Random Links XXXXII

Inflation, Excess Reserves, & Illiquid Assets:

http://woodwardhall.wordpress.com/2009/04/13/the-fed-needs-to-make-a-policy-statement/

http://macromarketmusings.blogspot.com/2009/04/there-is-no-free-lunch-in-central.html

http://macroblog.typepad.com/macroblog/2009/05/when-is-rapid-growth-in-a-central-banks-balance-sheet-not-cause-for-concern.html

It is often asserted (also here; critiques here & here) that recent massive increases in the Fed’s balance sheet carries a significant risk of future inflation, since the Fed may find it impossible to wind down the balance sheet in a timely manner.  Woodward & Hall rightly note, however, that even if inflation becomes a problem (e.g., via an unexpected increase in monetary velocity), the Fed could keep its monetary base large, and simply increase interest rates on banks’ excess reserves.  This, in turn, would reduce velocity by inducing banks to keep such reserves on deposit in the Fed (instead of lending them out).  Hence, it isn’t necessarily the case that massive Fed holdings of potentially illiquid assets may end up hindering its ability to conduct monetary policy.

It’s encouraging to note Robertson’s finding New Zealand was able to keep reserve levels high by paying interest on said reserves.  Somewhat less encouraging is Beckworth’s observation that paying interest on excess reserves could be quite costly; but this, IMHO, is not fatal – merely something to consider.

Layoff Alternatives: Paying lawyers $80k to take a year off.

Overleveraging & the Financial Crisis:  How the latter exacerbated the former.

Perpetual Housing Inflation:

http://www.economist.com/blogs/freeexchange/2009/04/the_assumption_that_almost_des.cfm

http://www.american.com/archive/2009/april-2009/did-they-really-believe-house-prices-could-not-go-down/article_print

A couple of takes re. a factor I tend to view as a major “root cause” of our current troubles.

Credit Card Downfall, HSBC Edition: Junk lending claims another victim…. 

Free Speech & Religion: Western cowardice in the face of intolerance.

Facebook & Grades:  “Facebook Users Get Worse Grades in College”

Cheap Credit & Fragile Companies: How the former makes the latter more likely.

Dubai’s Dark Side: Apparently slavery & indentured servitude are not entirely dead yet. 

Lemming Effect, Quants Edition:

http://www.technologyreview.com/biztech/19529/

http://www.voxeu.org/index.php?q=node/1029

http://blogs.reuters.com/felix-salmon/2009/04/14/can-you-stop-banks-acting-like-lemmings/

Strange things happen when the entire financial industry (regulators included) start using the same playbook….

Screw Darfur: How the actions of “Save Darfur” may have been counterproductive.

The Utility of Grotesque Hypotheticals

TARP v. RTC, Accounting Edition:  “The last great experiment in working through financial crisis took longer than expected, involved some accounting pushing and shoving at the outset, confronted a skeptical Congress, and cost more than initially projected, but quite a lot less than feared.”

Charitable Deduction & Conservative Hypocrisy

BK & GM Pensions:

http://meganmcardle.theatlantic.com/archives/2009/04/how_badly_will_bankruptcy_hurt.php

http://www.detnews.com/article/20090415/AUTO01/904150364

Life & Death of Pigs:

I enjoy being at the top of the food chain.

Retirement Tripod:

David Merkel:  http://alephblog.com/2009/04/16/ancient-and-modern-the-retirement-tripod/

Megan McArdle:  http://meganmcardle.theatlantic.com/archives/2009/04/in_search_of_the_perfect_pensi.php

Why there’s no easy fix for public or private pension problems.

China Downfall, Guangdong Edition

Balance Sheet Recession

A Canadian Visits America

Chevy Volt

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