A happy ending to the current economic recession

History shows the difficulty of predicting the short-term path of economic or political events.  However, we can often see the medium-term with greater clarity.  In January 1942 none could forecast the events of the next 44 months, but it did not take an expert to see that the US would defeat Japan.  So it is with the current economic down cycle in America.

This series describes (see the list at the end) how we have begun to reduce the massive debts the US private sector has accumulated over the past two generations.  As I said here, there are only four ways to get rid of one’s excess debt (that, debt that cannot be repaid):

1.  Growth:  given time and rapid wage growth, the debt burden becomes manageable.  We pay it off ever more easily as incomes grow.  That was the dream solution to America’s high levels of household debt and large long-term government obligations.  It burst in 2000, and will not return in time to help us.

2.  Inflation, reducing the real weight of our debt.  This requires two things.  First, real growth in wages (no signs of this).  Second, either the cooperation or blindness of bond investors — they must either accept negative real after-tax yields, or remain oblivious to rising inflation.  The consequences are severe if our creditors (domestic and foreign) rebel.

3.  Debt can burn off the hard way as debtors default on their loans.  Both recessions and declining home prices drive defaults (involuntary and voluntary, respectively).  This is equivalent of surgery without anesthesia, resulting in bankruptcies, homelessness, decaying neighborhoods, and bank failures.

4.  Socialization of the debt.  The government can spread the burden of debt, in many different ways (that so many of our creditors are foreigners makes this more attractive).

  • They can legislate to change contracts (e.g., mortgages):  reducing interest rates and payment terms, preventing or slowing foreclosures.  This spreads the debt burden from debtors to creditors.
  • They can change the rules of the bankruptcy courts, with the same result as above – spreading the debt burden from debtors to creditors.
  • They can directly intervene in the markets, extending loans (absorbing the resulting losses) or buying property from debtors or creditors (e.g., as the Resolution Trust Company did after the commercial real estate bust in the early 1990’s.)

Socialization is the seemingly easy path.  Done well, we have reforms like those Solon instituted for Athens — laying the foundation for its future greatness.  Done poorly, we have increased moral hazard leading to another cycle of rising debt and speculation – except that the next crash will imperil a larger part of the society, or even all of it. 

It’s all about choice.  Every downturn gives us the opportunity to determine what America will become.  We weigh our fidelity to our principles, our history, our forefathers — vs. our ability to collectively withstand pain (financial, social, political).  These are collective decisions, because all large-scale economic events have a decisive political component. 

Speculation about the future

Inflation is impractical (for reasons too complex to discuss in this post).  Large-scale defaults would likely lead to a deflationary collapse of our financial system.  The government will not allow that to happen as the consequences would be apocalyptic.  I believe that instead we will socialize the debt, the least-painful and most operationally feasible alternative.

Not all will agree.  Robert Taft, and Andrew Mellon will have their modern equivalents, advocating the hard path that leads to long-term prosperity.  President Hoover wrote in his Memoirs that Mellon, as Secretary of the Treasury, had

… only one formula:  liquidate labor, liquidate stocks, liquidate the farmers, and liquidate real estate…. It will purge the rottenness out of the system.  High costs of living and high living will come down.  People will work harder, live a more moral life.  Values will be adjusted, and enterprising people will pick up from less competent people.

We already hear similar recommendations.  Are they correct?  Ask God for when you see him, for the question is irrelevant in this world.  Politicos adopting such views will find themselves unemployed after the elections of 2008 and 2010,  in the dustbin of history alongside the Republican politicos defeated in 1932. 

Nor will find allies at the Federal Reserve.  Chairman Bernanke is an interventionist and Statist.  He see these things through the prism of the Fed’s failures during the Great Depression.  If he fails, it will NOT be for lack of large bold actions.  Since I believe the Democrats will sweep the 2008 elections, those calling for strong solutions will have both Executive and Congressional Support.   The Supreme Court will also change composition during the next eight years, with at least three Justices expected to retire quickly — giving the activists a strong majority on the Bench.

