Archive for the ‘Economist’ Category

What Remains of Milton Friedman’s Monetarism?

July 18, 2017

Robert Hetzel of Richmond Fed has a paper:

From the early 1960s until the early 1970s with the emergence of rational expectations, under the rubric of monetarism, Milton Friedman defined macroeconomic debate. Although the Keynesian consensus that he challenged has disappeared, the current academic literature makes little reference to monetarist ideas. What happened to them? The argument here is that those ideas remain relevant but require translation into terms expressible in modern macroeconomic models and in the monetary policies of central banks, neither of which contain any obvious references to money. Moreover, the Friedman and Schwartz methodology for identifying shocks retains relevance.

Lots of monetary history in the paper..

How New Keynesian economics betrays Keynes

July 14, 2017

Roger Farmer has an interesting essay on evolution of macro thought (HT: Cafe Economics). It is actually an extract from his book Prosperity for All.

He reviews the history of macro thought and says New Keynesians miss a basic point from Keynesian view:

The program that Hicks initiated was to understand the connection between Keynesian economics and general equi­librium theory. But, it was not a complete theory of the macro­economy because the IS- LM model does not explain how the price level is set. The IS- LM model determines the unemploy­ment rate, the interest rate, and the real value of GDP, but it has nothing to say about the general level of prices or the rate of inflation of prices from one week to the next.

To complete the reconciliation of Keynesian economics with general equilibrium theory, Paul Samuelson introduced the neoclassical synthesis in 1955. According to this theory, if un­employment is too high, the money wage will fall as workers compete with each other for existing jobs. Falling wages will be passed through to falling prices as firms compete with each other to sell the goods they produce. In this view of the world, high unemployment is a temporary phenomenon caused by the slow adjustment of money wages and money prices. In Samuelson’s vision, the economy is Keynesian in the short run, when some wages and prices are sticky. It is classical in the long run when all wages and prices have had time to adjust.

Although Samuelson’s neoclassical synthesis was tidy, it did not have much to do with the vision of the General Theory. Keynes envisaged a world of multiple equilibrium unemploy­ment rates where the prevailing rate is selected by the propen­sity of entrepreneurs to take risks. He called this propensity animal spirits.

In Keynes’ vision, there is no tendency for the economy to self- correct. Left to itself, a market economy may never recover from a depression and the unemployment rate may remain too high forever. In contrast, in Samuelson’s neoclassical synthe­sis, unemployment causes money wages and prices to fall. As the money wage and the money price fall, aggregate demand rises and full employment is restored, even if government takes no corrective action. By slipping wage and price adjust­ment into his theory, Samuelson reintroduced classical ideas by the back door— a sleight of hand that did not go unnoticed by Keynes’ contemporaries in Cambridge, England. Famously, Joan Robinson referred to Samuelson’s approach as “bastard Keynesianism.”

The New Keynesian agenda is the child of the neoclassical synthesis and, like the IS- LM model before it, New Keynesian economics inherits the mistakes of the bastard Keynesians. It misses two key Keynesian concepts: (1) there are multiple equilibrium unemployment rates and (2) beliefs are funda­mental. My work brings these concepts back to center stage and integrates the Keynes of the General Theory with the mi­croeconomics of general equilibrium theory in a new way.

Hmm..

Lots more there..

How economics became a religion…

July 13, 2017

Another piece berating economics and its soothsayers. It is a book extract from a book:

Although Britain has an established church, few of us today pay it much mind. We follow an even more powerful religion, around which we have oriented our lives: economics. Think about it. Economics offers a comprehensive doctrine with a moral code promising adherents salvation in this world; an ideology so compelling that the faithful remake whole societies to conform to its demands. It has its gnostics, mystics and magicians who conjure money out of thin air, using spells such as “derivative” or “structured investment vehicle”. And, like the old religions it has displaced, it has its prophets, reformists, moralists and above all, its high priests who uphold orthodoxy in the face of heresy.

