Apologies for the lack of posts over the last couple of weeks: I have had to spend time with my elderly mother down in Dorset, UK; and for the last 10 days I have been in Greece studying their economic and political crisis through meetings with government ministers, opposition politicians, large and small businesses, NGOs and ordinary people. Meanwhile, the world moves on (and many of the developments are negative for both Greece and for the world economy).
- Much of the intellectual underpinning of the Fed’s unconventional monetary policy can be found in a 2003 paper by Eggertsson and Woodford. Unconventional monetary policy is justified through a model of the inflationary expectations of economic actors. For a non-technical treatment for a general audience see a paper by the Richmond Fed here. In a stunning development, Bernanke appears to have dumped this approach. Ambrose Evans-Pritchard has a good summary of this seismic shift in the Telegraph.
- Meanwhile, the EU has reached a banking agreement that bails in depositors to any bank recapitalization (see the FT here). To me, this will guarantee bank runs at some future time.
- And also in the FT, Trevor Maynard, Head of Exposure Management at Lloyd’s of London, talks intelligently about other kinds of risk, including climate risk. Well worth a read.
- Staying on climate, there is much comment in the general media to the effect that global warming has slowed. This post in Skeptical Science brings out the difference between earth system warming and atmospheric warming — without understanding this difference (and most journalists don’t), it is difficult to put the climate sensitivity debate into perspective.
- Over in Ireland, tapes have come to light showing how bank executives mocked the naivety of the state bail-out at the height of the crisis. Reuter’s summarizes the story here. It is extraordinary that the blatant lies extended by senior bank executives to the government have not resulted in jail sentences. You can listen to the tapes on the website of the Irish Independent, the newspaper that broke the story, here.