A Scenario (just a sketch due to keep the length tolerable)

The US is already moving towards #4 through de facto nationalization of the banks, as loans by the Fed (and foreign governments) become the primary source of new capital.  The large scale government interventions advocated by several of the leading Presidential candidates (e.g. Clinton) indicate what we can expect if conditions continue to deteriorate.

A recession – especially if long and deep — will accelerate deterioration of both households and businesses, forcing this nationalization process to continue.  The “Japan solution” is the course of least political resistance:  prop up the banks with lightly hidden government help and wait for natural forces to “heal” the economy over time.

There are many ways to socialize the debt.  The government (via the Fed or the Treasury) could expand its loans to banks in both size and duration, similar to what Japan did when they re-capitalized their banks with convertible preferred stock.  Or government-sponsored mortgage agencies could be the hidden hand providing support.  Either way, the mechanics are conceptually simple.  For example, a government program could allow you to exchange your existing mortgage for a 30-year, low interest, fixed rate mortgage (non-refinancable, with recourse, principle and interest “government guaranteed” to the creditor).  Done well this might require small cash outlays (hence minimal adverse fiscal impact), but would have severe impact on the government’s balance sheet (although few care about such things, yet).

This would require strong legislative action of dubious constitutionality.  Neither is unprecedented in American history; both are commonplace in the past fifty years.

And for our second trick

Rescuing the financial system would not distract the Democratic Party from its major public policy goal:  nationalization of the health care sector (like that of other western nations).  Together these would represent a massive expansion in the scope of the US government, a repudiation of the post-1980 bias towards private-sector solutions. 

Are banks are too powerful, so that this could never happen?

The major financial institutions probably will not object, as seen in this quote from the American Securitization Forum conference (4 February):

Merrill Lynch senior director Sarbashis Ghosh, in a session on RMBS research: “It’s not a subprime problem, it’s a housing leverage problem … we have people with a mortgage who simply cannot afford to make their payments.” Ghosh suggested the solution was “to address the question of leverage,” and went so far as to suggest something like a food stamp program to help borrowers with payments.

From  Wall Street Embraces Government to Avoid Recession, Bloomberg (1 Feb 2008) — Excerpt:

Alex Pollock, former president of the Federal Home Loan Bank of Chicago, urges the creation of a federal lending agency based on the Home Owners Loan Corp., or HOLC, created by Congress during the Great Depression.  Robert Kuttner, co-founder of the Washington-based Economic Policy Institute, Senate Banking Committee Chairman Christopher Dodd and others have proposed similar ideas.

Many who are calling for action point to the 1930s, the last time the U.S. national median home price fell, as an example of what government should do. During the worst economic slump of the 20th century, HOLC issued tax-exempt bonds and used the proceeds for below-market- rate mortgages. It refinanced one-fifth of U.S. homes between 1933 and 1936 after negotiating with the original lenders to accept less than the amount owed on the defaulted mortgage.

… In the 1930s, lenders were seizing homes at an average rate of 3,000 a day, adjusted for today’s housing stock size. In the fourth quarter of 2007, new foreclosures averaged 2,939 a day, double the pace of a year earlier, according to RealtyTrac Inc., an Irvine, California-based real estate data company.

And if the banks resist?  During a deep recession politicos might care little about Wall Street’s views.  Andrew Mellon was a respected financial Titan in the early 20th century, America’s longest serving Treasury Secretary (1921 – 1932).  The Great Depression made him a “malefactor of great wealth.”  From 1932 – 1937 FDR waged a dirty battle to put him in jail.  Mellon was acquitted in December 1937, only after his death.

But people who took on too much debt should suffer the consequences!

As a democracy, American values are determined by mass behavior.  Divorce and abortions are bad, until lots of folks get them.  Then they become empowering and life-affirming.  Likewise the moral stigma of illegitimacy and bankruptcy have largely faded away.  This may be happening now with bankruptcy and even voluntary mortgage defaults.