Over time, successive economists slid into the role we had removed from the churchmen: giving us guidance on how to reach a promised land of material abundance and endless contentment. For a long time, they seemed to deliver on that promise, succeeding in a way few other religions had ever done, our incomes rising thousands of times over and delivering a cornucopia bursting with new inventions, cures and delights.

This was our heaven, and richly did we reward the economic priesthood, with status, wealth and power to shape our societies according to their vision. At the end of the 20th century, amid an economic boom that saw the western economies become richer than humanity had ever known, economics seemed to have conquered the globe. With nearly every country on the planet adhering to the same free-market playbook, and with university students flocking to do degrees in the subject, economics seemed to be attaining the goal that had eluded every other religious doctrine in history: converting the entire planet to its creed.

Yet if history teaches anything, it’s that whenever economists feel certain that they have found the holy grail of endless peace and prosperity, the end of the present regime is nigh. On the eve of the 1929 Wall Street crash, the American economist Irving Fisher advised people to go out and buy shares; in the 1960s, Keynesian economists said there would never be another recession because they had perfected the tools of demand management.

More than the predictions going wrong, it is how economics has come to dictate most things we do. If it makes economics sense, there is a point in doing something else dump it..

Econs do their best work when there is humility and limited hubris:

Economists arguably do their best work when they take the stories we have given them, and advise us on how we can help them to come true. Such agnosticism demands a humility that was lacking in economic orthodoxy in recent years. Nevertheless, economists don’t have to abandon their traditions if they are to overcome the failings of a narrative that has been rejected. Rather they can look within their own history to find a method that avoids the evangelical certainty of orthodoxy.

In his 1971 presidential address to the American Economic Association, Wassily Leontief counselled against the dangers of self-satisfaction. He noted that although economics was starting to ride “the crest of intellectual respectability … an uneasy feeling about the present state of our discipline has been growing in some of us who have watched its unprecedented development over the last three decades”.

Noting that pure theory was making economics more remote from day-to-day reality, he said the problem lay in “the palpable inadequacy of the scientific means” of using mathematical approaches to address mundane concerns. So much time went into model-construction that the assumptions on which the models were based became an afterthought. “But,” he warned – a warning that the sub-prime boom’s fascination with mathematical models, and the bust’s subsequent revelation of their flaws, now reveals to have been prophetic – “it is precisely the empirical validity of these assumptions on which the usefulness of the entire exercise depends.”

Leontief thought that economics departments were increasingly hiring and promoting young economists who wanted to build pure models with little empirical relevance. Even when they did empirical analysis, Leontief said economists seldom took any interest in the meaning or value of their data. He thus called for economists to explore their assumptions and data by conducting social, demographic and anthropological work, and said economics needed to work more closely with other disciplines.

Leontief’s call for humility some 40 years ago stands as a reminder that the same religions that can speak up for human freedom and dignity when in opposition, can become obsessed with their rightness and the need to purge others of their wickedness once they attain power. When the church retains its distance from power, and a modest expectation about what it can achieve, it can stir our minds to envision new possibilities and even new worlds. Once economists apply this kind of sceptical scientific method to a human realm in which ultimate reality may never be fully discernible, they will probably find themselves retreating from dogmatism in their claims.

Paradoxically, therefore, as economics becomes more truly scientific, it will become less of a science. Acknowledging these limitations will free it to serve us once more.

This blog pointed to the Leontief lecture just a few days ago.

20th anniversary of Start of Asian Crisis: Is China making the same mistakes?

July 12, 2017

Prof Barry Eichengreen points to several things South East Asian Countries have done since the 1997 crisis.

For starters, the crisis countries have ratcheted down their investment rates and growth expectations to sustainable levels. Asian governments still emphasize growth, but not at any cost.

Second, Southeast Asian countries now have more flexible exchange rates. None is perfectly flexible, to be sure, but the region’s governments have at least abandoned the rigid dollar pegs that were the source of such vulnerability in 1997.

