Marshall Auerback

Director of Institutional Partnerships
Institute for New Economic Thinking

Auerback has over 20 years of experience in the investment management business. He served as a director and global portfolio strategist for the Canada-based fund management group Pinetree Capital. He also was head of economic research for Madison Street Partners, a Denver-based investment management group, and he worked as an economic consultant to PIMCO, the world’s largest bond fund management group.  In addition, Auerback is a Research Associate at the Levy Economics Institute of Bard College and a Research Fellow for the Economists for Peace and Security. (http://www.epsusa.org)

Previously, Auerback managed the Prudent Global Fixed Income Fund for David W. Tice & Associates and assisted with the management of the Prudent Bear Fund. He also worked as an international economics strategist for Veneroso Associates, which provided macroeconomic strategy to a number of leading institutional investors. Prior to that, Auerback ran an emerging markets fund for Tiedemann Investment Group in New York. He began his finance career as an investment manager at GT Management, focusing on the markets of Japan, Australia, and the Pacific Rim, while based in Hong Kong and then Tokyo.

Auerback graduated magna cum laude from Queen’s University in Canada and received a post-graduate masters degree from Oxford University.  .

My Content

Today is the day. Today the world will learn the definitive answer as to whether Scotland will remain a part of the United Kingdom or launch the first step toward independence.

The most recent polls seem to indicate a narrow margin of victory for the No side, but it's too close to call, especially given the huge turnout and the size of the youth vote (16 is the voting age minimum for the referendum.)

Alex Salmond, leader of Scotland's independence party and the nation’s First Minister, continues to dig his heels over the question of what currency an independent Scotland would use.  Following a debate in Scotland last week in which he was consistently challenged on the point, Salmond continued to insist that there was "no Plan B," and that nothing could stop a newly independent Scotland from continuing its use of the pound.

A showdown has taken place within Italy’s governing coalition.

Events are still unfolding, but the center-left Democratic leadership has given an explicit thumbs-down to the current government, and former Prime Minister Enrico Letta has resigned.   Matteo Renzi, the leader of Italy’s Democrats, says that he hopes to have his new government ready this weekend after nearly two days of talks with all of Italy’s political parties, and expects to form a coalition largely based on the same left-right alliance that previously supported Letta.

Bubbles have become a major focus of discussion in today's financial markets. But very few people actually define what they mean when describing this financial phenomenon.  

In a recent Harvard Business Review blog post, Markus Brunnermeier, an economist at Princeton University and a member of the Institute for New Economic Thinking’s Advisory Board, had a go at it. Brunnermeier defines the leading characteristics of bubbles thusly:

"Bubbles are typically associated with dramatic asset price increases followed by a collapse. Bubbles arise if the price exceeds the asset’s fundamental value."

The global financial crisis of 2008 created the worst recession in the developed world since the Great Depression. Governments had to respond decisively on a large scale to contain the destructive impact of a massive debt deflation. Still, large financial institutions such as American International Group, Bear Stearns, Lehman Brothers, Countrywide Financial, Washington Mutual, Wachovia, Northern Rock, and Landsbanki collapsed. Thousands of small-to-medium financial institutions failed or needed to be rescued. Millions of households lost their retirement savings, jobs, houses, and communities. And numerous non-financial businesses closed.

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During the 1990s, Argentina had been the poster child for Neoliberal policies—they adopted virtually the whole of the so-called “Washington Consensus” agenda lock-stock-and-barrel. They even adopted a currency board. And unlike Euroland (which also adopted something like a currency board as each member adopted a foreign currency—the euro), Argentina would have consistently met the tight Maastricht criteria on budget deficits and debts over that period. The main purpose of the austere budgets and currency board constraints was to kill high inflation. It worked. But, over that period unemployment grew and GDP growth was moderate.

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Since the revival of global capital markets in the 1960s, cross-border capital flows have increased by orders of magnitude, so much so that international asset positions now outstrip global economic output. Most cross-border capital flows occur among industrialized nations, but emerging markets are increasing participants in the globalization of capital flows.

While it is widely recognized that investment is an important ingredient for economic growth, and that capital flows may under certain conditions be a valuable supplement to domestic savings for financing such investment, there is a growing concern that certain capital flows (such as short-term debt) can have destabilizing effects in developing countries.

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Proprietary trading by Wall Street banks precipitated the 2008 financial crisis that resulted in a near 13 trillion dollar bailout by American taxpayers of Too Big To Fail financial institutions.  As early as 2007, Morgan Stanley lost $9 billion dollars due to bullish bets on complex derivatives related to mortgages and in 2008 American International Group famously lost billions of dollars betting on complex derivatives. Similarly, toward the end of 2008, Merrill Lynch lost nearly $16 billion and Deutsche Bank lost nearly $2 billion due to complex bets on risky securities.

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Professor Smithin argues that new economic thinking is not only about new thinking but also about recovering past knowledge from past crises. He talks about the policy response from the 2008 crisis compared to the 1930s. Most crucially, however, he discusses why teaching economics before and after the crisis has not changed; but "business as usual" is not appropriate. He argues that we need to rethink the "consensus" with tools old and new, starting with the original premise of neoclassical economics that barter is not the basis of economic exchange. He also takes issue with the representative agent problem and the proposed solutions.

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Private data is leaked more and more in our society. Wikileaks, Facebook, and identity theft are just three examples. Network defenses are constantly under attack from cyber criminals, organized hacktivists, and even disgruntled ex-employees.