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November 15 2009

"The Ghost in the Recovery Machine"

Robert Shiller:

The ghost in the recovery machine, by Robert J Shiller, Commentary, Project Syndicate: The International Monetary Fund’s October World Economic Outlook proclaimed that, “Strong public policies have fostered a rebound of industrial production, world trade, and retail sales”. The IMF, along with many national leaders, seem ready to give full credit to these policies for engineering what might be the end of the global economic recession.
National leaders and international organisations do deserve substantial credit... But one also suspects that world leaders have been too quick to claim so much credit for their policies. After all, recessions generally tend to come to an end on their own, even before there were government stabilisation policies. ...
Economic theorists long ago developed models that describe how recessions end on their own. ... Some of these factors, rather than just the actions taken by governments and multilateral organisations, plausibly played a role in the current economic improvement. Unpredictable human psychology also plays a role. Such factors, indeed, matter very much for the economic outlook, and for judging the success of the recovery programme.
One can start with the stock-market turnaround since March of this year, which has been stunning. ... Moreover, this same sharp turnaround occurred in many countries – and for many assets, including oil prices, gold, and, in some countries, residential real estate.
Any solid understanding of the causes of this turnaround is likely to prove elusive. ... A market boom, once started, can continue for a while as a sort of social epidemic, and can foster inspiring “new era” stories that are spread by news media and word of mouth. The stories themselves help magnify the boom, becoming part of the feedback that sustains it.
The agreements reached at recent G-20 meetings stand as one of these stories, for they suggest a new era of international co-operation and economic professionalism – a narrative that has probably been exaggerated in the psychology of recovery.
The G-20 story is particularly salient in the developing world, for the international recognition that the G-20’s expanded role has given to developing countries is highly resonant psychologically.
Beyond that, stories of highly profitable banks paying huge bonuses to their executives have also inspired people to think that things are not so bad in the business world. Anger at these profits and bonuses only tends to increase the contagion of the story.
But any such speculative boom is inherently unstable... It was, in fact, an excessive speculative boom in the stock market and the housing market that got us into this financial mess in the first place.
To be sure, governments and multilateral institutions made some reasonable attempts to restore confidence. But they did not “engineer” a recovery. They got lucky, and the G-20, as well as the governments that instituted stimulus packages, are currently in a honeymoon period of apparent success.
Where our still-ailing world economy goes from here is as uncertain as the speculative markets that played such an important role in both the financial crisis and the recovery. We can only wish that formulating economic policy were as clear-cut as, say, mechanical engineering. It is not: a host of poorly understood natural cyclical factors play a role, and so do the vagaries of human psychology.

He may not want to give much credit to policy, but I would not have wanted to go through this crisis without the aggressive monetary and fiscal policy measures that policymakers put into place (and given the state of the labor market, even more was and is needed).

Reposted bydarinrmcclure darinrmcclure

January 11 2009

ivan krstić · code culture " How Porsche hacked the financial system and made a killing

Adolf Merckle, one of the world’s richest men, committed suicide yesterday by throwing himself under a train, Bloomberg reports. Financial difficulties, and particularly great losses he suffered on Volkswagen stock, are being cited as the key reason he ended his life: ---- [Merckle's company] VEM was caught in a so-called short squeeze after betting Wolfsburg, Germany-based Volkswagen’s stock would fall. Merckle lost at least 500 million euros on the bets on VW stock, people familiar said on Nov. 18. VEM lost “low three-digit million euros” on VW stock, the company said in November.

October 23 2008

Chomsky on the economy, therealnews 21.10.2008

In part two of their interview, Paul Jay asks Prof. Noam Chomsky to weigh-in on the dominant subject of the day, the economic crisis. While Prof. Chomsky agrees that the current crisis is a very serious one that will have broad implications for the broader society, he points out that the foreseeable Medicare-induced economic crisis will "dwarf" the current one in magnitude. Furthermore, Prof. Chomsky develops his contention that democracy is hindered by unrestrained free markets. While on the other hand, state-restricted markets are democratic by design in that they allow people take control--through their government--of financial institutions to force them to include externalities and risks to the broader population in their decision-making. These factors are such that profit-seeking enterprises will not accommodate them when left to their own volition, given that free markets do not put a price on these externalities.

October 19 2008

Play fullscreen
Hanif Kureshi, ein Dichter plädiert für eine neue linke Ideologie - euronewsde 18.10.2008
Hanif Kureishi ein Mann mit pakistanischem Namen, aufgewachsen in Großbritannien, der sich selbst einfach nur als Schriftsteller versteht. Von seinen zumeist sozialkritischen Werken erschienen auf deutsch u.a. Der Buddha aus der Vorstadt, Mein wunderbarer Waschsalon, Das schwarze Album. Für die Verfilmung seines Romas Rastlose Nähe gab es einen Goldenen Bären der Berliner Filmfestspiele. Luca Vitali besuchte den 54jährigen im Westen von London.
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