Archive for May 12th, 2008

Richard Fisher analyses sub-prime crisis

May 12, 2008

Richard Fisher (President of Dallas Fed)  has analysed the subprime crisis and regulatory responses. As usual, it is full of wit and humor and makes for a good, light read. The html version is here and pdf version is here.

A few Fisherisms:

  • Like exotic foods, consumption of new risk products can lead to indigestion, and even allergic reactions. Lately, we have witnessed many allergic reactions—in the form of losses and setbacks—especially among money center banks and other financial institutions.
  • It didn’t stop there. Banks in other countries that had invested in the too-good-to-be-true U.S. housing market through these products began to record large losses. Even some that weren’t directly involved in the U.S. housing sector or these products still felt the repercussions; who could have imagined that house price declines in the U.S. would contribute to a bank run in England?
  • We must have a system where the financial pipes and sprinkler heads that nourish capitalism sustain the fertile lawn that is the American economy. It is the Fed’s duty as lender of last resort to lead the way to restoring the efficacy of the financial system.

Fisher also mentions about Washington Irving’s essay on “Mississippi bubbles” in 1819. Every word is relevant today and it is as if he is talking today. Despite this people say times have changed and this is modern finance


Definition of infrastructure

May 12, 2008

I had sometime back read an article by Vinayak Chatterjee of Feedback Ventures where he said let us define infrastructure first, before we build it.  

I came across this document in Committee on Infrastructure’s website which attempts to do the same.

It first summarises definition of infrastructure from six different sources and then concludes what all is to be included:

(i) Electricity (including generation, transmission and distribution) and R&M of power stations,
(ii) Non-Conventional Energy (including wind energy and solar energy),
(iii) Water supply and sanitation (including solid waste management, drainage and sewerage) and street lighting,
(iv) Telecommunications,
(v) Road & bridges,
(vi) Ports,
(vii) Inland waterways,
(viii) Airports,
(ix) Railways (including rolling stock and mass transit system),
(x) Irrigation (including watershed development),
(xi) Storage,
(xii) Oil and gas pipeline networks.

 And what all it does not include which other sources include (from the table on last page):

  1. Housing
  2. Urban services; as street lighting, Solid Waste Management (SWM)
  3. Mining
  4. Aircrafts
  5. Vehicles, trucks, buses etc.(Road Transport System)
  6. Industrial Park/SEZ
  7. Educational Institutions
  8. Hospitals
  9. Posts

Assorted Links

May 12, 2008

1. Ajay Shah gives his viewpoint on foodcrisis. He also points to some evidence on decoupling

2. TTR counters CK Prahalad

3. IEB points fighting inflation the wrong way 

4. Nudges on is Toyota Prius changing the driving habits? Also read the post on complexity in college aid

5. Rodrik points to the reason behind Italy’s poor performance- exchange rate appreciation

6. PI Blog on role of brands

7. Econbrowser comments on what if we move to a gold standard now

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