A Few Links
By Arnold Kling
The U.S. and global financial systems require credit creation and foreclosure prevention, not bank nationalization as currently contemplated by some.
As you know, I differ. I want foreclosures and bank shutdowns.
Nick Schulz points me to Chistopher Whalen.
In my view, CDS and the entire OTC derivatives market represents a form of regulatory arbitrage – a retrograde and deliberate evasion of established prudential norms masquerading under the innocent guise of innovation.
As you know, I agree. I want the CDS market to die a natural death. I think that without government support, neither mortgage-backed securities nor credit default swaps would survive. I could be wrong about CDS. But I’d like to see what happens in a world where the buyer of a CDS has no assurance that the government is going to bail out his counterparty, so he has to find some other way of guaranteeing that the counterparty will fulfill the contract.
Finally, Daron Acemoglu on the importance of long-term growth relative to cyclical output gaps.