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Seattle Bubble Forum Archive • View topic - Surviving the Crash: Macroeconomic Blog Resource List

Surviving the Crash: Macroeconomic Blog Resource List

How will housing affect the US and world economy? How will the economy affect housing?

Moderators: synthetik, The Tim, Lake Hills Renter

Taking the blue pill now.

Postby siddha99 » Mon Apr 28, 2008 9:37 am

Taking the blue pill now.
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Re: Surviving the Crash: Macroeconomic Blog Resource List

Postby rose-colored-coolaid » Wed Mar 04, 2009 7:54 pm

I recently heard Simon Johnson on NPR, and he seemed to have an excellent grasp on the current situation. He's a contributor on the following

of the situation, advice about what should be done, and predictions about what will be done and how that will play out.

Johnson is a professor at MIT.

From his radio interview, here's my summary of his arguments.

1) Big banks must be allowed to fail/nationalized. He wants an FDIC style nationalization where the banks are re-privatized shortly after being seized. When doing this, every bank gets the same deal: investors wiped out, and leadership is dismantled with no payouts.

2) Create a "bad bank". He was vehemently opposed to TARP. Don't buy bad assets off of banks, but when they do fail and are temporarily nationalized, some assets will be too toxic to liquidate until a later time. Use a bad bank to manage those assets and maximize proceeds from them. He thinks you might eventually get 40-50 cents on the dollar.

3) Stand up to bankers. Basically, give regulators the authority to sit across from bankers and tell them "no, no, no" to demands for bailouts. He says this is the real key to the "Swedish Solution".

4) Don't worry quite so much about the national debt. Ours is still lower (believe it or not) as percentage GDP than most developed nations (swaths of Europe and Japan specifically). Instead, worry about the efficiency of the bailout. He estimates we could spend between 10% and 30% of GDP fixing the financial system, and that our current strategy is closer to the 30% cost.
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