Archive for January 14th, 2010

Connection betwen leverage, house prices and consumption

January 14, 2010

FRBSF Economists Reuven Glick and Kevin J. Lansing explain the relationship very clearly in this short note:


RBI warns over teaser rates

January 14, 2010

Though I am posting this late, just couldn’t resist it. I had posted a while ago that Indian banks are not learning lessons from the recent crisis and offering home loans at teaser rates (see this article for the fight between bankers over teaser rates).

RBI Deputy Gov, Usha Thorat in her recent speech speaks on risk management issues. She says teaser rates as one of the risks banks should watch out:

In the area of housing loans, teaser rates are increasingly being offered which is a cause for concern. I hope banks are ensuring that borrowers are well aware of the implications of such rates and the appraisal takes into account repaying capacity of the borrowers when the rates become normal.

Thankfully RBI is talking about it. However, India’s bankers are still not understanding the issue. Their first line of defence is Indian financial system/consumers etc are different. Same was said in 2005 in US as well. 

Well, avoiding these fancy products helped us remain out of trouble at first place. And this is what we were told in times of crisis as well that India does not have such products. How quickly times change. See the number of banks offering these products. It is like a race going on….

Chicago Economists interviews

January 14, 2010

Reading material keeps piling up.

John Cassidy of New Yorker had interviewed Chicago Univ economists in October. There was a buzz in blogosphere when he posted about the interviews on Jan 1, 2010.  But he had not provided transcripts of the interviews

Now he has started posting the transcripts. He plans to release them in stages.

Enjoy the interviews of

More to follow….


More interviews added:

Urbanomics has a very useful summary of interviewed econs ideas.

Financial Crisis Inquiry Commission begins

January 14, 2010

I had pointed about Financial Crisis Inquiry Commission.

The Commission has begun with its inquiry and has a website giving schedule etc. The first hearing was held on 13 Jan 2010 and had leaders of top US Banks speaking – JP Morgan, Bank of America, Goldman Sachs and Morgan Stanley.

Loads to read up…

Fogel optmimstic on China and pessimistic on Europe

January 14, 2010

Robert Fogel of Chicago Univ (and 1993 Nobel winner) is an eternal China optimist. In this FP article he points some startling ideas on Chinese economy (HT Marginal Revolution)

Some forecasts:

  • China is going to be USD 123 trillion economy by 2040! This would be 3 times the economic output of the world economy
  • The per capita income would be around USD 85,000, double that os EU and much higher than Japan and India
  • China will contribute 40% of world GDP compared to US 14% and Europe just 5%  
  • Average Chinese urban dweller would be twice as well-off as the average Frenchman



A list of bubble naysayers

January 14, 2010

Economics of Contempt Blog (HT: Kruman’s Blog) has prepared a list of experts who said there is no housing bubble. He provides links of the experts’ views as well. Quite a long list that one.

Reading the forecasts, the feeling one gets is the overconfidence economists have on their forecasts. Knowing how bad the forecasting record is, they should be adding some disclaimers etc. But all you get to see is just forecasts with high brashness..

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