It is increasingly common to hear prominent US and European central bankers claim, with respect to the crisis of 2008-10, essentially the following verdict: “We did well.” But this arrogant claim merely undermines central bankers' credibility, which, ultimately, is the only basis of their authority.
WASHINGTON, DC – It is increasingly common to hear prominent American and European central bankers proclaim, with respect to the crisis of 2008-2010, the following verdict: “We did well.” Their view is that the various government actions to support the financial system helped to stabilize the situation. Indeed, what could be wrong when the United States Federal Reserve’s asset purchases may have actually made money (which is then turned over to the US Treasury)?
But to frame the issue in this way is, at best, to engage in delusion. At worst, however, it creates an image of arrogance that can only undermine the credibility on which central banks’ authority rests.
The real cost of the crisis is not measured by the profit and loss statement of any central bank – or by whether or not the Troubled Asset Relief Program (TARP), run by the Treasury Department, made or lost money on its various activities.
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Since the 1990s, Western companies have invested a fortune in the Chinese economy, and tens of thousands of Chinese students have studied in US and European universities or worked in Western companies. None of this made China more democratic, and now it is heading toward an economic showdown with the US.
argue that the strategy of economic engagement has failed to mitigate the Chinese regime’s behavior.
While Chicago School orthodoxy says that humans can’t beat markets, behavioral economists insist that it’s humans who make markets, which means that humans can strive to improve their functioning. Which claim you believe has important implications for both economic theory and financial regulation.
uses Nobel laureate Robert J. Shiller’s work to buttress the case for a behavioral approach to economics.
WASHINGTON, DC – It is increasingly common to hear prominent American and European central bankers proclaim, with respect to the crisis of 2008-2010, the following verdict: “We did well.” Their view is that the various government actions to support the financial system helped to stabilize the situation. Indeed, what could be wrong when the United States Federal Reserve’s asset purchases may have actually made money (which is then turned over to the US Treasury)?
But to frame the issue in this way is, at best, to engage in delusion. At worst, however, it creates an image of arrogance that can only undermine the credibility on which central banks’ authority rests.
The real cost of the crisis is not measured by the profit and loss statement of any central bank – or by whether or not the Troubled Asset Relief Program (TARP), run by the Treasury Department, made or lost money on its various activities.
To continue reading, register now.
Subscribe now for unlimited access to everything PS has to offer.
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