"If money isn't loosened up, this sucker could go down" - George W. Bush warned in September 2008

Thursday, March 11, 2010

Really great links - heads I win, tails someone else loses banking - debt/GDP and population growth - naked bubble

Paul Krugman on "heads I win, tails someone else loses" banking - "So what can we learn from the way Ireland had a U.S.-type financial crisis with very different institutions? Mainly, that we have to focus as much on the regulators as on the regulations. By all means, let’s limit both leverage and the use of securitization — which were part of what Canada did right. But such measures won’t matter unless they’re enforced by people who see it as their duty to say no to powerful bankers."

Nick Rowe - debt/GDP and population growth - "Now compare two countries: the first has 1% population growth; and the second 0%. The country that has a growing population has half the debt burden of the country with constant population, if both have the same debt/GDP ratio. And the country with a growing population can handle twice the debt/GDP ratio with the same debt burden."

Rick Bookstaber - The naked bubble in gold - "Usually the markets have the courtesy of giving cover for bubbles. We adorn the bubbles with some justification. Even if a guy is just after sex, he at least has the decency to act like there is some substance behind his interest. For the Internet bubble, it was that fundamental analysis based on the brick and mortar world did not bear relevance in the New Paradigm. For the Nikkei bubble, it was that the crazy P/E ratios were not considering one subtlety or another in the Japanese accounting system. But with gold, no one seems even to care about giving a justification, other than “gold has been a store of value throughout 5,000 years of monetary history”. Which is fine as far as it goes, but that doesn’t say anything about what the price of that store of value should be."

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