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Simon Johnson

Among the fundamental principles of any functioning judicial system is the following: Don’t lie to a judge or falsify documents submitted to a court, or you will go to jail. These are serious criminal offenses, but apparently not if you are the heart of America’s financial system.

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RECENT COMMENTARIES

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Grit is Good

Howard Davies Series: Finance in the 21st Century

2012-02-21

Nowadays, many are questioning the old assumption that greater market efficiency is always and everywhere a public good. Phrases like “sand in the machine” and “grit in the oyster,” which were pejorative before the 2008 financial crisis, are now used to support regulatory or fiscal changes that might slow down trading and reduce its volume.... read

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The Middle Class Goes Global

Johannes Jütting Series: Frontiers of Growth

2012-02-21

We are moving at high speed toward a world based on a new geography of growth, with millions of people in the east and the south moving out of extreme poverty to become powerful middle-class consumers. Will their dreams be achieved, or will governments’ failure to provide adequate social protection and services lead to a global nightmare?... read

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Good and Bad Deficits

Robert Skidelsky Series: Against the Current

2012-02-20

The distinction between capital and current spending (or between “good” and “bad” deficits) is old hat to any student of public finance. Nevertheless, we forget knowledge at such an alarming rate nowadays that it is worth re-stating, particularly with deficit hawks in power in the UK and throughout Europe.... read

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Obama’s Recovery?

Jeffrey Frankel Series: Mapping the Market

2012-02-17

CAMBRIDGE – With November’s election in the United States fast approaching, the Republican candidates seeking to challenge President Barack Obama claim that his policies have done nothing to support recovery from the recession that he inherited in January 2009. If anything, they claim, his fiscal stimulus, the bank bailouts, and US Federal Reserve Chairman Ben Bernanke’s aggressive monetary policy made matters worse.... read

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Tobin Trouble

Mark Roe Series: The Rules Of The Game

2012-02-17

European leaders are seriously considering a Tobin tax, which would put a small levy on financial transactions, thereby dampening trading. But that is neither a desirable outcome nor an appropriate goal.... read

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The Sustainability Mindset

Michael Spence Series: The New Wealth of Nations

2012-02-17

The global economy will probably triple in size in the next quarter-century, fueling concern that the planet’s natural resources and recuperative capacities will not withstand the pressure. The challenge is to change the growth model in order to lighten the impact of higher levels of economic activity.... read

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The Uptick’s Downside

Nouriel Roubini Series: After the Storm

2012-02-16

Since late last year, a series of positive developments has boosted investor confidence and led to a sharp rally in risky assets, starting with global equities and commodities. But at least four downside risks are likely to materialize this year, undermining global growth and negatively affecting investor confidence and market valuations of risky assets.... read

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Lighting the Dark Continent

Achim Steiner, Adnan Amin and Kandeh K. Yumkella Series: The Development Drama

2012-02-15

Nineteenth-century European explorers called Africa the Dark Continent, because to them it was vast and largely unknown. Today, Africa may still be dark, but for a very different reason: it is chronically short of electricity.... read

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From Argentina to Athens?

Mohamed A. El-Erian Series: The Risk Factor

2012-02-15

What Greece is facing today is, in key respects, what Argentina faced in August of 2001. Unless Europe reflects on Argentina's experience, the parallels with Greece may end up including financial meltdown, a deep output collapse, and social and political turmoil.... read

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The 70% Solution

J. Bradford DeLong Series: Anatomy of the Global Economy

2011-11-30

Today's super rich command and control over resources that they are effectively satiated. So, when we calculate what their tax rate should be, we should not consider the effect on their happiness, but rather on the well-being of everyone else.... read

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Bleed the Foreigner

Harold James Series: Capitalism Then and Now

2011-10-04

The economists’ commonplace that a monetary union demands a fiscal union is only part of a much deeper truth about debt and obligation. Debt is rarely sustainable if there is not some sense of communal or collective responsibility.... read

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The Second Great Contraction

Kenneth Rogoff Series: The Unbound Economy

2011-08-02

Why is everyone still referring to the recent financial crisis as the “Great Recession”? The term, after all, is predicated on a dangerous misdiagnosis of the problems that confront the US and other countries, leading to bad forecasts and bad policy.... read

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Read China’s Lips

Stephen S. Roach Series: The Asia Portfolio

2011-07-27

Chinese admire America’s economic dynamism, but they have lost confidence in the US government and its dysfunctional economic stewardship. The debate over the debt ceiling and the budget deficit is the last straw, and China's own shift away from export-led growth implies an end to its limitless demand for US government securities.... read

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Debt and Delusion

Robert J. Shiller Series: Finance in the 21st Century

2011-07-21

The fundamental problem for much of the world today is that investors are overreacting to debt-to-GDP ratios, fearful of some magic threshold, and demanding fiscal-austerity programs too soon. We should worry less about debt ratios and thresholds, and more about our inability to see these indicators for the often-irrelevant constructs that they are.... read

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The Battle of the Bonds

Robert Skidelsky Series: Against the Current

2011-07-20

Every week, the preposterous coterie of European bankers and finance ministers drags itself from one capital to another to discuss which default/restructuring plan to adopt. No one who is not well versed in financial legerdemain can make much sense of the various schemes, but behind them lie two moral attitudes, which are much easier to grasp.... read

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Defaulting to Big Government

Simon Johnson Series: The Hopeful Science

2011-07-18

Opponents of raising the US debt ceiling argue that the federal government is too big relative to the economy, and that drastic measures are needed to bring it under control. But the consequences of any default would, ironically, actually increase the size of government relative to the US economy.... read

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Confessions of a Financial Deregulator

J. Bradford DeLong Series: Anatomy of the Global Economy

2011-06-30

Back in the late 1990’s, in America at least, support for financial deregulation was widespread, and the entire experiment turned out to be woefully misguided. But if it all looks like such a bad idea now, why didn’t it then?... read

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Europe’s Naked Banks

Simon Johnson Series: The Hopeful Science

2011-06-24

European leaders are convinced that bank capital is “expensive,” in the sense that raising capital requirements would slow economic growth. But the latest developments in the Greek crisis show that the exact opposite is true – it’s European banks’ lack of capital that threatens to derail European and global growth.... read

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Common Sense on Capital Controls	Andrés Velasco
Those who claim that capital controls are ineffective seldom specify at what they are presumed to be ineffective. In fact, by reducing the share of short-term foreign-currency debt in a country’s total liabilities, capital controls can reduce vulnerability to financial crises.... read
Latin America’s Glossed Decade	Andrés Velasco
The Inter-American Development Bank declared last July that this would be “Latin America’s Decade,” an idea subsequently endorsed by The Economist and repeated by countless apologists and experts. But, as in the past, the basis of the current wave of giddiness does not withstand scrutiny.... read

Corporate Liability for Human Rights

Joseph E. Stiglitz Series: Unconventional Economic Wisdom

2003-11-06

Wittingly or unwittingly, individuals do things that injure other individuals. For society to function, it must provide individuals with incentives not to do so, through rewards and punishments, regulations and fines. By polluting the air, one harms anyone who breathes. The legal system has an important role here. If I injure you, you should be able to sue me. ... read

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Do What We Did, Not What We Say

Joseph E. Stiglitz Series: Unconventional Economic Wisdom

2003-10-06

Today, many emerging markets, from Indonesia to Mexico, are told that there is a certain code of conduct to which they must conform if they are to be successful. The message is clear: here is what advanced industrial countries do, and have done. If you wish to join the club, you must do the same. The reforms will be painful, vested interests will resist, but with enough political will, you will reap the benefits. ... read

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Donor Funds are Needed for Poverty, Not Iraq

Jeffrey D. Sachs Series: Economics and Justice

2003-09-29

America wants the world to pledge billions of dollars to Iraq's reconstruction at a donor's meeting to be held in October in Madrid. The world's answer should be an unequivocal "No!" Iraq's long-term reconstruction does not need foreign financial assistance. What it needs is a political settlement, and that will be possible only with the withdrawal of America's occupying army. The billions of dollars that the US seeks should be directed towards true global emergencies, such as the fight against AIDS and hunger. ... read