November 2011

What a liquidity crisis looks like

Bloomberg's reporters continue their diligent work looking back on the Fed's lending in the subprime crisis. Matt YglesiasYves SmithPaul Krugman, and others have picked up the story. Meanwhile, the world looks ahead to the next development in the eurozone crisis. To read these crises correctly, liquidity should be front and center. It is missing in Bloomberg's work, and it is missing in European policymaking. Read more

Financial (De)Globalization and the European Experiment

Europe is embarked on a grand experiment, managing modern financial crisis without a dealer of last resort, so refusing to follow the lead of the 2008 Fed.  The scientist in me thrills at this opportunity to gather new data from unexplored territory; the citizen in me quails at the brinksmanship, what Martin Wolf has called "just in time, just enough". Read more

Liquidity, Public and Private

A week ago, Mark Carney, chairman of the Financial Stability Board, warned of emerging global consequences of the escalating eurozone crisis.  The problem, he said, is contraction of global liquidity.

What he is worried about, apparently, is disruption of the global funding system as continental European banks retrench.  In normal times, these global banks serve as funding intermediaries, gathering short term funds from all ends of the earth at one price, and lending them on to other ends of the earth at a slightly higher price.  Trouble for these banks means trouble for global credit markets.

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Economics in Uncertain Times

My first TV chat show performance: