Six “Facts” About Our Debt: Corrections to Robert Solow’s Op-Ed

  In yesterday’s NYTimes, Nobel winner Robert Solow tackled the US debt debate, proclaiming that while it is a serious issue, many Americans are not aware of the facts. See here: Solow is a “neoclassical synthesis” Keynesian, the type of Keynesian economics that used to be taught in the textbooks. He was also on […]

‘Pervasive’ Fraud by our ‘Most Reputable’ Banks

A recent study confirmed that control fraud was endemic among our most elite financial institutions.  Asset Quality Misrepresentation by Financial Intermediaries: Evidence from RMBS Market.  Tomasz Piskorski, Amit Seru & James Witkin (February 2013) (“PSW 2013”). The key conclusion of the study is that control fraud was “pervasive” (PSW 2013: 31). “[A]lthough there is substantial heterogeneity across underwriters, a […]

Great Graphic: Cross Border Capital Flows

This Great Graphic comes from one of the best reports on the global capital markets. For the last several years McKinsey&Company publishes an annual report on it and released this year’s earlier this week. Here is the link.  It is a must-read and it is free. The question it poses this year is whether financial globalization is retreating […]

Environmental Issues that Could De-Rail the Natural Gas Boom

There are two key environmental issues that have the most likelihood of slowing the natural gas boom or, perhaps, redirecting its trajectory: fracking chemicals and fracking water usage. Fracking chemicals: what the frack? Inflamed by dramatic scenes like tap water catching on fire, worries over the effect of fracking on the quality of groundwater have […]

Another Look at Ricardian Equivalence: The Case of the European Union

The so-called Ricardian equivalence suggests that a government will have the same effect on private spending whether it raises taxes or takes on additional debt to finance higher government spending. The logic behind it is that as the government gets more indebted, people would put aside more money in expectation of higher taxes in the […]

Climate Change: Get Ready to Adapt!

World Bank President Jim Yong Kim’s recent Washington Post op-ed “Make Climate Change a Priority” warned that “global warming imperils all of the development gains we have made”.  Jim Kim drew on a recent World Bank report that points to the possibility for global temperatures to rise by 4 degrees Celsius or more by the […]

Foreign Investment Relocates in China and Asia

At the surface, foreign direct investment (FDI) into China has been declining for months. In 2012, it fell 3.7 percent to $111.7 billion, according to the Ministry of Commerce. In January, the drop was 3.7 percent –the lowest level since 2009. Internationally, the decline has been portrayed as a sign of decreasing foreign interest in […]

Using Game Theory to ‘Solve’ Government Spending

“Don’t tax you. Don’t tax me. Tax that fellow behind the tree.” -Louisiana Senator Russell Long. The famous Russell Long quote above reflects a basic truth about politics: Many people want other people’s taxes to go up, but not their own. The same is true for spending: Other programs are wasteful, but not our favorites. […]

Understanding the Plutocrats: Talent vs. Capital, The Illusion of Skill, and the Winner’s Curse

In my spare time, I have been reading Chrystia Freeland’s The Plutocrats. A refreshingly nonjudgmental book, it seeks neither to condemn nor defend the super-rich, but simply to understand them. The author’s brisk, journalistic prose, with references hidden away at the end by page number, belies the fact that she has done her homework in […]

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