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Brad DeLong on the Crisis
EconLog: Library of Economics and Liberty —
He writes , In normal times, our models predict, with the ability to diversify portfolios that exists today the risk discount on assets like corporate equities should be around 1% per year. It is more like 5% per year in normal times -- it is more like 10% per year today. Read the whole thing. I give Brad a lot of credit for steering clear of IS-LM analysis and trying to re-think macro from the ground up. In my important ...
Brad DeLong on Larry White
Marginal Revolution —
... financial accelerator-that is the important part of the story. $2 trillion shocks to global wealth do, after all, happen every several years, everytime there is a recession or a big rise in the prices of natural resources. But financial distress of the magnitude we see today happens once a century. Since the Bank of England developed its lender of last resort doctrine in the 1830s, we have only had two episodes this bad: the Great Depression and today. Here is the whole essay, interesting throughout. Brad is also blogging parts of the General ...
Liquidity, Default, Risk
J. Bradford DeLong's Grasping Reality with All Eight Tentacles —
We are live at Cato Unbound:
Cato Unbound: Liquidity, Default, Risk:
Brad DeLong on the Crisis
CrossingWallStreet.com —
From Cato Unbound, Professor DeLong jumps to the heart of the matter.
Things are even worse as far as the risk discount is concerned. Our models predict that in normal times, with the ability to diversify portfolios that exists today, the risk discount on assets like corporate equities should be around 1% per year. It is more like 5% per year in normal times — and more like 10% per year today. And our models for why the risk discount has taken such a huge upward leap in the past year and a half are little better than simple handwaving and just-so stories. Our ...
Liquidity Discount versus Time Preference
Economist's View —
<p>HTML clipboard</p> Nick Rowe disagrees with Brad DeLong:
Liquidity, Time Preference, Brad DeLong, and the missing $20 trillion,
Worthwhile Canadian Initiative: Brad DeLong has an excellent short
essay on the financial crisis. ... I disagree with one part
of it:
Liquidity Discount: The cash flowing to capital arrives in the present rather
than the future, and people prefer — to varying degrees at different times — the
bird in the hand to the one in the bush that will arrive in hand next ...
links for 2008-12-09
Economist's View —
... New Jobs for Women? - NYTimes.com
The Sticky Money Wage Keynes - Brad DeLong
"The Labor Market Is Not a Partial-Equilibrium Market" Keynes - Brad DeLong:
Assessing the Potential for Instability in Financial Markets - FRB: Kroszner
Restoring Financial Intermediation: The Role of Regulators - FRB: Kohn
Why "philosophy of social science"? - Understanding Society
Liquidity, Default, Risk - Brad DeLong
No Further Questions, Your Honor
EconLog: Library of Economics and Liberty —
... , I expressed my suspicion that CDS are the explanation for the mysterious multiplier in this crisis--the one highlighted by Brad DeLong . Salmon says that credit default swaps have "other uses" than price discovery. Those other uses seem to me to consist primarily of creating systemic risk and huge swings in liquidity preference in response to revaluation of out-of-the-money put options.
Does Gravity Kill?
EconLog: Library of Economics and Liberty —
... this line from Larry White: "One can't explain an unusual cluster of errors by citing greed, which is always around, just as one can't explain a cluster of airplane crashes by citing gravity." Soon afterward, Brad DeLong retorted : Larry White writes that those who blame the crisis on greed are wrong because "greed... is always around" and you cannot explain a variable result by a constant cause "just as one can't explain a cluster of airplane crashes by citing gravity." I say that the same is true of the CRA. It has been around in more-or-less its current form for a ...
