Arnold Kling  

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Democracy in Middle Earth... Change I Believe In...

Ben Bernanke on the future of bank regulation.


there is some evidence that capital standards, accounting rules, and other regulations have made the financial sector excessively procyclical--that is, they lead financial institutions to ease credit in booms and tighten credit in downturns more than is justified by changes in the creditworthiness of borrowers, thereby intensifying cyclical changes.

I will have more to say about this and related issues soon.

Jeff Jarvis on restructuring.


entire swaths and even sectors of the economy will disappear or will change so much they might as well disappear:

This is one of my current themes. Again, I think of David Halberstam's book The Fifties, and how a very different economy emerged. The Great Depression got rid of a lot of farms and a lot of urban manufacturing work. What emerged twenty years later was a suburban economy, with a lot of businesses based in shopping malls.In some sense, the period from 1930-1955 completed the transition brought about by the automobile and the electric motor. Now, we may be in the painful process of completing the transition brought about by Internet communications.


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COMMENTS (7 to date)
Randy writes:

"...we may be in the painful process of completing the transition brought about by Internet communications."

Looking forward to it. I'm hoping that my daughters won't be forced to make a daily commute, and I might even work a few years longer if I could do most of it from a home office. Its possible now, just not traditional.

Kevin writes:

Looking forward to your comments on the pro-cyclicality of financial institutions. It does seem weird that the insurance company has to be able to pay for a house burning down after it just paid for the house burning down.

Barkley Rosser writes:

Well, the combination of minimum capital standards with the mark to marketing rule in accounting does seem to be very procyclical. Was this what you had in mind?

Gary Rogers writes:

He is a bit more optimistic than I am. I agree things are changing, but the biggest change I see is that consumer spending can no longer remain at 70% of GDP. The reason is that 70% consumer spending requires continued borrowing to keep the economy going at that level. The main thing, though, is to keep in mind that we are not going back to the way things were.

David W. writes:

I've been wondering if this isn't what's happening with health care costs. Maybe health care is going to be the replacement for manufacturing as manufacturing replaced farming?

Granted, the various intermediaries add to the cost, but I doubt they add as much as the difference between 'you have 6 months to live, put your affairs in order' and 'you'll spend 3 months in the hospital, then another 3 months of therapy, and you'll probably live another decade'.

Kenny Evitt writes:

In the first link, I got to the third paragraph, under 'Too Big To Fail':

... policymakers must insist that the large financial firms that they supervise be capable of monitoring and managing their risks in a timely manner and on an enterprise-wide basis.

Oh, yes – you must insist.

How 'bout instead, you make a public announcement that from this point, forever more, no one will be safe from failure; not for size, nor any other reason. That should keep the financial firms dancing a little further apart at the next party.

savantadmin writes:

With office rental increasing, it doesn't make much sense to have a physical office. I believe the future of most businesses will be virtual and leveraging off using a virtual office space.

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