Third, countries like Thailand that were running large external deficits, heightening their dependence on foreign finance, are now running surpluses. Running surpluses has helped them accumulate foreign-exchange reserves, which serve as a form of insurance.

Fourth, Asian countries are now working together to ring-fence the region. In 2000, in the wake of the crisis, they created the Chiang Mai Initiative, a regional network of financial credits and swaps. And now they have the Asian Infrastructure Investment Bank to regionalize the provision of development finance as well.

Ironically, the more things change the more they remain the same. In 1997, China was not a risk. This time it is as it seems to be following the same model followed by SE Asian countries 20 years ago:

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Making sense of Argentina ‘s 100 year bond offer

July 5, 2017

This blog pointed earlier how Argentina managed to sell a 100 year bond recently despite such a poor fiscal history.

Carmen Reinhart points this is mainly due to search for yield:

At the end of the day, this is not about the character of the country, the maturity of the debt, or the size of the issue. It is about the coupon rate on the offering, 7.9%, which is considerably higher than most other plausible alternatives. Just as water finds its level in nature, capital finds its level in international finance: when interest rates are low in core markets, it flows to higher-yielding alternatives.

Without question (and without much precedent), interest rates are extraordinarily low in advanced economies, pulled down partly by the slowdown in longer-term output growth, but also as a consequence of official efforts. Two of the “big three” central banks, the European Central Bank and the Bank of Japan, have lowered their policy rates into negative territory and continue to add to their balance sheets. As for the third, the US Federal Reserve’s slow motion monetary tightening has just put the federal funds rate above 1%, and plans to pare the Fed’s asset holdings appear to be in the works. As the chart shows, almost one half of GDP in advanced economies is produced where policy rates are below 0.5%. Only a sliver of activity takes place where the policy rate is above 1.5%.

Official measures extend beyond the realm of central banks, too. In terms of the huge stock of foreign exchange reserves held worldwide, the public sector holds more US Treasury securities than the private sector.

These distortions encourage investors in money centers to scan the horizon for more attractive destinations. Argentina got their attention, but so, too, did Cyprus, another country that recently had a financial crisis. Likewise, capital has flowed into Iceland at such a rapid clip that the International Monetary Fund felt obliged to warn that, “overheating risks are a clear and present concern.”

She is after all the co-author of the book which has become very important four words in economics: This time is different..

Being an economics rebel like Prof. Deirdre McCloskey…

June 29, 2017

Superb interview of Prof McCloskey who has challenged most aspects of current economic teaching and research.

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Where does World Health Organisation get its economic advice?

June 15, 2017

From nobody and hence it needs a chief economist urgently.

Amanda Glassman has a post on how WHO messes up on basic health economics. She also links to this more detailed letter by health economics expert citing many mistakes made by WHO.

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When an Australian economist’s piece on monetary transmission is discussed in Parliament..

June 7, 2017

It does not happen too often when Parliamentarians discuss an economist’s piece, even if the hearing is on economic matters.

So it is interesting when Prof. Abbas Valadkhani of Swinburne University of Technology writes this piece in Oct 2016 on how banks delay rate cuts following rate cut by central bank. He shows via research that these delayed rate cuts help these banks make money:

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The three kinds of economist jokes…:-)

June 2, 2017

Michael Munger has a great post on economist humor. He is apparently writing a paper to on the topic and asks to send jokes.

Mark Twain said, in Pudd’nhead Wilson’s New Calendar, that “Man is the only animal that blushes. Or needs to.” Our propensity to tell, or enjoy, jokes seems to parallel this need to recognize that we don’t always live up to our inflated sense of our own importance.

Problems of inflation are often studied by economists. Having myself been catechized in that church, I am still a bit sensitive to the particular branch of humor called “economist jokes.” You’ve probably heard them, often along the lines of “Economists were invented to make the weatherman feel better about his predictions.”

Why do economist jokes exist?I’ve been working, with my Duke colleague Geoffrey Brennan, on a paper on “economist jokes.” We are trying both to catalog and to explain the phenomenon of economist jokes. (If you know any good ones, please do send them along!)

