dunnettreader + financialization   78

Joseph Joyce - Capital Flows and Financial Crises | Capital Ebbs and Flows - Oct 2016
Prof at Wellesley. The impact of capital flows on the incidence of financial crises has been recognized since the Asian crisis of 1997-98. Inflows before the crisis contributed to…
Pretty much my position re Chile's controls in 1990s - FDI good, portfolio vulnerable to hot money, bad, especially foreign-denominated debt, but also bank deposits attracted by interest rates but easily reversed. But they're finding that it's not just the flows that are destabilizing -- exchange rate appreciation comes with foreign capital buying debt assets as well. So much for developing local bond markets? -- See links to papers, tracking not just macro level but B-schools looking at firm-level incentives, who goes in for leverage, etc.
economic_history  financial_crisis  financialization  emerging_markets  capital_flows  FDI  capital_markets  sovereign_debt  FX-misalignment  FX  economic_policy  from instapaper
october 2016 by dunnettreader
Clément Fontan - La BCE et la crise du capitalisme en Europe - La Vie des idées - 24 février 2015
Selon Clément Fontan, la Banque centrale européenne a outrepassé ses prérogatives et a, sans contrôle démocratique, traité de manière trop différenciée l’aide qu’elle apporte aux États et celle qu’elle alloue au système financier. Mots-clés : Europe | banque centrale | capitalisme | Grèce | euro -- quite helpful for details of how the various powers, decision-making processes and authority in the EU, the Eurozone, the member states, and the ECB interact -- downloaded pdf to Note
article  EU_governance  Eurozone  ECB  Great_Recession  financial_crisis  capitalism-systemic_crisis  finance_capital  financialization  Greece-Troika  Eurocrsis  QE  bank_runs  payments_systems  bailouts  Germany-Eurozone  France  accountability  democracy_deficit  austerity  Maastricht  sovereign_debt  sovereignty  Europe-federalism  European_integration  downloaded 
july 2015 by dunnettreader
Jürgen Habermas - Re Wolfgang Streeck - Freedom and Democracy: Democracy or Capitalism? | Reset Dialogues on Civilizations - 1 July 2013
1st of a back-and-forth with Streeck and others -- Freedom and Democracy: Democracy or Capitalism? On the Abject Spectacle of a Capitalistic World Society fragmented along National Lines -- In his book on the deferred crisis of democratic capitalism Wolfgang Streeck develops an unsparing analysis of the origins of the present banking and debt crisis that is spilling over into the real economy. This bold, empirically based study developed out of Adorno Lectures at the Institute of Social Research in Frankfurt. At its best—that is, whenever it combines political passion with the eye-opening force of critical factual analysis and telling arguments—it is reminiscent of The Eighteenth Brumaire of Louis Napoleon. It takes as its starting point a justified critique of the crisis theory developed by Claus Offe and me in the early 1970s. The Keynesian optimism concerning governance prevalent at the time had inspired our assumption that the economic crisis potential mastered at the political level would be diverted into conflicting demands on an overstrained governmental apparatus and into “cultural contradictions of capitalism” (as Daniel Bell put it a couple of years later) and would find expression in a legitimation crisis. Today we are not (yet?) experiencing a legitimation crisis but we are witnessing a palpable economic crisis.