Consider the politics.  Are legislators likely to miss an opportunity to help voters in the 50 million American households with mortgages?  This is not just speculation.  During the Depression several states (e.g., Minnesota) passed foreclosure moratoriums.   There were also widespread “penny auctions” of farmers’ land and equipment at which his neighbors forcibly prevented competing bids.

That was generations ago, before the maturation of 4GW — of which mass popular action is an essential part (e.g., US civil rights and anti-Vietnam War protests).  Mass action might appear much faster and with more impact than in the 1930’s.

Will these drastic measures work?

How do you define “success”?  These measures will slow the decline, allowing natural forces to heal the economy (which did not work during the 1930’s) — albeit with large scale and unpredictable side-effects.  The steps forecast here are only illustrative in nature, the first phase in the end of the post-WWII economic and geopolitical regime. Looking beyond these early steps takes us far into the unknown.

Afterword

If you are new to this site, please glance at the archives below.  You may find answers to your questions in these.

Please share your comments by posting below.  Per the FM site’s Comment Policy, please make them brief (250 words max), civil, and relevant to this post.  Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).

For more information from the FM site

To read other articles about these things, see the FM reference page on the right side menu bar.  Of esp relevance to this topic:

Posts about solutions to this economic downturn:

  1. How should we respond to the crisis?, 24 September 2008
  2. A solution to our financial crisis, 25 September 2008
  3. The last opportunity for effective action before disaster strikes, 3 October 2008 — How to stabilize the financial system.
  4. Effective treatment for this crisis will come with “The Master Settlement of 2009″, 5 October 2008
  5. Dr. Bush, stabilize the economy – stat!, 7 October 2008
  6. The new President will need new solutions for the economic crisis, 9 October 2008
  7. A brief note about our financial system: Intermediation, disintermediation, and soon re-intermediation, 16 October 2008
  8. New recommendations to solve our financial crisis (and I admit that I was wrong), 23 October 2008
  9. A look ahead to the end of this financial crisis, 30 October 2008
  10. Everything you need to know about government stimulus programs (read this – it’s about your money), 30 January 2009

17 thoughts on “A happy ending to the current economic recession

  1. The alternative, I suppose, would be for each of us to retreat to Walden Pond.

    Fabius Maximus replies: Please explain. I do not see the connection! Do you mean retreat to an simple rural existance?

  2. Please explain how you can consider an economy where all homes are and all health care is owned by the failing institution of the state to be a healed economy.

  3. “Fabius Maximus replies: Please explain. I do not see the connection! Do you mean retreat to an simple rural existance?”

    To an extent, yes. But more basically, an existence in which lack of credit does not matter so much because it is less important. One in which individual and local self reliance trump one’s credit and social standing. ( Personally, I do live in Appalachia and am interested in the Amish. )

    Once upon a time, I thought quite highly of the Institute for Local Self Reliance. I hesitate to recommend them only because I am no longer up to date on them. But they once were and probably still are the sort of thing I am talking about.

  4. I did not say “by the failing institution of the state to be a healed economy.” This would buy time for the economy to heal by natural forces. It is a short- to medium-term pallative.

    As for the “failing state”, that is a long-term perspective. The State absorbing still more of the economy might be just another phase of long-term decline. After all, I have described this process as part of the end of the post-WWII geopolitical order.

    If the US State is failing, what comes next? I believe we cannot know, because we cannot see beyond choices we have yet to make. Those choices will create the new world beyond the current economic and political regimes. Let us hope that we choose wisely.

    A nit: I said that the government might become the primary mortgage creditor — or guanantor of mortgages. Not that the government would own the homes. A fine distinction, but an important one.

  5. Allow me to supplement my prior post.

    I will frankly concede that any transition to my self-reliant type community would appear to be wrenching for our urbanized society ( and perhaps even more wrenching for our suburbanized society.) Drug withdrawal seems an apt metaphor.

    Recently I have been watching DVD’s of King Lear and Timon of Athens. The outraged screams of outcasts in the wilderness that these plays present seem topical here.

    I am not trying to present some rosy scenario. I am simply trying to play a poor hand as well as I know how.

  6. Ah Fabius! I’m going to play Cato the Censor again….

    Fabius Maximus… do you remember how angry you were that Rome had to melt down the temple gold and silver because Hannibal’s brother Hamilcar violated our existing pact and blocked our Iberian mines; and the Punic’s and their Greek allies controlled OUR SEA’S trade? Then there was Hannibal and his Gauls and Celts, having kicked our tails (as you well remember) running around sucking up the resources of half of Italy… Well, to shorten your own story, by the time we cornered that rascally old devil we had a lot of mopping up to do. It COST A FORTUNE.

    I mentioned to you how Scipio and the other perfumed young Romans let the Punics and those back stabbing Greeks and hillbilly Macedonians sign the STUPIDEST Treaty imaginable. What YOUR generation of Romans did after you were dead was ALLOW CARTHAGE and SYRACUSE and the Macedonians fifty years to REBUILD at Rome’s expense! Instead of using Rome’s surplus wealth prudently, as I TRIED to explain to them, they squandered most of it on luxury and concubines and trying to live forever rather than just opening a vein in a hot bath when they got too old! Our Roman women, urged on by Scipio’s perfumed bottomed neo-Greeks and hippy Athenian philosophers preaching “libertas” over “gravitas”, walked the streets of Rome dressed like Babylonians! I actually had to push sumptuary laws through the Senate BECAUSE YOU OLD MEN would NOT discipline your children! The WOMEN wore PURPLE, Fabius! YOU ONLY WORE Purple when you commanded all of Rome during Second War! The WOMEN wanted to wear purple EVERY DAY!

    “Cato you cheapskate!” they’d say to me, “you’re a scary guy with those crazy eyes and sword scars across your face and orange Celtic hairdo and tattoos! But YOU are NOT Fabius Maximus! Scipio Africanus took care of Carthage and Hannibal years ago! We all know what you think, but the Greeks and Punics are OUR FRIENDS NOW. & etc.”

    Well, Fabius. You always said after Cannae that we needed armistice or stalemate in the field so we could recover, and once we recovered we’d avenge our dead brothers in arms. You always said that if Rome sued for peace Carthage would not act like the Celts who simply left Italy or settled up north… and you were right. And the Punic’s learned YOUR lesson! The Punic’s and Greeks, as the fifty years of tribute came closer to it’s end, openly stated they could not live with a Roman Hyper-power. They ignored Scipio’s STUPID peace from the end of the SECOND Punic WAR, and rebuilt their fleets while using the gold we let them keep to pay for bandits and pirates to keep our Legions fighting tribe after tribe.

    A couple of years before I died myself of old age, the Senate asked me to go to Carthage to see if what I’d been warning of for fifty years was true. I was horrified as was my entire entourage! All Carthage lacked was a Commander like Hannibal to use it’s fleet and gold to buy mercenaries and Rome’s geese would be cooked. Our generations of Romans had wasted so much gold on luxury that we had no temple treasures to melt when they found a new Hannibal or Phillip. The Senate looked so young to me Fabius Maximus, and only a small handful had any memory of you, when they agreed that Carthage HAD TO BE DESTROYED. But after seeing their parents and grandparents had ignored me and left them in debt and surrounded… they got as mean as rabid wolves (mine in the end, Fabius Maximus, the last generation of Old Roman Gravitas)

    A year after my death, my freed servants grand children and my grand children and those Romans who weren’t too fat or lazy to fight, fought the LAST PUNIC WAR… I was so proud of them! They were every bit as merciless as we were in our youths, yet had more resolve than your generation or mine. They put every man in Carthage to death and enslaved every woman. They destroyed Carthage DOWN TO SINGLE BRICKS. And Salted the lush Fields for miles in every direction so that it’d be a wasteland. (And destroyed a couple Greek cities for good measure).

    Do you know how much taxes Roman citizens had to pay after the Third Punic War? ZERO. Roman Citizens didn’t pay taxes, they watched as Tribute poured in from whichever province looked cross eyed at our Legions. NO TRADE PORT on OUR SEA failed to pay, or it was quickly destroyed. Tens of thousands of slaves were sold every auction for years after Carthage was obliterated. (this was the death of the Republic, as no Roman citizen was without a captive slave or concubine, nor ever do any manual labor).

    Isn’t that ironic Fabius? We were so angry over our debt, and I have to admit it didn’t occur to me just TO BLACKMAIL OTHERS to pay our expenses. I wish I’d have thought of that idea: “TRIBUTE OR WAR”. Genius. I’d MUCH rather have just robbed the Greeks and Punics and Libyans than been called “The Censor”! Maybe if I’d thought of that Carthage (which was a beautiful land) could have been allowed to exist…

  7. With the invention of nukes and 4GW, the whole “tribute or war” thing loses its appeal. The big guys (i.e., almost any nation-state) can build nukes. Smaller states, “provinces”, and colonies can use 4GW.

  8. My point was that state interference in mortgage contracts and in rationing of health care will profoundly limit the natural forces of the economy and prolong or even prevent the healing by seriously reducing the efficiency of the markets in two products that every single human requires, housing and medicine.

    Fabius Maximus replies: Agreed!

  9. I wonder how all of this looks from overseas. During the 90’s, when a 3d world country ran into financial trouble, the IMF made them balance the budget and eliminate subsidies (see atimes.com article called “Physician Heal Thyself) . Now, it is our turn and we won’t take the medicine we once used to prescribe. What hypocrites we are. If this weren’t an election year, would the pols be so quick to react? Further, i don’t see a Democrat sweep as a given. They are so wimpy that they can’t even bring a lame duck president down. W still dominates them.

  10. The relevance of IMF bailouts to America’s future is no joke. If currency flight hits the US dollar — by US investors going overseas, private foreigners or foreign central banks selling dollars — international “coordination” will be required. That might mean our creditors acting through the IMF, as the US has so often done, to “help” the mis-managed USA set its house in order. A little work with a blue pencil would balance the Federal Budget, as I doubt they will lend us money just to continue our massive military spending.

    Oh yes, no doubt our creditors will have many interesting “suggestions” to offer in exchange for their help.


  11. That might mean our creditors acting through the IMF, as the US has so often done, to “help” the mis-managed USA set its house in order. A little work with a blue pencil would balance the Federal Budget, as I doubt they will lend us money just to continue our massive military spending. Oh yes, no doubt our creditors will have many interesting “suggestions” to offer in exchange for their help.

    Ironically, this means that the American white lower class might look for help from Hugo Chavez, or at least from his model of populism.
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    Fabius Maximus replies: There are slight elements of this in both Edwards’ and Obama’s speeches. An economic downturn might bring these themes out more strongly.

  12. I lived through the IMF coming into the UK. Then, barely, it acted in its designed role as the ‘lender of last resort’. Later it became a tool of neo-con thought. Not just, fix your economy, it was “do what we say”, screw your population (and if they didn’t like that then we can train your military and torturers) and make lots of money for ‘someone’. I say that because it didn’t make the US as a society rich (otherwise it wouldn’t be in the mess it is now), but it made some individuals very rich.

    The IMF is an US institution pushing a political agenda (which was the first neo-con victory), far removed from its original purpose (John Maynard Keynes is turning in his grave over this).

    It is also irrelvent now. After its tender ‘mercies’ South America is building its own ‘IMF’. Asia wants nothing to do with it (after the treatment it got after the Asian 1990’s crash) and have built up their own resources and reserves.