In this essay, I will summarize the reasons we have come up with to explain why economist jokes exist, and to give an example of each of the three “types” of economist jokes that we have identified.

One could object that our theory is too abstract, or that our jokes are not funny, but c’mon, we’re economists!

Meanwhile, he says there are three kinds of economist jokes: funny, insightful and mockery. There is thin line of difference between the three categories. For instance insightful:

A joke may contain no unexpected alteration in point of view at all, but simply be intended to encapsulate or aphorize some feature of the economics profession. Whether this is “funny” to the listener may depend on whether that insight is recognizably true.

Here it’s worth noting that the truth may sometimes be exaggerated, which may make it even more true as a general description. Of course, the things that are “true” of economists are never true of all, and may not even be true of most real economists. But the exaggeration of a quality that all economists recognize can be the basis of amusement.

One of my favorite “insightful” jokes might also contain elements of mockery (although I must admit almost no one finds it very funny). The joke goes like this:

Three friends  –  a priest, a psychiatrist, and an economist  –  decide to play a round of golf. They get behind a *very* slow two-some, who, despite a caddy, are taking all day to line up their shots and four-putting every green, and so on. By the eighth hole, the three men are complaining loudly about the slow play ahead. The priest says, “Holy Mary, I pray that they should take some lessons before they play again. Standing around this much is a sin against God!” The psychiatrist says, “I swear there are people that like to play golf slowly, as a passive-aggressive reaction to their hatred of their mothers.” The economist says, “I really didn’t expect to spend this much time playing a round of golf. This is costing me a fortune.”

By the ninth hole, they have had it with slow play, so they tee off while the group in front is still on the fairway. Shouting “FOUR!” they all three hit, scattering the other golfers willy-nilly. Almost immediately, the course marshal comes up on his cart and admonishes the impatient threesome. “Those two guys are blind! They are firefighters who lost their eyesight saving people in a fire. Show a little respect!”

The priest is mortified; he says, “Here I am a man of the cloth and I’ve been swearing at the slow play of two blind men.” The psychiatrist is likewise also mortified; he says, “Here I am a man trained to help others with their problems and I’ve been acting like someone with a neurotic compulsion.” The economist stares at the ground for a moment, and then tells the marshal: “Listen, this is a terrible situation, and I feel awful that I didn’t see this before. Tell those good men that next time they should play at night.”

The point being that the priest and the psychiatrist are mostly concerned about their own socially embarrassing action, but the economist is concerned about the social optimum. It would be a Pareto-improvement, at least weakly, for the blind men to play at night. They would be no worse off, and the costs of the slow play would be eliminated since only blind people would be willing to play at night. Economists are concerned about the efficient allocation of resources, and much less about the distributive consequences of that allocation.

Does that mean that economists are “bad people?” You can hear the joke that way (and many people do consider this joke to be mockery in the negative sense). I don’t think, however, that it is necessarily a bad thing to think in terms of efficiency.

Regardless, there really is an insight to be had about the way that economists think.

Hmm.. 🙂

Then there are jokes which mix all three called portmanteau jokes.

Do send the jokes to Mr. Munger and please mark e a copy as well.

 

The World Bank has bigger problems than bad writing…

May 31, 2017

Paul Romer recently raised a storm over wanting World Bank econs to wrote better but got sidelined. I mean how can you teach “the econs” from “The Bank”? Romer should have known better.

Noah Smith says problems are deeper than writing:

A picture is beginning to emerge of global financial institutions that are too hidebound and conservative. Faced with changes in both the global economy and economists’ understanding of recessions, both the World Bank and the IMF have too often resisted change rather than embrace it. It’s worth wondering if the root of the problem comes from the culture of economics.

Economists are, in general, an insular and hierarchical bunch. They are used to having the quality and value of their work judged only by other economists. The outside world is expected to pay economists’ salaries and listen to their advice, but not to question the value of what they do. But when this ivory-tower approach is applied to real-world organizations, the result can be unacceptable institutional inertia.

