John Cassidy's Blog, page 124

A Dissenting Voice on "Stress Tests"

Of all the reactions to my piece this week on Tim Geithner, this post , by Mike Konczal at NewDeal 2.0 might well be the most interesting. Konczal, a financial engineer turned blogger, restates the case that the Treasury's stress tests, which I portrayed in a positive light, were an exercise in window dressing—an argument he and others originally made last spring. The new twist in the story is Konczal's reworking of bank losses on the basis of what he claims are more realistic estimates of...

On Tim Geithner

Apologies to regular readers for my recent absence: I'd been rushing to finish a piece on Treasury Secretary Geithner, which is in this week's issue of the magazine. I knew the article would spur some controversy, and so it has proved. The Web is full of comments suggesting that I am part of an orchestrated effort to burnish Geithner's reputation, a Wall Street tool, and/or an ignoramus. I'll be talking more about the piece in an online conversation tomorrow, but for now I just want to make a...

Tea Party, U.S.A.: It's Still the Economy, Stupid!

In the wake of yesterday's fascinating report in the Times about sixty-something Tea Party activists bracing for a violent counter-revolution, several people have asked me why Americans are so angry. I am tempted to say that that is what age and a steady diet of Fox News does to people, but that can't be the full story. (Roger Ailes and his gang have been on air since 1996.)

One factor that the Times article tiptoed around, but which undoubtedly plays some role, is racism. For some white...

Tea Party U.S.A.: It's Still the Economy, Stupid!

In the wake of yesterday's fascinating report in the Times about sixty-something Tea Party activists bracing for a violent counter-revolution, several people have asked me why Americans are so angry. I am tempted to say that that is what age and a steady diet of Fox News does to people, but that can't be the full story. (Roger Ailes and his gang have been on air since 1996.)

One factor that the Times article tiptoed around, but which undoubtedly plays some role, is racism. For some white...

This Is What a Bubble Looks Like!

Memo to Ben Bernanke, Alan Greenspan, Ric Mishkin and all other economists who still argue it is impossible to discern a speculative bubble while it is inflating. (This chart is from p. 27 of this year's Economic Report of the President, which the White House Council of Economic Advisers released yesterday.)

The Return of Rosy Scenario

If you want to get good and depressed, go the Web site of the Office of Management and Budget and spend some time browsing through the plethora of materials related to the 2011 federal budget. That's what I've being doing for the past couple of days, and, boy oh boy, it wasn't much fun. Even if the economic recovery continues at a healthy clip, with annual GDP growth averaging about four per cent over the next five years, the budget deficit, currently running at about $1.55 trillion, will...

Uncle Sam: From Riches to Poorhouse

As commentators too numerous to mention have pointed out, the spending "freeze" that President Obama will announce tonight is largely a political move. From an economic perspective, an austerity measure that applies to less than twenty per cent of the federal budget, as this one does, is too small to have much macroeconomic impact, although the cuts to individual programs will be real enough.

The debate about the need for short-term stimulus versus long-term deficit reduction is an important o...

Doing the Bernanke Dance

Call me a cynic, but I've never taken seriously the idea that Congress, a body that is largely incapable of taking decisive actions, would refuse to confirm Ben Bernanke for another four years at the helm of the Federal Reserve Board. Once the White House stepped up the political pressure, and the stock market started reacting negatively to the heightened uncertainty that a vote against Bernanke would entail, the bravehearts on the Hill were always going to buckle for fear of being blamed...

Interview with Richard Thaler

This is the eighth in a series of interviews with Chicago School economists. Read "After the Blowup," John Cassidy's story on Chicago economists and the financial crisis. (Subscribers only.)

Thaler, one of the founders of behavioral economics, was out of town when I visited Chicago. I subsequently caught up with him on the phone, and I began by asking him what remained of the efficient-markets hypothesis, which he has long questioned.

Thaler: Well, I always stress that there are two components ...

Interview with Raghuram Rajan

This is the seventh in a series of interviews with Chicago School economists. Read "After the Blowup," John Cassidy's story on Chicago economists and the financial crisis. (Subscribers only.)

I met Rajan in his office at the Booth School of Business. I began by asking him about the academic work he and several colleagues at the business school did in the years leading up to 2007 on banking and liquidity. In addition to exploring theoretical issues that turned out to be important, Rajan, in...