Posts filed under “Philosophy”

QOTD: Financial Crisis Recoveries

How prescient was this, circa January 2008:

“Broadly speaking, financial crises are protracted affairs. More often than not, the aftermath of severe financial crises share three characteristics:

First, asset market collapses are deep and prolonged. Real housing price declines average 35 percent stretched out over six years, while equity price collapses average 55 percent over a downturn of about three and a half years.

Second, the aftermath of banking crises is associated with profound declines in output and employment. The unemployment rate rises an average of 7 percentage points over the down phase of the cycle, which lasts on average over four years. Output falls (from peak to trough) an average of over 9 percent, although the duration of the downturn, averaging roughly two years, is considerably shorter than for unemployment.

Third, the real value of government debt tends to explode, rising an average of 86 percent in the major post–World War II episodes. Interestingly, the main cause of debt explosions is not the widely cited costs of bailing out and recapitalizing the banking system.

Admittedly, bailout costs are difficult to measure, and there is considerable divergence among estimates from competing studies. But even upper-bound estimates pale next to actual measured rises in public debt. In fact, the big drivers of debt increases are the inevitable collapse in tax revenues that governments suffer in the wake of deep and prolonged output contractions, as well as often ambitious countercyclical fiscal policies aimed at mitigating the downturn.”

Not only are most other economists getting it wrong, they seem to be pretending that nobody warned them in advance what to expect.

Kudos to Reinhart & Rogoff (again)

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Previously:
5 Historical Economic Crises and the U.S. (February 9th, 2008)

The Aftermath of Financial Crises (January 24th, 2009)

Sources:
Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International
Historical Comparison*  (PDF)
Carmen M. Reinhart, University of Maryland and the NBER
Kenneth S. Rogoff , Harvard University and the NBER, January 14, 2008
http://www.economics.harvard.edu/faculty/rogoff/files/Is_The_US_Subprime_Crisis_So_Different.pdf

Category: Bailouts, Philosophy

Listening to Dead Philosophers

This post was originally published today at The Financial Philosopher. Whenever a timely milestone, such as this new calendar quarter and the second half of the year, is reached I do my best to resist the tiresome looking-back-and-looking-forward ritual.  To remove myself from the timely chatter, I indulge in the timeless words of philosophers from…Read More

Category: Philosophy, Psychology

Happy Birthday, America, but it’s time to grow up.

> I have a new column out in the Sunday Washington Post business section on, well, America. “It’s been 235 years already? America, it’s time to grow up.“  The sub hed is “Happy birthday, America. But at 235 years old, you’re flabby, creaky and easily led astray.” The column speaks to the nation as if…Read More

Category: Apprenticed Investor, Philosophy

Wisdom from the Wealthy: Sunday’s WaPo Column

> In case you missed it, my Sunday Washington Post column is on the interesting life lessons I have learned from people of great wealth. I excerpted it yesterday. Rather than run yet another excerpt, I’d rather a) Point you to “7 life lessons from the very wealthy,” and 2) pull some of the quotes…Read More

Category: Philosophy

Shiller on EMH

I hope you did not miss the weekend post of Yale Professor Bob Shiller’s Efficient Market Hypothesis discussion. Shiller: More Expectations Theory, Less Efficient Market Hypothesis Well worth your time . . .

Category: Philosophy, Really, really bad calls

Yale professor Bob Shiller’s column in the Sunday NYT ( The Sickness Beneath the Slump) is filled with interesting tidbits, data and analysis. You may be tempted to think of his column as the typical Residential Real Estate analysis, looking at historical prices and current trends. Don’t. What the good professor does this morning is…Read More

Category: Philosophy, Real Estate, Really, really bad calls

Investment Advice from George Carlin

I believe philosophers can be the best investors and that comedians can be the best philosophers. Therefore one may logically deduce that comedians can make the best investors. Look no further than the philosophy of the late and great George Carlin to prove my point: Don’t confuse causation with correlation. “Death is caused by swallowing small…Read More

Category: Philosophy, Psychology

Apocalypse Thinking: All Too Human Pattern Seeking

I was a little surprised about some of the pushback to the Oh, No, Not the End of the World (Again) column. Which made this column in New Scientist all the more delightful. It starts with pattern seeking: “Cognitively, there are several processes at work, starting with the fact that our brains are pattern-seeking belief…Read More

Category: Philosophy, Psychology, Science

Welcome to Socialist America!

To those of you who irrationally fear the US is turning into a Socialist state, I say unto thee: YOU ARE TOO LATE! We’ve already turned into a red nation of commies! At least, that seems to be how some folks see it.  It is a quite a bit more accurate to describe the current…Read More

Category: Economy, Philosophy

The Power of Words

This short film illustrates the power of words to radically change your message and your effect upon the world: Created by RedSnappa (www.redsnappa.com) Filmed/directed & edited by Seth Gardner Music by Giles Lamb ‘One to One’ Homage to Historia de un letrero, The Story of a Sign by Alonso Alvarez Barreda Music by: Giles Lamb…Read More

Category: Philosophy, Weekend