political_economy  political_philosophy  international_political_economy  capitalism-systemic_crisis  capital_as_power  finance_capital  financialization  Great_Recession  democracy  democracy_deficit  legitimacy  nationalism  financial_crisis  sovereign_debt  social_theory  globalization  global_governance  political_culture  economic_culture  stagnation  economic_sociology  Habermas  post-secular  Eurozone  European_integration  monetary_union  EU_governance  EU  Europe-federalism  downloaded 
july 2015 by dunnettreader
Suzanne J. Konzelmann, Marc Fovargue-Davies - Anglo-Saxon Capitalism in Crisis? Models of Liberal Capitalism and the Preconditions for Financial Stability :: SSRN (rev'd September 2011) Cambridge Centre for Business Research Working Paper No. 422
Suzanne J. Konzelmann, Birkbeck College - Social Sciences, School of Management and Organizational Psychology; Cambridge - Social and Political Sciences -- Marc Fovargue-Davies, U of London - The London Centre for Corporate Governance & Ethics -- The return to economic liberalism in the Anglo-Saxon world was motivated by the apparent failure of Keynesian economic management to control the stagflation of the 1970s and early 1980s. In this context, the theories of economic liberalism, championed by Friederich von Hayek, Milton Friedman and the Chicago School economists, provided an alternative. However, the divergent experience of the US, UK, Canada and Australia reveals two distinct ‘varieties’ of economic liberalism: the ‘neo-classical’ incarnation, which describes American and British liberal capitalism, and the more ‘balanced’ economic liberalism that evolved in Canada and Australia. In large part, these were a product of the way that liberal economic theory was understood and translated into policy, which in turn shaped the evolving relationship between the state and the private sector and the relative position of the financial sector within the broader economic system. Together, these determined the nature and extent of financial market regulation and the system’s relative stability during the 2008 crisis. -- PDF File: 61 -- Keywords: Corporate governance, Regulation, Financial market instability, Liberal capitalism, Varieties of capitalism -- downloaded pdf to Note
paper  SSRN  economic_history  20thC  21stC  post-WWII  post-Cold_War  US_politics  UK_politics  political_economy  political_culture  ideology  neoliberalism  economic_theory  economic_sociology  business_practices  business-and-politics  business-norms  business_influence  Keynesianism  neoclassical_economics  Austrian_economics  Chicago_School  capitalism-systemic_crisis  capitalism-varieties  corporate_governance  corporate_finance  capital_markets  capital_as_power  financialization  finance_capital  financial_regulation  Great_Recession  financial_crisis  policymaking  trickle-down  Canada  Australia  downloaded 
july 2015 by dunnettreader
Understanding the Modern Monetary System by Cullen O. Roche :: SSRN - revised April 1, 2013
Orcam Financial Group, LLC -- August 5, 2011 -- This paper provides a broad understanding of the workings of the modern fiat monetary system in the United States. The work is primarily descriptive in nature and takes an operational perspective of the modern fiat monetary system using the understandings of Monetary Realism. -- Pages in PDF File: 40 -- downloaded pdf to Note
macroeconomics  financial_economics  monetary_policy  monetary_theory  central_banks  banking  interest_rates  financial_system  financialization  demand-side  investment  economic_models  downloaded 
june 2015 by dunnettreader
Economist's View: 'Social Costs of the Financial Sector' - Luigi Zingale lecture and paper - May 2015
Via Tim Taylor, a quotation from Luigi Zingales ("watch video of the lecture or read the talk at his website"): "While there is no doubt that a developed economy needs a sophisticated financial sector, at the current state of knowledge there is no theoretical reason or empirical evidence to support the notion that all the growth of the financial sector in the last forty years has been beneficial to society. In fact, we have both theoretical reasons and empirical evidence to claim that a component has been pure rent seeking. ..." -- downloaded pdf to Note of Zingale paper
financial_system  financial_innovation  financial_sector_development  rent-seeking  financial_regulation  financialization  capital_markets  banking  NBFI  shadow_banking  economic_growth  video  downloaded 
may 2015 by dunnettreader
Reading About the Financial Crisis: A 21-Book Review by Andrew W. Lo :: SSRN
Massachusetts Institute of Technology (MIT) - Sloan School of Management; Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL); National Bureau of Economic Research (NBER) -- The recent financial crisis has generated many distinct perspectives from various quarters. In this article, I review a diverse set of 21 books on the crisis, 11 written by academics, and 10 written by journalists and one former Treasury Secretary. No single narrative emerges from this broad and often contradictory collection of interpretations, but the sheer variety of conclusions is informative, and underscores the desperate need for the economics profession to establish a single set of facts from which more accurate inferences and narratives can be constructed. -- Pages in PDF File: 41 -- Keywords: Financial Crisis, Systemic Risk, Book Review -- downloaded pdf to Note
paper  SSRN  reviews  books  economic_history  21stC  Great_Recession  financial_crisis  financial_system  financial_regulation  financialization  capital_markets  banking  NBFI  shadow_banking  regulation-enforcement  rent-seeking  fraud  debt  debtors  housing  securitization  derivatives  bank_runs  banking-universal  Glass-Steagal  risk_management  risk-systemic  financial_economics  global_system  global_imbalance  capital_flows  institutional_investors  institutional_economics  bubbles  Minsky  downloaded 
