Debt revamps hindered by credit default swaps Dealscape

Chrysler files bankruptcy.  Let's be clear about who is responsible here.  It is the banks, bondholders, and Wall St. that created the derivatives and Credit Default Swap (CDS) monster.  Derivatives have already created the current economic depression (Bear Stearns, Lehman, Merrill, etc).  Now the presence of CDS's distorts the normal workings of a market economy … Continue reading Debt revamps hindered by credit default swaps Dealscape

GM: Some Bondholders Want Bankruptcy – BusinessWeek

Business Week catches up to Econproph from last month. The barriers to getting a deal done with GM bondholders, and negotiating away enough of that debt to strike a deal and avoid a planned, government-assisted bankruptcy, remain very big, with five weeks to go before the deadline. ...And second, some of the bondholders own credit … Continue reading GM: Some Bondholders Want Bankruptcy – BusinessWeek

Using Anti-trust to remedy “too big to fail”

Simon Johnson, along with Joseph Stiglitz, and Thomas Hoenig argued yesterday in hearings that we need to break-up "too big to fail" banks. I heartily agree. But of course our argument, both in the Atlantic and more broadly, is not against finance per se. In fact, we’ve received some strong expressions of support from within … Continue reading Using Anti-trust to remedy “too big to fail”

Macro: an awful mess today

I was not alone.  Apparently Tim Harford of was also confused and disappointed while learning the modern macro models and theories.  I however figured it was a bunch of nonsense.  The assumptions made by modern macro models, particularly the Rational Expectations stuff of New Classical and New Keynesian theory are the problem.  By making … Continue reading Macro: an awful mess today

Krugman: Make Banking Boring

If the real economy, the economy of making goods and services that improve people's lives is to recover, we need to make banking boring again.  We need to focus on how to create goods, services, productive processes and real businesses.  These means giving up the gin, poker, and roulette games of high finance.  It will … Continue reading Krugman: Make Banking Boring

Mind the Wage Gap

The real roots of the current crisis are structural changes in the American economy in the last generation.  We continued to fuel "prosperity" from increasing consumption of the middle and upper classes.  But, the during this period the middle class saw flat real incomes. To keep increasing our lifestyle, we had to borrow.  Why? Because … Continue reading Mind the Wage Gap

The definition of depression and recession

A "recession" is actually well-defined.  A recession's start and end are officially (in the US) declared by the National Bureau of Economic Research.   A "depression", though is more subjective.  Personally I think we are now in a depression, but not one as big as the Great Depression --maybe we should call it the "little Depression" … Continue reading The definition of depression and recession