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Carliner Articles
Up one levelA collection of all the articles written by Ben Carliner for Global Strategy Watch.
Comfortably Numb
OK, deep breaths everyone. Now that Secretary Paulson and Chairman Bernanke have floated a massive public rescue plan and financial Armageddon seems to have been averted (at least for the short term), it is time to take a step back and think hard about what we are doing here.
Unbalanced and Unhinged
Treasury Secretary Hank Paulson attempted to soothe rattled markets on Sunday by making explicit the government’s guarantee of Fannie Mae and Freddie Mac’s securities. Unfortunately, Paulson’s vague plan to backstop the two mortgage giants didn’t seem to add much to what the markets had assumed was already there. Fannie and Freddie have always had an implicit government guarantee, and Paulson’s plan merely confirmed what the markets had already assumed: that Agency debt and guaranteed securities had the backing of the Federal government, but equity holders didn’t. So the trade that worked so well last week – going long GSE debt [...]
The Bigger They Come, the Harder They Fall
For the first time since December 1992, the Ford F-150 pick-up truck has lost its crown as the best selling vehicle in the United States. After seeing its sales implode by 33% in one short month, the F-150 dropped four full places on the best-seller list, behind Honda’s Civic and Accord, and Toyota’s Camry and Corolla. These aren’t the best of times to be a US automaker. Back in 1992, the vehicle that beat the F-150 out for the top spot on the sales list was the Ford Taurus. But since then, the US automakers have more or less abandoned [...]
Dismantling the Washington Consensus
The Commission on Growth and Development, a blue-ribbon panel of policy makers, business leaders and academics chaired by Nobel Prize winning economist Michael Spence, has just released its report on creating and sustaining economic growth in developing countries. The Commission has spent the past two years researching and writing the report, and now that the final report is out, it is striking how much the state of the debate has moved away from the ‘Washington Consensus’ and towards a strong, constructive role for states in fostering and sustaining economic development.
Misallocation of Capital
The failure of the US financial sector to intermediate excess global savings into productive investments in the US is the proximate cause of the current financial turmoil. Financial markets were faced with a surge in the supply of investment capital, which in turn boosted demand for securities. This led to a fundamental mispricing of risk, as the search for high-yield assets drove investors into riskier instruments and promoted the use of excessive leverage to increase returns on low-yielding assets. These conditions led to a series of asset bubbles that are now unwinding, with expensive implications for taxpayers.
Intermediate This
The recent turmoil in the financial markets has caused hundreds of billions of dollars in losses and now threatens to push the real economy into recession. Public officials and central bankers have already organized a slew of interventions to prop up the markets and bigger public bailouts are likely on the way. As the turmoil continues, the finger pointing has begun, and a number of suspects have been tagged as responsible for getting us into this mess: some blame Alan Greenspan and the Fed for keeping interest rates too low for too long; others point to fraudulent lending practices in [...]
The Financial Turmoil Explained
This has been on the web for awhile, but it's still funny. The clip is from a British TV show called the South Bank Show and features two comedians - John Bird and John Fortune talking through the sub-prime mess. The English accent makes the role of the bankers in all this sound so much more sophisticated...
Time to Take Our Medicine
The weekend’s extraordinary actions on the part of the Federal Reserve are evidence of the amazingly precarious state of the financial markets. If there was any doubt that the current financial crisis is one of historic proportions, Sunday’s takeover of Bear Stearns by JPMorgan for $2 a share (one-tenth of the value of Bear as of last week), backed by a $30bn guarantee of Bear’s suspect portfolio of securities from the Fed, the opening of the discount window to the prime dealers, and a further 25bp cut in the discount rate should put any remaining reservations to rest.
Stiglitz on the True Cost of the Iraq War
Aida Edemariam of the Guardian talks with Nobel Prize winner and Columbia Professor Joseph Stiglitz on his new book. The book, which Stiglitz wrote with Linda Bilmes and is currently promoting, is an accounting of the enormous economic costs of the Iraq War and the incompetent and dishonest planning and decision-making processes of the Bush Administration that got us into this mess. More attention should be paid to the long term costs of the Iraq War when it comes to discussion of Bush's economic legacy. His administration will be over in nine months, but Americans (and the rest of the [...]
Can the Nordic Model Survive?
Modern Sweden is known for its elegant, cutting edge design, its skilled engineers, its stable of world class multinational corporations, and above all, its generous social services. Sweden is in fact the epitome of the modern social welfare state, enjoying one of the highest standards of living in the world while preserving a strong emphasis on egalitarianism, social justice and thrift. But there is increasing concern that the economic model upon which Swedish prosperity was built is fraying under the pressure of globalization. Swedish firms are expanding abroad, but at home the economy is failing to create enough new jobs, [...]