Paul Krugman's Blog, page 631

Urge to surge

So I've been reading stories about a "surge" in housing starts. And it's true that starts were up 17 percent over the previous month. But here's the thing: new-home construction has come to a virtual standstill, so even large percentage changes mean only a handful of extra homes started. If we're building 6 homes a [...:]

More notes on the regulation plan

First of all, the regulation of "Systemically important systems" should clearly be undertaken by the Department of Redundancy Department.
Now that I've got that out of my system:
1. Cheers for the extension of regulation, including capital requirements, to all "Tier 1 FHCs" - which, in the report's jargon, means any financial institution, whether or not it's [...:]

And I was on the grassy knoll, too

One of the funny aspects of being a somewhat, um, forceful writer is that I'm regularly accused of all sorts of villainy. I was personally responsible for the demise of Enron; my nonexistent son worked for Hillary; etc.. The latest seems to be that I called for the creation of a housing bubble - in [...:]

YHTMAAAIYP*

*You have too many acronyms and abbreviations in your paper (a phrase I learned from Rachel McCulloch.) That's my first reaction to the financial regulation proposal. When I reached the section on "Systemically important systems" …
OK, this isn't supposed to be judged on literary merit.
From my point of view, the key passage is this:
Any financial [...:]

Podcast me

Lecture links:
Lecture 1
Lecture 2
Lecture 3

Is skin in the game the answer?

According to the Washington Post, one part of the soon-to-be-announced financial regulatory reform will be a requirement that lenders keep some "skin in the game":

Lenders would be required to retain at least 5 percent of the risk of losses on each package of loan pieces, known as an asset-backed security.
…
The administration concluded that securitization encouraged [...:]

Health care miscommunication

Before people get too worried by the nasty CBO report on health reform costs, read Ezra Klein:
The bill the CBO examined this time was missing these policies. In an effort to buy some extra time to negotiate with Republicans on the committee, the Democrats on HELP left out some of the key points of controversy [...:]

Good move by the BOE

Adam Posen, my favorite Japan expert, is joining the Monetary Policy Committee.

Parsing interest rates

Long-term interest rates have risen substantially over the past few months. But what does that mean? Is it the burden of vast government borrowing, as the deficit hawks claim? Or is it actually a good sign, an indicator of greater confidence?
I've argued against the fiscal explanation on the basis of both theory and the fact [...:]

The return of liquidationism

One discouraging feature of the current economic crisis is the way many economists and economic commentators - apparently ignorant of what went on over the last 75 years or so of macroeconomic debate - have been reinventing old fallacies, imagining that they were coming up with profound insights. I've written about how Fama, Cochrane, and [...:]