Systemic Banking Problem: A Japanese Experience

I have been reading excellent analyses by Chris Whalen on potential systemic banking crisis. I missed the RGE Monitor Panel Discussion, but I enjoyed reading the report by Naked Capitalism. I find Whalen’s and others’ argument that a systemic banking crisis involving many U.S. banks is likely, starting with the failure of the Bank of […]

Oil price fundamentals

I’ve been offering reasons for believing that the flow of funds into commodity investing has contributed to the recent oil price highs. Although I believe this speculation has gotten ahead of fundamentals in the last few months, there is no question in my mind that market fundamentals are the main reason for the broader 5-year […]

How Effective Will Monetary Easing Be? The Bank Lending Channel and the Implications of Increasingly Internationalized Banks

As I noted in a previous post, monetary policy works through various channels, one of which is the “bank lending channel”. Lower policy rates, as witnessed in the past few months and shown below, should induce greater lending. Figure 1: Nominal effective Fed Funds rate (blue), and real (red). NBER-defined recession dates shaded gray. Real […]

Oil prices: Risks and Opportunities

Most analysts attribute the increase in the price of crude oil to the demand by the Asian economies. These high prices spread worries on the Western economies, where the memory of the recessions in the 70s and early 80s, after similar spikes in oil prices, is still vivid. Can these historical episodes be compared? What […]

The Greenspan Gamble

The most notable thing about Treasury Secretary Hank Paulson’s proposed plan for restructuring financial regulation is the expansion of the Federal Reserve into a sort of “Super Fed.” This new Fed would have oversight of all financial markets and firms, including investment banks. It would be responsible for financial market stability and would be expected […]

Does rising government debt signal a return to higher inflation?

The Governor of the Bank of England is currently telling us that the NICE (non-inflationary consistently expansionary) decade is over. A period of low inflation, stable business cycles and a flat profile of low interest rates has come to an end. Rising inflation, triggered by high commodity prices, and financial stress, in the wake of […]

Oil – Is There a Bubble?

There is something puzzling about the price of oil. It is high and rising. I think there are a couple of good reasons why the price is high. First, demand is growing fast (in part because of growing demand from emerging markets), and new discoveries of oil have slowed down. Second, low real interest rates […]

The Credit Crisis: Final Act or Intermission?

[Based on a talk presented on April 29th to a meeting of UK-based CFOs – explaining the references to Britain and focus on Europe.] We have reached a particularly difficult stage in the development of the credit crisis. There are two quite different views of where we’re at. One is that the worst is now […]

Openness and independence

There has been an interesting debate recently in the web pages of the Financial Times regarding what needs to be done to maintain political support for globalization. In his contributions, Larry Summers raised among many other points the issue of whether globalization implies a race to the bottom in terms of regulation, corporate income taxes, […]

How integrated are European financial markets? And what’s trust got to do with it?

Europe’s capital markets are far from integrated. Here is some very innovative research that combines financial integration measures with ‘social capital’. It turns out that the market fragmentation stems in a large part from a lack of trust and confidence in certain regions and nations – things that the EU cannot directly affect. Financial market […]