Don’t rush to blame the Fed — Kristin J. Forbes

MIT Sloan Professor Kristin Forbes

MIT Sloan Professor Kristin Forbes

From the New York Times

Last week, Turkey’s central bank surprised investors by raising a key interest rate to 10 percent from 4.5 percent. It was a bold move to rein in inflation and calm the markets. But Turkey’s prime minister, Recep Tayyip Erdogan, has been vocal in blaming the “interest-rate lobby” — a supposed conspiracy of foreign bankers, and some economists and journalists — for volatility in stock prices and a steep decline in the lira.

Turkey is far from the only country to blame foreigners for recent market turmoil. Venezuela’s president, Nicolás Maduro, recently complained of a “psychological war from abroad.” The governor of the Central Bank of Brazil, Alexandre Antônio Tombini, describes rising interest rates in rich countries as a “vacuum cleaner” that indiscriminately sucks capital out of emerging markets.

Read More »

Dropping the Ball on Financial Regulation — Simon Johnson

 

MIT Sloan Prof. Simon Johnson

From the New York Times

With regard to financial reform, the outcome of the November election seems straightforward. At the presidential level, the too-big-to-fail banks bet heavily on Mitt Romney and lost; President Obama received relatively few contributions from the financial sector, in contrast to 2008. In Senate races, Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio demonstrated that it was possible to win not just without Wall Street money but against Wall Street money. Read More »

After the Debt Ceiling Debate and S & P's Credit Downgrade, Picking an Investment Adviser in an Unruly Market: S.P. Kothari

 

[vodpod id=Video.15431900&w=425&h=350&fv=videoGUID%3D%7B436720EB-B185-4E0C-BABF-FB6994BAD6C4%7D%26amp%3Bplayerid%3D2001%26amp%3BplyMediaEnabled%3D1%26amp%3BconfigURL%3Dhttp%3A%2F%2Fm.wsj.net%2Fvideo-players%2F%26amp%3BautoStart%3Dfalse]

 

From Dow Jones Marketwatch
S.P. Kothari, deputy dean at the MIT Sloan School of Management and a former Barclays fund manager, talks about what investors should look for in choosing an investment adviser to steer them through these turbulent markets.
What do you think?

Defaulting to big government—the unintended consequences of not raising the debt ceiling

MIT Sloan Prof. Simon Johnson

From CNN World

Leading United States congressmen are determined to provoke a showdown with the Obama administration over the federal government’s debt ceiling. Ordinarily, you might expect House Republicans to blink at this stage of the negotiations, but there is a hardline minority that actually appears to think that defaulting on government debt would not be a bad thing.

These representatives – with whom I’ve interacted at three congressional hearings recently – are convinced that the US federal government is too big relative to the economy, and that drastic measures are needed to bring it under control. Depending on your assessment of “Tea Party” strength on Capitol Hill, at least a partial debt default does not seem as implausible as it did in the past – and recent warnings from ratings agencies reflect this heightened risk.

But the consequences of any default would, ironically, actually increase the size of government relative to the US economy – the very outcome that Republican intransigents claim to be trying to avoid.

See the full post at Global Public Square

Simon Johnson, a professor of global economics and management at MIT Sloan, is the former chief economist at the International Monetary Fund and co-author of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown