The Economist reports about the political economy aspects of America’s semi-nationalized mortgage industry.
The movie Inside Job portrays as
- evil: Feldstein, Hubbard, Paulson, Rubin, Summers, Wall Street, … ;
- clueless or not convincing: Bernanke, Campbell, Geithner, Greenspan, Mishkin, Portes, … ;
- aware (at least ex post): Buiter, Johnson, Lagarde, Lo, Partney, Rogoff, Roubini, Strauss-Kahn, Tett, Wolf, … .
Economics and economists are considered part of the problem rather than the solution. While the movie
- depicts Ragu Rajan as the hero,
it is silent about the fact that Rajan is one of the most prominent economists.
In a Project Syndicate post, Axel Weber argues that inflation targeting needs to be rethought.
Within a complex and constantly evolving economy, a simplistic inflation-targeting framework will not stabilize the value of money. Only an equally complex and highly adaptable monetary-policy approach – one that emphasizes risk management and reliance on policymakers’ judgment, rather than a clear-cut formula – can do that. Such an approach would be less predictable and eliminate forward guidance, thereby discouraging excessive risk-taking and reducing moral hazard. … intermediate targets … could potentially be applied to credit, interest rates, exchange rates, asset and commodity prices, risk premiums, and/or intermediate-goods prices. … Short-term consumer-price stability does not guarantee economic, financial, or monetary stability.
Katharina Knoll, Moritz Schularick and Thomas Steger discuss data on long-run house price trends in Vox. House-price-to-income ratios have risen after World War II. Rising land prices played a crucial role.
This is their figure 2: