What follows is a Foreword I wrote for the Japanese translation of New Lombard Street, coming out later this year: The Global Financial Crisis (GFC) of 2007-2009 served as the first real stress test of the global financial system we had been building over the preceding decades. I refer here to the market-based credit system […]
In retrospect, it is easy to see why most observers didn’t see the crisis coming. The crisis was a stress test of shadow banking, “money market funding of capital market lending”. In most universities, including mine, monetary economics and financial economics are separate fields with their own specialized language and faculty, and the regulatory apparatus […]
The BIS and the IMF have each weighed in from the center, representing the perspectives of central banks and central Treasuries respectively. (Interestingly, they don’t agree, see here for a recent sample of the debate.) Now comes the periphery. The new Trade and Development Report of the United Nations Conference on Trade and Development is titled “Making […]
Goldman Sachs takes “A Look at Liquidity”, and tells us what they see. Suffice it to say that different people see different things, depending on their vantage point, like the proverbial blind men touching the elephant. Let’s see if we can construct a picture of the animal as a whole from the snapshots provided. What […]
Now comes a symposium of five articles, published in the AEA outreach Journal of Economics Perspectives, several of which read clearly as a kind of apologia pro vita sua for the actions of the authors themselves. The idea seems to be that, if only readers could be made to understand the conditions under which the […]
As regular readers know, I emphasize two central functions of monetary systems: payments and market-making. These are the foundation pillars of what I call the “money view”. In my teaching, I have come to appreciate a variety of barriers that people bring with them to the study of money, and to appreciate the necessity of […]
A month ago, the Volcker Alliance issued a report intended to address a central issue that had been purposely left to one side in the Dodd-Frank reform legislation, namely the inadequacy of the regulatory system that will be tasked with implementing any future financial reform. Titled “Reshaping the Financial Regulatory System: Long Delayed, Now Crucial”, […]
The Fed has announced plans to raise rates in the imminent future, but the market does not believe it. Why not? Conventional wisdom appears to be that the Fed will chicken out, just as it did during the so-called Taper Tantrum. The Fed has signaled its appreciation that “liftoff” will involve increased volatility, and has […]