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Begin New Search Topic Economics Content Type Journal Article

681. Moral Hazard in the Policy Response to the 2008 Financial Market Meltdown

Author:
Andrew A. Samwick
Publication Date:
01-2009
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The Cato Institute is the ideal place to draw lessons from the sub- prime crisis. The organization's mission focuses on the interaction of public policies with free markets and limited government. Even the most ardent believer in free markets must fully understand that individual liberty implies neither the nonexistence nor the indifference of government to economic affairs. Individuals live in freedom and peace when public policies are crafted in accordance with well-established rules and implemented with an eye toward effectiveness, not expansion. In the halls of government, we need sobriety and vigilance rather than apathy or empire building.
Topic:
Democratization, Economics, International Trade and Finance, Markets, and Privatization
Political Geography:
United States

682. Moral Hazard and the Financial Crisis

Author:
Kevin Dowd
Publication Date:
01-2009
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
There is no denying that the current financial crisis has delivered a major seismic shock to the policy landscape. In country after country, we see governments panicked into knee-jerk responses and throwing their policy manuals overboard: bailouts and nationalizations on an unprecedented scale, fiscal prudence thrown to the winds, and the return of no-holds-barred Keynesianism. Lurid stories of the excesses of “free” competition—of greedy bankers walking away with hundreds of millions whilst taxpayers bail their institutions out, of competitive pressure to pay stratospheric bonuses and the like—are grist to the mill of those who tell us that “free markets have failed” and that what we need now is bigger government. To quote just one writer out of many others saying much the same, “the pendulum will swing—and should swing—towards an enhanced role for government in saving the market system from its excesses and inadequacies” (Summers 2008). Free markets have been tried and failed, so the argument goes, now we need more regulation and more active macroeconomic management.
Topic:
Democratization, Economics, International Trade and Finance, Markets, and Privatization
Political Geography:
United States

683. Money and the Present Crisis

Author:
Gerald P. O'Driscoll Jr.
Publication Date:
01-2009
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
We remain in an economic crisis and financial crisis, one that Gary Gorton has named “The Panic of 2007” (Gorton 2008). The thesis of this article is that monetary policy has played a pivotal role. Under Alan Greenspan and now Ben Bernanke, the Fed has conducted monetary policy so as to foster moral hazard among investors, notably in housing (O'Driscoll 2008a). More generally, the crisis is the product of a “perfect storm” of misguided policy. Policies to encourage affordable housing fostered the growth of subprime lending and complex financial products to finance that lending. Regardless of the desirability of the social goal, the financial super- structure depended on housing prices never falling. Housing prices do fall sometimes, and did so decisively beginning in 2007 (Gorton 2008: 50).
Topic:
Democratization, Economics, International Trade and Finance, Markets, and Privatization
Political Geography:
United States, Europe, and New Zealand

684. Interest-Rate Targeting during the Great Moderation: A Reappraisal

Author:
Roger W. Garrison
Publication Date:
01-2009
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In the era that has come to be known as the “Great Moderation” (dating from the mid-1980s), the Federal Reserve's policy committee (the Federal Open Market Committee or FOMC) pursued what has to be called a “learning-by-doing” strategy. The data that counted as relevant feedback—the unemployment rate and the inflation rate—seemed all along to be suggesting that the Fed was doing the right things. Even when the Fed lowered the Fed funds target to 1 per- cent in June 2003 and held it there for nearly a year, the economy appeared to be on an even keel and U.S. interest rates were in line with those in other countries. The historically low interest rates were attributed not to excessive monetary ease in the United States but to a worldwide increase in savings.
Topic:
Democratization, Economics, International Trade and Finance, Markets, and Privatization
Political Geography:
United States

685. The Way Forward: Incentives, Not Regulations

Author:
William Poole
Publication Date:
01-2009
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Most of the world today is concentrating not on the way forward after the crisis, but the way out of the crisis. This concentration brings the very real danger that steps taken now will cause problems later. The most obvious danger, perhaps, is that enormous government spending, here and abroad, will increase outstanding debt to a degree that will increase temptation to attempt to finance government budget deficits through inflation. Moral hazard is the less obvious, but perhaps more serious, problem we will face.
Topic:
Democratization, Economics, International Trade and Finance, Markets, and Privatization
Political Geography:
United States