Perhaps it was this insular culture, rather than just bad writing, that Romer had really intended to shake up. If so, the deck was stacked against him from the start. Making economists open up and engage with the wider world — and make themselves vulnerable to criticism by intelligent outsiders — may be a task too great even for a famous and brilliant individual like Romer.

Nice bit…

 

Economic ideas you should forget

May 30, 2017

This is the title of a new book by Prof Bruno Frey (who has the title of Permanent Visting Professor??) and David Iselin.

They explain some basic ideas here:

Economics and the human instinct for storytelling

May 29, 2017

Robert Shiller has a nice essay on the topic:

I’m starting now, with my more recent work, to think that we have to look at the humanities as well. There is something difficult to formalize about human beings, but something that we nonetheless have to understand, and I think one way to do that is with an approach that I’m calling “narrative economics”: taking economics and adding the study of the narratives that people transmit. 

The human species, everywhere you go, is engaged in conversation. We are wired for it: the human brain is built around narratives. We call ourselves Homo sapiens, but that may be something of a misnomer—sapiens means wise. The evolutionary biologist Stephen Jay Gould said we should be called Homo narrator. Your mind is really built for narratives, and especially narratives about other humans. That is why advertisers tend to focus not on a product itself, but rather on somebody doing some human action related to the product.

Narratives are contagious: they spread from one person to another. Some narratives disappear quickly; others can last a long time. I think of a narrative as a gem, something that you heard somewhere, and you think, I’ll remember that next time I’m in a conversation. I’ll use that. I’ll say it. I’ll try to present it right because I want it to have the effect that it had on me. That is a narrative. Narrative can, in the parlance of the internet, go viral. 

Hmm…

Don’t Be “a jibbering idiot”: Economic Principles and the Properly Trained Economist

May 26, 2017

A must read short paper by Prof Peter Boettke of George Mason Univ.  It is actually a speech given at 42nd Annual Meetings of The Association for Private Enterprise, Hawaii.

He calls to bring back history into economics (how many such calls will be made to a profession and yet be ignored):

Economics, properly understood, makes sense out the complex web of historical relations that constitute reality, namely by utilizing economic theory. Economics without price theory is not economic theory, and measurement without theory isn’t empirically meaningful. However, graduate students are being increasingly trained in sophisticated procedures of optimization and statistical testing, remaining largely ignorant of economic theory as a tool to understanding economic history. This address is a renewed call for my fellow economists to continue to instill in their teaching the beauty of economic theory, as well as the empirical importance of economic history. In short, economic teaching and training must instill an understanding of economic forces at work, and properly done, instills the principles that constitute a golden key that unlocks the deepest mysteries in the human experience. Without learning the governing dynamics of human action and the mechanisms that produce the social cooperation under the division of labor, modern civilization will be left undefended against the fallacious claims that market processes are exploitative, monopolistic, and unfair. 

It has some important lessons and comments from late Prof Buchanan as well.

Boettke says given all the noise about economics training, it is basically about 8 basic principles:

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How Paul Romer has been sidelined in World Bank due to war over words and usage of ‘and’…

May 26, 2017

Interesting piece on politics of economic research and grammar usage  in World Bank.

The World Bank’s chief economist has been stripped of his management duties after researchers rebelled against his efforts to make them communicate more clearly, including curbs on the written use of “and.”

Paul Romer is relinquishing oversight of the Development Economics Group, the research hub of the Washington-based development lender, according to an internal staff announcement seen by Bloomberg. Kristalina Georgieva, the chief executive for the bank’s biggest fund, will take over management of the unit July 1.

Romer will remain chief economist, providing management with “timely thought leadership on trends directly affecting our client countries, including the ‘future of work,’” World Bank President Jim Yong Kim said in the note to staff dated May 9.

Romer said he met resistance from staff when he tried to refine the way they communicate. “I was in the position of being the bearer of bad news,” he said in an interview. “It’s possible that I was focusing too much on the precision of the communications and not enough on the feelings my messages would invoke.”

It’s unusual for the World Bank’s chief economist, a role once occupied by heavyweights such as Stanley Fischer and Lawrence Summers, not to run the Development Economics Group, known as DEC, which publishes original research, develops the bank’s forecasts and oversees its data. The move raises questions about how much freedom the bank’s economists will have to do outside-the-box research on policies to help the world’s poorest.

Hmm..

How the cold war led CIA to promote government financed human capital theory..

May 18, 2017

Fascinating piece by Prof. Peter Fleming of Cass Business School.

We in economics rarely figure how the guys at the top push certain ideas onto us. He says human capital is one such idea. The idea emerged as Profs. Theodore ‘Teddy’ Schultz and Milton Friedman debated how to beat USSR in the ideas battle during Cold War.

USSR announced how it will smash capitalist system by pushing state driven growth in agri and industry. The question was how should US respond?

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Should Walmart be allowed to get into banking?

May 17, 2017

Prof Lawrence White of Stern School has a piece on Walmart entry into banking. He says we should actually ask the following question: Why shouldn’t Walmart get into banking?

By the way I also learnt from the article that the retail giant entered banking in Canada and Mexico. In Mexico it sold off its banking business in 2014. The one in Canada continues. The issue is whether it should be allowed in America as well.

Prof White says:

One question to ask might be, “Why should Walmart be allowed to enter banking?” But a more relevant question would be, “Why shouldn’t Walmart be allowed to enter banking?” 

After all, the U.S. economy is generally market-oriented, and entry is generally recognized as potentially beneficial for consumers, as entrants can bring new ideas, innovations, and efficiencies to the market. Of course, incumbents usually don’t like the idea of entrants’ disrupting the status quo; and often those incumbents lobby for regulation and/or legislation that creates barriers to entry. But, for most markets, the presumption in broad U.S. economic policy is that entry should be encouraged—or at least, that policy should be neutral between incumbents and entrants—so that the benefits of entry can be enjoyed by consumers.

Of course, banking is special—as the regular readers of this blog are well aware. And how the specialness of banking and the presence of Walmart in banking can be reconciled must be addressed, and will be addressed below.

But first, consider what the entry of Walmart into banking might well achieve: Walmart is well known for providing reasonably priced goods to low- and moderate-income households. Its position as the largest company in the United States—as measured by sales and by employment—is a testament to that reputation.

But it is exactly this demographic group—low- and moderate-income households—that is most in need of reasonably priced financial services. The percentage of U.S. households that are unbanked (i.e., do not have a bank account) or underbanked (i.e., have an account but rely on non-bank providers for some financial services and products) has been a longstanding policy concern. The most recent data (from a FDIC report that covers 2015) in this regard—based on a survey of more than 36,000 households nationwide—show that 7% of all households were unbanked and an additional 20% of all households were underbanked. Unsurprisingly, the percentages are substantially larger for low- and moderate-income households (see table)

Hmmm.

The post also has a interesting discussion on the complex financial regulation setup in US:

So, how would the entry of Walmart—and, presumably, other non-financial companies that are interested in entering banking—fit into that system of prudential regulation?

The crucial concept is that the “Walmart Bank” that would provide banking services to the public would be organized as a separate subsidiary of the parent Walmart company. In essence, the parent Walmart company would be a bank holding company (BHC), which is a common ownership structure for U.S. banks. The Walmart Bank subsidiary would be expected to abide by all prudential regulations—including adequate net worth (capital) requirements—that apply to banks.

…..

However, because it is relatively easy for the owners (including BHCs) of a bank to drain the bank of its assets—for example, by paying excessive dividends to its owners, or by making loans to the owners that are not repaid, or even by paying excessive prices for any materials that it buys from the owners—it is essential that any transactions between the bank and its owners be on arm’s-length terms. U.S. bank regulators have long been aware of this danger of the draining of a bank by its owners and have rules in place (which are embodied in Sections 23A and 23B of the Federal Reserve Act) that insist on this arm’s-length standard.

