| TED spread | 1.51 |
| S&P 500 returns | +0.29% |
| VIX | 44.93 |
| Nikkei 225 (9:02 AM IST) | +1.42% |
| US Financials index | +0.86% |
| ICICI Bank ADR | +1.30% |
| Call rate on 20th | 6.55% |
| Currency futures (9:06 AM IST) | 47.4325 |
- I have an article in Financial Express today about the policy rate of zero at the US Fed.
- Ila Patnaik tracks the VIX, the US dollar and the US Baa credit spread.
- An editorial in Business Standard worries that banks won't lend.
- Jayanth Varma in Financial Express on the fiscal constraints of governents.
- Mahesh Vyas writes in Financial Express that smaller companies are where the problems are concentrated.
- The subject of ethics has come back to prominence. See my blog post Goodbye great moderation, hello financial fraud? and my blog post on Satyam. If the climate gets sullied, it could worsen entry barriers and competition in India. Catherine Rampell has an excellent explanation of Ponzi schemes in the New York Times, but see Becker and Posner also. Alessandra Stanley misses the sex.
- A speech by Charles Plosser on new questions about financial innovation and financial stability.
- Gideon Rachman says: It would be a historic irony if the Chinese Communist party was thrown into crisis, not by the collapse of communism in 1989 but by the convulsions of capitalism in 2009.
- Japanese companies still invest in themselves by Martin Fackler, in the New York Times.
Regarding Gideon Rachman's comment on changes in China... see recent analysis at http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=22554&prog=zch
ReplyDeleteOn "ZIRP at the Fed," it is quite touching to see you attempt to reassure yourself that the Fed will get back to normal functioning once things get better, but I'm sure it has occurred to you that this situation fundamentally challenges your worldview.
ReplyDeleteBasically, if your much-vaunted BCD Nexus breaks down in a crisis, it can't be much good, can it? If the BCD Nexus is only as strong as a market-maker of last resort, should you not be arguing for a much more balanced set of institutions that enables this public function? And if there is an imperative for a MMoLR, but this facility is bound to a tight rule, are we not in moral hazard heaven?
Rules favour the market, discretion those to whom the central banker is accountable. Greenspan was captured, hence his discretion created moral hazard.
We need central banking systems that are accountable to a democratic state, not bound to an unelected market. We need ethical central bankers who can be trusted to use their necessary discretion wisely.
I would rather bet on the balance between the ethics of an accountable central banker and the efficiency of a set of markets that are prone to collective error. We have the balance badly wrong in India, to be sure, but the solution is hardly the one-sided response that you advocate.