686. After War: The Political Economy of Exporting Democracy

Author:
Christopher J. Coyne
Publication Date:
01-2009
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Christopher Coyne's book seeks to contribute to an understanding of the “precise mechanisms and contexts that contribute to or prevent” successful efforts to “export liberal democracy” by means of “military occupation and reconstruction” (p. 7). Even if this were the only accomplishment of this fine book, it would represent one of the most important contributions to the field of political economy in recent decades. However, Coyne does more. He draws from economics to produce a full-fledged framework for analyzing the economic, political, and social effects of all reconstruction efforts. He also questions the long-standing view that reconstruction requires, or even benefits from, a suspension of the principles of liberty, free association, and free market.
Topic:
Democratization, Economics, International Trade and Finance, Markets, and Privatization
Political Geography:
United States

687. Capitalism at Work: Business, Government, and Energy; Book 1 of Political Capitalism (A Trilogy)

Author:
Robert L. Bradley Jr.
Publication Date:
01-2009
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Robert L. Bradley Jr., for many years had to balance loyalty to his employer, Enron, with his belief in Austrian economics. With the collapse of Enron came the opportunity to resolve the conflict in favor of Austrian economics. Bradley chose to undertake the slow development that would produce a definitive study rather than an instant bestseller. He ultimately decided to produce a three-volume treatment. The first of these, the book under review here, deals with two overriding conceptual issues relevant to the Enron collapse and their implications to Enron and earlier debacles. The first is what is the essence of free-market economics and whether the Enron experience undermines the case for free markets. The other is the invalidity of resource pessimism. Later volumes will deal with similar problems such as the Insull holding-company collapse in the Great Depression and then a concluding volume on Enron itself.
Topic:
Democratization, Economics, International Trade and Finance, Markets, and Privatization
Political Geography:
United States

688. On the Contrary: Leading the Opposition in a Democratic South Africa

Author:
Tony Leon
Publication Date:
01-2009
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
On the Contrary is a seamless combination of a memoir of an influential South African politician and a well-researched modern history of his country. The author was the leader of the liberal Democratic Alliance, the leader of the opposition in Parliament.
Topic:
Democratization, Economics, International Trade and Finance, Markets, and Privatization
Political Geography:
United States and South Africa

689. It's the Economy, Stupid – Only This Time, Everywhere

Publication Date:
01-2009
Content Type:
Journal Article
Journal:
European Affairs
Institution:
The European Institute
Abstract:
Beneath the mantra about a coordinated global response to the economic crisis, a line of fracture starkly divides the two sides of the Atlantic about what to do in practice to revive the sinking economies. In Washington, the Obama administration is accepting an unprecedented amount of government debt in order to pump money into the hands of consumers who can spend it and revive business. An Obama aide says that Canada, France, Germany and are not matching the U.S. effort with stimulus spending of their own and should do more. No, answer Ms. Merkel and Mr. Sarkozy - firmly but politely, so far - this is the wrong approach, the wrong priority. The global financial rules need to be overhauled before more money is pumped into it, they say, because the real problem is the lack of confidence in a recent U.S. model of capitalism that has collapsed. And, they say privately, America is to blame for the problem, so America should pay to fix it.
Topic:
Economics
Political Geography:
America, Washington, Canada, France, and Germany

690. The Economic Quicksands of Globalization

Author:
Martin Walker
Publication Date:
01-2009
Content Type:
Journal Article
Journal:
European Affairs
Institution:
The European Institute
Abstract:
David Smick's book, The World Is Curved, explains that financial engineering has outpaced the understanding of regulators and governments - and even of many of the people involved in the business. His book, reviewed by journalist and consultant, Martin Walker, predicts that worse is still to come for the U.S. and also for highly-leveraged banks in Europe holding "toxic" assets.
Topic:
Economics
Political Geography:
United States, China, and America