"links for 2009-02-07
- Contraction, not tightening - macroblog
- IS, LM, and two wedges: understanding the second wedge - Nick Rowe
- Pork is Essential for Good Health - knzn
- New U.S. Plan to Help Banks Sell Bad Assets - NYTimes.com
- The Fed, Eurosystem, and Bank of Japan: Similarities and diffs - voxeu.org
- Krugman's lessons from Japan - Greed, Green and Grains
- How to Repair a Failed System - voxeu.org
- The Death of 'Rational Man' - washingtonpost.com
- America is not in an irreversible decline - Daniel Gross
- Jobs:The Tangible Sector Takes it On the Chin - BusinessWeek
- Time for a Price Level Target, and a Damned High One! - knzn
- And Now, the Counterargument - The Baseline Scenario
- Watchdog: Treasury Overpaying for Bank Investments - Real Time Economics"
On the post "Repairing a failed system", I like the idea of insurance for these implicit government guarantees:
"It will be good to know whether the financial system can even pay for the subsidies it receives.
* Recognise the negative externality of LCFIs. Then quantify the systemic risk of LCFIs and “tax” (through capital requirements or deposit insurance fees) their contributions to systemic risk rather than individual risk.
This is hard to do, but present regulations do not even claim to address the problem. The need for such systemic risk regulation, possibly by augmenting Central Bank agendas, is only underscored by the growing size of the few remaining players in the financial arena. "
I simply wonder how in the world you charge insurance for a systemic crisis. What do you use to compute the odds? It sounds like an enormous premium, or an amount that would help in a crisis, but not necessarily stop a run as the insurance should presumably do. Both these authors and Caballero don't seem to take this on. They seem to be assuming that it would be easy. I doubt that. Am I wrong?
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