    Plus the US has no money.
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    Fabius Maximus replies: The role of IMF is most commonly seen as preventing losses by western lenders. Watching the travel of IMF advisors was a good leading indicator of social unrest. The policies advocated by the IMF, the “Washington Consensus”, were noteworthy by their conistent failure.

    In the 1990’s the “Bretton Woods II” system developed, in which emerging nations had undervalued currencies, high domestic rates of savings and investment, rapidly growing exports — and increasing prosperity. The IMF’s ex-clients are getting rich, and no longer need the IMF.

    Under this system the US ran large and increasing trade and current account deficits — rising debt. It’s a bizarre system, probably disasterous for the US over the long-term. But fun while it lasts.

  13. Man… I just can’t get you salty old dogs to rise to the bait! lol.

    If you guys would like, I can post a letter from Buffet’s man at Lazard to the NYS insurance board regarding the municipal bond guarantors (insurance firms). It’s kind of a banker version of legalese, but I’m confident I can translate and/or clarify obscure references. Let me know.

    The bottom line is that the IMF relies on the BIS as it’s primary settlement arm, and like the World Bank, is mostly a front institution. The UK, by the way, doesn’t conform to IMF transparency guidelines (nor does Austria or Switzerland), which is why so much off-shore banking and dubious cross-border transactions use those financial centers. “Hypothetically”, under the terms of the NAFTA Treaty related to financial transactions, one could introduce an ENTIRE currency, like the Euro for example, backed by nothing more than leveraged U.S. municipal and corporate Bonds held in Mexico City and Hong Kong representative offices of a Swiss Bank, and then use tertiary currencies, like Sterling, Swiss Francs, or etc. to exponentially over-leverage those SAME U.S. Bonds to the point where a global short term liquidity crises occurred… And the entire ‘hypothetical’ structured financial house of cards would rely on ONE SINGLE U.S. States insurance regulator allowing successive (and quite illegal) bailouts of firms with less than 1% of the liquidity required by law. If the Countries regulators and accountants responsible for the tertiary currencies weren’t very responsible, ‘hypothetically’, the irony of this situation would be that THEIR National currencies, rather than the secondary currency (in our example, the Euro) or that of the over-leveraged Bonds (the dollar), would be the currencies that’d collapse… a scenario that’d likely lead their fellow citizens to howl for their blood upon realizing that “Nationalization” of private banking debt created by over speculating on OTHER Countries municipal bonds is a very very very bad idea if that ‘other’ Country is the United States (as Americans outside of New York are quite touchy about their own muni bonds being illegally leveraged by foreigners in order to buy assets in their own back yards). Hypothetically, of course.

    Obviously such a scenario couldn’t possibly occur without a large number of American bankers, institutional fund managers, accountants, and politicians being involved up to their eyebrows as well, which is crazy enough for me to use ‘hypothetical’ to describe such a case.

    I would disagree with you on one point, Fabius, regarding my “tribure or war” bit. The nuclear option is a 3GW extension into 4GW strategic conflict. As the 4GW understanding of warfare includes ALL aspects of ones opponents ability to pursue traditional Nation State goals previously restricted to OPEN and declared engagement of hostilities, we must not forget that in a 3GW world our allies had to choose between the conventional physical protection of ECONOMIC rivals (‘communism’ versus ‘capitalism’), but that in a post cold war 4GW world, this is no longer the case. Thus if a minor Nation State perceives that it’s political goals can best be pursued by manipulating or betraying a 3GW allied Nation using some 4GW tactic, and needn’t fear any 3GW consequences should it’s duplicity be exposed, the “game theory” logic recommends that minor Nation State players assume exactly this strategy. In a 4GW strategic view of geo-politics post cold war, the primary reorientation every individual Nation State must undertake is to define and distinguish IT’S OWN interests INDEPENDENT of it’s 3GW allies interests! Otherwise a Country like the U.S. might mistakenly include circumstantial allies in it’s OODA loop as if said allies were perfectly disinterested contributors, even after their Nation States had made it perfectly clear that their National goals were fundamentally different that our own.

