquidity”, and tells us what they see. Suffice it to say that different people see different things, depending on their vantage point, like the proverbial blind men touching the elephant. Let’s see if we can construct a picture of the animal as a whole from the snapshots provided. What seems clear is that the
Read moreNow comes a symposium of five articles, published in the AEA outreach Journal of Economics Perspectives, several of which read clearly as a kind of apologia pro vita sua for the actions of the authors themselves. The idea seems to be that, if only readers could be made to understand the conditions under which the authors were operating, they would
Read moreAs regular readers know, I emphasize two central functions of monetary systems: payments and market-making. These are the foundation pillars of what I call the “money view”. In my teaching, I have come to appreciate a variety of barriers that people bring with them to the study of money, and to appreciate the necessity of bringing these barriers up to
Read moreA month ago, the Volcker Alliance issued a report intended to address a central issue that had been purposely left to one side in the Dodd-Frank reform legislation, namely the inadequacy of the regulatory system that will be tasked with implementing any future financial reform. Titled “Reshaping the Financial Regulatory System: Long Delayed, Now Crucial”, the report got respectful notice
Read moreThe Fed has announced plans to raise rates in the imminent future, but the market does not believe it. Why not? Conventional wisdom appears to be that the Fed will chicken out, just as it did during the so-called Taper Tantrum. The Fed has signaled its appreciation that “liftoff” will involve increased volatility, and has stated its resolve this time
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