Comments on: How can we de-risk the economy?

By: Bigelow

Bigelow — Wed, 06 May 2009 12:42:30 +0000

You mean in the “real world” of too big or too connected to fail? Economists serve to rationalize the existing money flows to the top 1/2% of richest criminals. I’m sure Taleb knows railing against the stupid but highly remunerative status quo is pointless, but bless him for trying.

“Give me control of a nation’s money and I care not who makes her laws.”
Mayer Amschel Rothschild

By: Mean Mister Mustard

Mean Mister Mustard — Wed, 06 May 2009 02:31:40 +0000

Everyone who might be construed as being for the status quo should probably get smart and start sounding like Bob Shiller. The shrill nonsense (yeah, I am talking about you Cliffy the Clown) just makes your inanity more obvious. Bob kind of wants to save you all, so do be his friend.

By: Economics of Contempt

Economics of Contempt — Wed, 06 May 2009 01:55:22 +0000

The most well-known “regulatory convertible debt” proposal actually came from Mark Flannery originally, in a 2005 book called Capital Adequacy Beyond Basel.

Here’s a copy of Flannery’s chapter proposing the RCD instrument: http://www.cba.ufl.edu/fire/docs/publish edpapers/Published_RCD_Chapter.pdf

By: Hal

Hal — Tue, 05 May 2009 21:25:15 +0000

Interesting. I would like to have been there for this. I think Taleb is onto something.

By: dWj

dWj — Tue, 05 May 2009 20:28:05 +0000

The “regulatory convertible debt” idea evolved from a paper “Rethinking Capital Regulation”, by Anil Kashyap and Raghuram Rajan at the University of Chicago and Jeremy Stein at Harvard, presented at the Jackson Hole conference last August.

By: BJ Feng

BJ Feng — Tue, 05 May 2009 19:27:09 +0000

Taleb could be right, but the costs of implementing his plans are higher than just allowing financial crises to occur every so often. Restricting credit, and reducing the operational efficiencies of financial institutions (code for making them hold more money) will reduce growth in the economy.

The costs of reform cannot be ignored and should be the #1 factor, more accurately, cost/benefit analysis should. Put it this way, it is so expensive to buy earthquake insurance here in Los Angeles that most people don’t bother. It’s cheaper just to let the earthquake happen and then rebuild. I think people should realize that our economic system undergoes systemic shocks every so often. It’s like living in Los Angeles, earthquakes are part of the landscape and come along with the sunshine and lifestyle.

By: Daily Coase

Daily Coase — Tue, 05 May 2009 17:56:14 +0000

But what if Taleb is right? Are “the likes of Shiller and Waldman…more constructive” if Taleb is right?

By: KenG

KenG — Tue, 05 May 2009 15:50:31 +0000

Yes!!! Debt for equity, that is exactly what has to be done. How can economists and policy makers and corporate executives not see this? Too many businesses can not afford to service the debt they have with their current or future level of business.

Creditors who refuse to accept equity need a visit from the ghosts of Detoit future, where they see what happened to GM’s and Chrysler’s bondholders.