    This is a point evoked in a counterintelligence paper on the NCIX site: There might be such a thing as allied Nations, but there is no such thing as allied National Intelligence Services. I would suggest that Military Intelligence entities that fail to grasp that they are necessarily National as a first principle cannot possibly perform their duties/functions in a 4GW environment, and that an observable consequence of this failure would be that disinformation and misinformation fed via military intelligence into it’s National strategic OODA process would reflect OTHER Nations interests as indistinguishable from its own.
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    Fabius Maximus replies: I disagree with your description of the BIS, IMF, and WB. Nor are State insurance regulators necessary for leveraging up assets into bubbles. Banks can do it with the approval of their regulators (e.g., thru SIV’s). Private investors (e.g., hedge funds) can do so without any official approval, so long as can find lenders.

    The role of nukes in preventing state-to-state conflict is described in several of van Creveld’s works and, and more recently in Chet Richard’s “If We Can Keep It.”

  14. Pode, there are certain thing that the ‘market’ does not do well, actually it is terrible at. There are many theoretical and real reasons why this is .. which can be gone into in later discussions.

    One is healthcare. Now I do a lot of analytic work in this area and the incontovertable, gold plated fact is that the ‘market’ does not work. The US spends more money per person and a higher % of GDP than any other country in the world, and its health statistics are shameful. Cuba does better (google it and find out). In every country where there is ‘socialised’ medical care (and there are a multitude of technical ways to do this) the health statistics are better .. for a far lower cost .. and for a greater % of the population.

    Bit like its military, spend a lot for not a lot.

    Take Australia (longest lived Anglo Saxon based country in the world). My wife is going in next week for an incredibly advanced treatment for a very difficult brain aneurism. She has a Professor doing it. She is getting the best care in just about the whole world .. direct cost to us .. zero.

    Poll after poll shows that Australians are happy to pay higher taxes to have better health care overall .. even if you, as an individual person never needs it .. but your wife or relative or friend may need it so you are happy to pay. Society working together it is called. Plus we have the benefit of paying a fraction of what the US does per person, so we are actually, overall financially better off.

    QED.

  15. Fabius,

    Given the chaos of the financial markets this week, and (sullenly) conceding that my personal descriptions of BIS, the IMF and WB were overly simple, I thought I’d provide you with some choice links. These aren’t comprehensive, but do provide references and a degree of insight for readers who wouldn’t be inclined to brush up on this kind of obscure financial wonkery a week ago ago (prior to the current crises).

    Here’s a link to Basel and the BIS, and their research on global financial stability: the use of BIS international financial statistics.

    Here are links to a couple of articles over at Cato:

    Audit the World Bank’s Performance

    New Mandates for the IMF and World Bank

    Global Imbalances, Tanking Dollar, and the IMF’s Surveillance Over Exchange Rate Policies” by Sitikantha Pattanaik

    Links to (some) related GAO reports (when possible, I’ve used executive summary links for ease of use by non-specialists):

    Financial Regulation: Industry Trends Continue to Challenge the Federal Regulatory Structure“, GAO-08-32 (October 12, 2007)

    Financial Market Preparedness: Significant Progress Has Been Made, but Pandemic Planning and Other Challenges Remain“, GAO-07-399 (March 29, 2007)

    Financial Market Regulation: Agencies Engaged in Consolidated Supervision Can Strengthen Performance Measurement and Collaboration“, GAO-07-154 (March 15, 2007)

    It’d probably only take me a couple of days to cut and paste these into a full subject post, but again, given the irony of the crises occurring within the timeline of our thread, I’d rather err by providing a couple of very general and very pointed references relating to the immediate issue, as these can be of use independent of their relation to my prior posts.

    Best, A. Scott Crawford
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    Fabius Maximus replies: Thanks. Much useful material here!

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