The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. – F.A. Hayek
Posted in Financial Institutions on May 26th, 2011
So, I am really wishy-washy about what I think of securitization. In many respects, I appreciate that it allocates risk to those most able to bear it, it seems to expand the amount of liquidity in certain markets, and used properly can be an effective way for firms to raise money without relinquishing certain rights [...]
Posted in Financial Institutions, Government Gone Wild on Mar 15th, 2010
I am reading Reinhart and Rogoff’s excellent book on financial crises. In it, they point out that emerging markets suffer from what they call “debt intolerance” – you can get into serious troubles even when you are running what seem to be low levels of debt. To illustrate they show that 50% of defaults on [...]
Posted in Behavior, Financial Institutions on Jan 23rd, 2010
The average nominal price for a share of stock on the New York Stock exchange has been about $35 since the Great Depression. Read more about why here (gated).
Posted in Financial Institutions, Immigration, Regulation, Unintended Consequences on Jun 28th, 2009
New institutions like private stock markets emerge. It will be entertaining to watch the dogs in DC chasing their tails after they institute their new financial institution regulatory overhaul, and when they try to regulate hedge funds, derivatives, money funds and more. A key point from the article: Besides the economy, startup investors say the [...]
Posted in Competition, Financial Institutions, Price System, You Can't Have it Both Ways on Mar 3rd, 2009
FDR and his Administration aggressively promoted the passage of the bill that included Regulation Q. In general, this regulation put a limit on the interest rates that banks could pay on deposit accounts (to zero percent). Why would the government enforce such a regulation? Because the omniscient planners thought that they could direct resources in [...]
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