Linking ≠ endorsement. Enjoy and share:
- Federal Reserve Bank San Francisco | Bubbles Tomorrow, Yesterday, but Never Today?
He’s sounding more Post-Keynesian.
To understand the past and avoid a recurrence of the devastating events we lived through so recently, we need to acknowledge that investors and financial markets do not behave the way rational asset price theory implies. We need to incorporate these channels into the models we use for forecasting, risk analysis, and policy evaluation. This opens up a world where actions, including regulatory and monetary policy measures, may have unintended consequences—such as excessive optimism, risk taking, and the formation of bubbles—that are assumed away in standard rational models.
Of course, this is a difficult task, and successful models are likely to be far more complicated than the simple and elegant rational models we have relied on in the past. But, it’s essential if we want to design policies that foster robust economic performance in the future.
John C. Williams is president and chief executive officer of the Federal Reserve Bank of San Francisco.
Read the source article … https://www.frbsf.org/economic-research/publications/economic-letter/2013/september/asset-price-bubbles-theory-models/
- Bank of America goes to trial over U.S. mortgage fraud charges | Reuters
It will be interesting to see how this turns out.
(Reuters) – Bank of America Corp heads to trial this week over allegations its Countrywide unit approved deficient home loans in a process called “Hustle,” defrauding Fannie Mae and Freddie Mac, the U.S. government enterprises that underwrite mortgages.
Read the source article … https://www.reuters.com/article/us-bankofamerica-hustle-idUSBRE98M11H20130923
- MortgageOrb: JPMorgan Settlement Could Set New Record
JPMorgan Chase CEO Jamie Dimon met with Attorney General Eric Holder on Thursday to hash out a settlement to resolve a Department of Justice lawsuit alleging that the bank sold billions in faulty mortgage-backed securities (MBS) to investors from 2005 to 2007.
The meeting followed days of “intense negotiations” during which JPMorgan ultimately offered to pay a roughly $7 billion fine and provide $4 billion in relief for struggling homeowners, according to a New York Times report. Federal officials, however, have reportedly rejected JPMorgan’s offer to pay a $7 billion fine and have asked bank officials to offer a larger settlement. The talks are ongoing.
The article goes on to discuss numerous other legal actions against JPMorgan Chase.
Read the source article … https://www.mortgageorb.com/e107_plugins/content/content.php?content.14385
- Financial markets: What we talk about when we talk about bubbles | The Economist
A bubble could be a pure, financial-market ponzi game, in which prices bear no relation to any defensible story about future fundamentals. It may depend entirely on buyers betting prices will go up because others will buy betting prices will go up, and so the bubble inflates until the supply of suckers is exhausted.
But a “bubble” might have a more rational basis. It could be a sustained rise in prices that is reasonable given particular, defensible expectations about the future, but which deflates once it becomes clear that particular version of the future has not come to pass. The future is uncertain, after all, and it is not irrational to bet that something might happen just because it doesn’t eventually happen.
Or, a “bubble” could be a sustained rise in prices that is reasonable given particular, defensible expectations about the future—which eventually are borne out—but which nonetheless deflates, temporarily, due to an unexpected turn in credit conditions.
Okay, but as we’ve seen, many “experts” and reporters have been simply saying some area is not in a bubble because it hasn’t hit peak bubble prices yet, as if 90% of the peak wasn’t a bubble even though the bust may have resulted in a 30-50% decline in local prices that have come back 20+ percent and are still climbing and with interest rates back down again.
The point appears to be that investors should take care not to over leverage as we move up out of the trough.
Read the source article … https://www.economist.com/blogs/freeexchange/2013/09/financial-markets-0
- 28 business leaders come together to tout Detroit’s $250 billion ‘bright future’ | MLive
DETROIT, MI – An oft-repeated number tied to negative news about Detroit is $18 billion.
It’s the estimated amount of the city’s long-term debt, and it has found its way under international headlines that declare the city financially near-death after it filed for Chapter 9 bankruptcy in July.
But prominent Detroit business leaders have another number: $250 billion. That represents the combined market capitalization of the 28 companies (full list below) that signed an ad the debuted Sunday in the New York Times, Washington Post, Detroit Free Press and Detroit News.
The full-page ad declares, “Here’s $250 billion that says the city of Detroit has a very bright future,” and then argues why the city is far from dead…
There are still 5 million people in the metro area. You wouldn’t know it from the general national press though.
Read the source article … https://www.mlive.com/business/detroit/index.ssf/2013/09/28_business_leaders_come_toget.html
- How Bad Data Warped Everything We Thought We Knew About the Jobs Recovery – Matthew O’Brien – The Atlantic
If the Fed has been making this error, it’s amazing to us. It just seems so fundamental that you’d not fail to see that the data wasn’t (weren’t if you’re a Latin stickler, which is okay) long enough upon which to base such important decisions.
The Fed has stepped on the gas when seasonal adjustments have made the recovery look weaker than it actually was. And the Fed has stepped off the gas when seasonal adjustments have made the recovery look stronger than it actually was. Now, this is certainly suggestive, but it’s not dispositive. As Wright points out, Fed economists are aware of Lehman’s seasonal distortions: it’s why they changed their seasonal adjustments for calculating industrial production. But there is still a question how aware the policymakers on the Federal Open Market Committee are of this. Indeed, St. Louis Fed president James Bullard said one reason they didn’t taper their bond purchases in September was weak data — and that “sometimes the jobs report can change the whole contour of how the [FOMC] look at the data.”
Read the source article …
- America’s Labor Market by the Numbers by Mohamed A. El-Erian – Project Syndicate
We can do better.
In August, the BLS classified 4.3 million Americans as long-term unemployed, or 37.9% of the total unemployed — a worrisome figure, given that the global financial crisis was five years ago. And, remember, this number excludes all the discouraged Americans who are no longer looking for a job. In fact, the more comprehensive employment/population ratio stands at only 58.6%.
The teenage-unemployment rate is another under-appreciated indicator that is at an alarming level. At 22.7%, too many American teenagers, lacking steady work experience early in their professional careers, risk going from unemployed to unemployable.
Then there are the indicators that link educational attainment and employment status. Most notable here is the growing gap between those with a college degree (where the unemployment rate is only 3.5%) and those lacking a high school diploma (11.3%).
Read the source article … https://web.archive.org/web/*/https://www.project-syndicate.org/commentary/the-downside-of-us-labor-market-data-by-mohamed-a–el-erian