Current U.S. banking policy has much of this story right.  But where policy has gone “off the rails” is the insistence that a BHC cannot be engaged in commerce—that is, in non-financial services activities. This restriction on scope was embodied in the Bank Holding Company Acts of 1956 and 1970 and remains established policy for banks and banking in 2017. Its persistence as policy is more a testament to the lobbying strength of the incumbent bankers (who clearly prefer less competition) rather than to a concern about the economic welfare of consumers. It also yields the economically absurd result that it is okay for a local car dealer to own a bank (so long as the dealer doesn’t form a BHC that involves the car dealership); but it is not okay for AutoNation (a publicly traded company that operates hundreds of car dealerships) to own a bank.

Until 1999 there was a potential way around this no-commerce restriction on the activities of a holding company: the holding company of a savings and loan (S&L or thrift) institution faced no such restriction, and at various times companies such as the Ford Motor Company, Fuqua Industries, Weyerhaeuser, ITT, Gulf & Western, Household International, and Sears, Roebuck have owned S&Ls via the formation of thrift holding companies.

In the middle of the 1990s, Walmart decided to try to enter banking by becoming a thrift holding company. However, before Walmart was able to become a thrift holding company, the Gramm-Leach-Bliley Act of 1999 (which was primarily focused on allowing commercial banks—via BHCs—to enter investment banking) forbade the creation of any new thrift holding companies that could engage in commerce. It also restricted the sale of an existing thrift holding company to a non-financial company, such as Walmart.

There was a second, more limited way around the “no commercial owner” restriction: a few states—most notably Utah—offered “industrial loan company” (ILC) charters that allowed a commercial firm to own a financial institution that could issue deposits and make loans and thus could function as a bank. But in order to operate, the ILC would need to obtain deposit insurance from the FDIC.

Walmart duly obtained a Utah ILC charter and in 2005 applied for FDIC deposit insurance. In 2007 Walmart withdrew its application after it was clear that the FDIC would not grant it deposit insurance. Further, the Dodd-Frank Act of 2010 placed a three-year moratorium on the granting of deposit insurance to any new (or newly acquired) ILC. Although the moratorium expired in 2013, bank regulators appear to have “gotten the message” that the commerce-finance barrier should remain intact.

Another example of how despite best intentions, regulations leave many gaps to be filled.

But overall a good discussion about many aspects of economics and finance..

Reading and Listening to Dead Economists…

May 16, 2017

Good friend Niranjan once told me how at a conference on so called new economics. To his shock and amusement,  none of what they were saying was new but old economics!

In the same spirit, Jeff Deist of Mises Institute says we should read and listen to dead economists:

We don’t revere dead economists to maintain their place in some academic hierarchy, or to satisfy an atavistic desire for an unchanging intellectual order. We revere them because their ideas still have purchase, because their work yields knowledge that is sorely needed today. We read them and promote them in order to understand the world as it is, filled with billions of purposeful but often irrational human actors. We need dead economists to save us from ourselves and to refute the stubborn myths of collectivism. We need them most of all because their work and their insights are far superior to those of most economists alive today. There is no “New Economics,” only new academic work that painstakingly advances the the knowledge bequeathed to us.

Totally agree!

What Nassim Taleb can teach us: The importance of having skin in the game..

May 3, 2017

Prof. Jeff Deist points to lessons from Nassim Taleb.

Most advice from the economic elite causes least amount of damage to them when the advise goes wrong:

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Why Europe still needs cash…

May 3, 2017

Yves Merschodf European Central Bank argues why Europe still needs cash.

He says there are 3 camps which argue for digital payments. However, their arguments are off the curve:

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Joan Robinson: Solutions offered by economists are no less delusory than those of the theologians

May 2, 2017

From Economic Sociology blog. How stalwarts of economics questioned the value of economics:

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