Financial downturns are unpleasant, but they do not need to turn into the Great Depression, which historians now agree was the product primarily of a number of egregious policy mistakes. For almost 80 years, we have thus felt safe from a recurrence of the “Great Depression” phenomenon, primarily on the basis of “we have learned […]

In the past six months the US government, partly through the agency of the Fed and JP Morgan Chase, has rescued no less than four major financial institutions, Bear Stearns, Fannie Mae, Freddie Mac and AIG, at a probable cost to the taxpayer of over $300 billion. A fifth, Lehman Brothers, was allowed to go […]

The investment bank Lehman Brothers spent last week teetering towards the sort of bankruptcy which like that of Bear Stearns, Fannie Mae and Freddie Mac, may require a “bailout” by the long-suffering US taxpayer. All four of these institutions shared a common feature: they had far too much leverage, i.e. they had borrowed far too […]

The resignation of Japanese prime minister Yasuo Fukuda on the grounds that his “fiscal stimulus” of $18 billion was inadequate throws into sharp relief a troubling reality: That most economically counterproductive of activities, the Keynesian boost in government spending, is making a horrid comeback. Like some eldritch creature from a 1950s Saturday morning horror serial, […]

The Case-Shiller Index of US house prices announced this week, down 17% in the top 10 markets, was greeted with rapture by the stock market, because its rate of decline had slowed somewhat compared to the previous month. Reams of analysis were written about how house prices were nearing the bottom, which was taken to […]