End the era of big bailouts

Tom Cooley and Kim Schoenholtz have a new op-ed up at the HuffPo:

To make the US financial system safe, we need to end the era of big bailouts. In December, the US and the UK took a significant step in that direction, announcing a common strategy for resolving insolvent cross-border financial giants. …  Cross-border entanglements make it difficult to resolve a [large financial institution] without a crisis. When Lehman failed, it had nearly three thousand legal entities in fifty countries.

More here.

American politics at work

You can’t have an effective economic system without a reasonably effective political system. We like to complain about ours — it’s good sport, really — but in truth we have one of the more effective ones. (Compare the Philippines.) Still, you sometimes run across things that make you wonder. I can’t vouch for the details, but this piece in the Times got my attention:

Favorite blogs

I polled colleagues and former students about their favorite blogs and compiled a list.  I added asterisks to some of my own favs, but you be the judge.  Comments welcome, either in the comments or by email.

Self-publishing at Amazon

Publishing is going through enormous change right now. We found that out for ourselves when we entered the business with our notes for Global Economy, a course in macroeconomics for business students with an international focus. A quick summary of our experience:

The quantity and quality of investment in China

MBA alum Aaron Butler asked about over-investment in China. Certainly investment rates over 40% of GDP are unusually high, but does China have too much capital? Those of us who follow China would summarize the situation somewhat differently:

The fiscal cliff “deal”

The following comments seem pretty much right to me:

• Steve Landsburg:  ”This deal does absolutely nothing to control entitlement spending, which means it’s 100% fiscally irresponsible.” (Come on, Steve, tell us what you really think.)
• Greg Mankiw:  ”After all the public discussion over the past couple years of what a good fiscal reform would [look] like, it is hard to imagine a deal that would be less responsive to the ideas of bipartisan policy wonks.”
• David Brooks:  ”[T]he proposal is not a balance of taxes and spending cuts. It doesn’t involve a single hard decision. It does little to control spending. It abandons all of the entitlement reform ideas that have been thrown around.” 
• Bruce Bartlett:  ”[G]etting Congress to act [is] … what economists call a time-inconsistency problem. The Congress that raises taxes and cuts benefits will suffer politically, while the benefits of lower deficits will accrue to future Congresses.” (This one is for Kim Schoenholtz.)
• Stan Zin:  ”Using “quotes” around random “words” is a cheap ploy used “by” people who don’t “really” know how to write.”

Which is to say, lots of drama, but absolutely no movement on long-term budget issues. The good news? New episodes of Psych due February 23.

Healthcare costs

From Kim Ruhl, a really striking chart of health care spending per person in the US, UK, Germany, France, and Japan — by age. The link comes from Dan Munro, who got it from Mary Meeker. I don’t know the underlying data, so can only take it at face value. Lots of others have piled on, including some who suggest the chart is misleading; see the comments to Austin Frakt’s post. I’d start here (esp Fig 1) and here.

However that turns out, the consensus is that health care costs are far and away the biggest fiscal issue facing the country.  Unless I missed something, there’s been no mention of that during the recent drama surrounding the fiscal cliff. Andy Borowitz reminds us of the good news: the Senate has had to work over the weekend.

Happy New Year to all.

Romer on Europe

Paul Romer has an interesting post about Europe at his Urbanization Project blog:

Reformers tend to assume that progress requires higher levels of government that embrace more people and more nations. This assumption should be challenged. Some reforms may be achieved more quickly by moving in the opposite direction, by devolving down from the national level to newly created subnational jurisdictions.

More here.

Credit carols from Citi

Who knew they had such a good sense of humor? Here’s one to the tune of “Jingle Bells” — they call it the fiscal cliff remix:

Fiscal cliff, fiscal cliff
Drama all the way!
Surely sense will soon prevail
And help them meet halfway? Hey!
Fiscal cliff, fiscal cliff
Washington at play
With Congress so polarized
Who knows which way they’ll sway?

More here.

Argentina gets its ship back

Good link here.   But don’t worry, there’s sure to be more entertainment in the Spring term.  If you’ve lost the thread, click here for our collection of Argentina posts.