april 2015 by dunnettreader
Òscar Jordà, Moritz Schularick, and Alan M. Taylor - Mortgaging the Future? | The Big Picture - Guest Post - March 27th, 2015
In the six decades following World War II, bank lending measured as a ratio to GDP has quadrupled in advanced economies. To a great extent, this unprecedented expansion of credit was driven by a dramatic growth in mortgage loans. Lending backed by real estate has allowed households to leverage up and has changed the traditional business of banking in fundamental ways. This “Great Mortgaging” has had a profound influence on the dynamics of business cycles. -- update of their 2012 article that goes back to 19thC and does more breakdown of the changes in the financial services industry -- downloaded page as pdf to Note
US_economy  economic_history  macroeconomics  financial_system  financial_innovation  financial_crisis  housing  mortgages  credit  debt  debt_crisis  business_cycles  financialization  NBFI  real_estate  banking  macroprudential_policies  macroprudential_regulation  macroeconomic_policy  downloaded 
march 2015 by dunnettreader
James Kwak - Why Capitalism Is Against Big Banks (like JP Morgan) — Bull Market — Medium - Jan 2015
Pressure now from stock analysts to break up JPM, which isn't just too-big-to-fail but too big to manage -- The debate over JPMorgan is not a debate between capitalists and socialists. It’s a debate between two types of capitalists: those who care solely about returns, and those who care about size for its own sake. In this debate, let’s hope the greedy bastards win over the megalomaniacs.
banking  banking-universal  shareholder_value  financial_regulation  financialization  finance_capital 
january 2015 by dunnettreader
Jordà, Schularick and Taylor - Betting the House - NBER working paper - SSRN
They look at link between loose monetary policy, real estate lending, housing bubbles and financial instability. No surprise, they're correlated. Their added twist is to note that the same egfect can be produced by low intetest rates in effect "imported" by countries maintaining fixed exchange rates even if their domestic economic management is kosher - in a way, importing a business cycle snd misallocation of investment. The effect of these correlations to produce financial instability has increased over the decades. (undoubtedly exacerbated by the push to open capital accounts) SSRN version posted simultaneously with NBER version on SSRN - downloaded pdf to iPhone
capital_flows  business_cycles  credit  21stc  interest_rates  19thc  financial  crisis  financialization  monetary_policy  20thc  paper  asset  prices  bubbles  globalization  Pocket  real_estate  FX  SSRN  downloaded 
january 2015 by dunnettreader
Eric Rauchway, review - Martin Wolf, The Shifts and the Shocks (2014) | TLS Jan 2015
... his analysis, which holds that we knew how to avoid, counter and cure these troubles; we have simply – largely out of wilful ignorance and lack of courage – failed to do more than the barest minimum of what was necessary. Governments, banks and international institutions did “just enough, almost too late” to prevent the worst possible result, which would have been a note-for-note replay of the 1930s including a slide into fascism and world war. But having done no more than avoid world-historic catastrophe, we find ourselves mired in a dim morass of our own making, with no sunlit uplands in sight. Wolf offers a persuasive account that is also clear, though he relies on no single factor but several: hence the title of the book. It took both long-term shifts and a series of shocks to cause a crisis of such magnitude. Our world was born in the end of the Cold War. With capitalism triumphant, the victors liberalized their economies and so did the Communist nations, particularly China. Yet all was not well in this brave new world; international finance and trade threatened the stability of smaller, emerging economies, as the crises of the 1990s demonstrated.
financialization  bad_history  shadow  banking  Pocket  risk  global  economy  money  markets  global_imbalance  keynesian  business_influence  bad_economics  books  financial_regulation  liquidity  deregulation  minsky  investment  economic_growth  reviews  fed  Bank_of_England  great_recession  us_politics  leverage  capital_flows  race-to-the-bottom  business  ethics  political_economy  ecb  rents  uk  central_banks  investors  financial  crisis  financial_system  austerity  capital  economic_theory  us_economy  eurozone 
january 2015 by dunnettreader
ECONOMICS AS SOCIAL THEORY - Routledge Series edited by Tony Lawson - Titles List
Social theory is experiencing something of a revival within economics. Critical analyses of the particular nature of the subject matter of social studies and of the types of method, categories and modes of explanation that can legitimately be endorsed for the scientific study of social objects, are re-emerging. Economists are again addressing such issues as the relationship between agency and structure, between the economy and the rest of society, and between inquirer and the object of inquiry. There is renewed interest in elaborating basic categories such as causation, competition, culture, discrimination,evolution, money, need, order, organisation, power, probability, process, rationality, technology, time, truth, uncertainty and value, etc. The objective for this series is to facilitate this revival further. In contemporary economics the label `theory' has been appropriated by a group that confines itself to largely a-social, a-historical, mathematical `modelling'. Economics as Social Theory thus reclaims the `theory' label, offering a platform for alternative, rigorous, but broader and more critical conceptions of theorising.
