Wall street journal reports that this crisis was the predicted result of politically correct lending policies commanded by the Clinton administration, continued and worsened by the Bush administration. Carpe Diem reports that this crisis was predicted when these policies were introduced by the Clinton Administration. In 1999, the NY Times observed: Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But …
Category: economics
The financial crash
Brad de Long looks at the financial crisis, and concludes that the wise and good hand of government is necessary. Third, the market fundamentalists in other sectors will need to be quiet for quite a while. We have just seen financial markets rife with moral hazard, agency, and adverse selection problems crash spectacularly. Is this a situation in which we should move health care–also rife with moral hazard, agency, and …
The success of globalization
Massive globalization — a major move towards free market capitalism — has brought over a billion people out of poverty, while sixty years of socialist chaos and violence has failed to convince most of the world that central planning is a very bad way to run any economy.“Ruble†symbolizes pretend money, unconvertible into goods, much as “Finland†symbolizes submission to a hostile power, and “Peso†symbolizes inflation. Globalism has done …
Explanations of the oil price rise
My explanation for high oil prices is the collapse of oil states. Arnold Kling argues that instead the problem is that investors fear the collapse of advanced states, so are reluctant to take their money. My explanation is that oil states are increasingly short of the competence to pump oil, the ability to provide security to people pumping oil, and the credibility to make deals with people who are competent …
US Chamber of commerce protests junk science
The second national climate assessment predicts that the United States will “very likely†experience rising sea levels and increasing droughts, heat waves, intense storms and resulting illness and premature death over the next century as climate change intensifies. But, as is the usual practice with climate “science†, the report fails to make available the evidence that supposedly leads to this conclusion, a gross and flagrant violation of normal and …
Bernanke explains what he is doing wrong
In his speech Governor Ben S. Bernanke observed that if inflationary expectations rise, and the Fed fails to raise interest rates correspondingly, this is unstable. He failed to make the reason for this clear, but the reason is that real interest rates are nominal interest minus expected inflation – so a rise in inflationary expectations causes a fall in real interest rates, causing massive real borrowing – as for example …
Bush rolls back oil prices, MSM in denial
Political correctness is that we should not drill for oil, for more oil will not solve the problem of high and rising fuel prices. Which political correctness the mainstream media firmly endorse. There are multiple bans on oil drilling. Bush ended one of them, which had no immediate effect on oil drilling, for other bans in place. But it had immediate psychological effect. Oil prices immediate dropped about eighteen dollars, …
Solution to the energy crisis
Newt tells it how it is: This crisis was caused by politicians. He tells how to reduce fuel costs in the short run, and the long run. “you want energy now†he tells us. And then he tells us how to get it. How do we solve the energy crisis? Answer. Let businessmen extract oil. Drill here. Drill now. Pay less.
Roots of the energy crisis
The energy crisis happened because of optimistic projections – that gas to liquid and coal to liquid would not be needed until the technology had been improved and the cost brought down, that the dramatic growth in China and India could be accommodated by rapidly expanding conventional oil production. The political elite, unable to introduce a carbon tax because it would directly and visibly hurt people, proceeded to block coal …
Rational Oil Prices
It seems that Arnold Kling has been in Afghan cave during the past six months. He does not seem to think that there has been any bad news on oil supply over the last six months. The recent run-up in oil prices represents a similar puzzle. I think that it’s difficult to tell a story for the rise in crude prices for the last six months that is based on …