books  social_theory  economic_theory  social_sciences  intellectual_history  political_economy  causation-social  economic_sociology  economic_culture  rationality-economics  rational_choice  rationality-bounded  rational_expectations  critical_realism  evolution-social  history_of_science  historical_sociology  agency-structure  power  power-asymmetric  business-and-politics  capitalism  capital_as_power  Marxist  Post-Keynesian  epistemology  epistemology-social  conventions  social_order  civil_society  public_policy  public_goods  anarchism  competition  financialization  development  economic_growth 
october 2014 by dunnettreader
Bichler, Shimshon and Nitzan, Jonathan - Differential Accumulation (Reprint) | bnarchives
Dissident Voice. 28 December 2011. pp. 1-13. (Magazine Article; English). -- This is the latest version of this eprint. -- Early in 2011, we received a surprising invitation from the Financial Times Lexicon. A reader had suggested that an entry on differential accumulation be added to the Lexicon, and the online content developer asked us if we would be willing to write it. Our first thought was that this must have been a mistake. . . . Keywords: capital, capitalization, differential accumulation, finance, investment, modes of power, sabotage -- downloaded pdf to Note
article  capital_as_power  capital  capitalism  capitalization  accumulation  accumulation-differential  financial_system  finance_capital  financialization  investment  power  power-asymmetric  sabotage-by_business  downloaded  EF-add 
october 2014 by dunnettreader
Jonathan Nitzan - Global Capital: Political Economy of Capitalist Power (YorkU, Graduate Seminar, Fall Term, 2014-15) | bnarchives
The seminar has two related goals: substantive and pedagogical. The substantive purpose is to tackle the question of capital head on. The course explores a spectrum of liberal and Marxist theories, ideologies and dogmas – as well as a radical alternative to these views. The argument is developed theoretically, historically and empirically. The first part of the seminar provides a critical overview of political economy, examining its historical emergence, triumph and eventual demise. The second part deals with the two ‘materialistic’ schools of capital – the liberal theory of utility and the Marxist theory of labour time – dissecting their structure, strengths and limitations. The third part brings power back in: it analyses the relation between accumulation and sabotage, studies the institutions of the corporation and the state and introduces a new framework – the capitalist mode of power. The final part offers an alternative approach – the theory of capital as power – and illustrates how this approach can shed light on conflict-ridden processes such as corporate merger, stagflation, imperialism and Middle East wars. Pedagogically, the seminar seeks to prepare students toward conducting their own independent re-search. Students are introduced to various electronic data sources, instructed in different methods of analysis and tutored in developing their empirical research skills. As the seminar progresses, these skills are used both to assess various theories and to develop the students’ own theoretical/empirical research projects. -- Keywords: arms accumulation capital capitalism conflict corporation crisis distribution elite energy finance globalization growth imperialism GPE liberalism Marxism military Mumford national interest neoclassical neoliberalism oil ownership peace power profit ruling class security stagflation state stock market technology TNC Veblen violence war -- syllabus and session handouts downloaded pdf to Note
bibliography  syllabus  capital_as_power  international_political_economy  political_economy  economic_theory  liberalism  neoliberalism  neoclassical_economics  Keynesian  Marxist  capital  capitalism  social_theory  power-asymmetric  globalization  financial_system  financial_regulation  risk-systemic  international_finance  finance_capital  financialization  production  distribution-income  distribution-wealth  inequality  MNCs  corporations  corporate_finance  corporate_ownership  corporate_control_markets  economic_growth  economic_models  imperialism  military  military-industrial_complex  IR_theory  ruling_class  class_conflict  energy  energy-markets  MENA  accumulation  accumulation-differential  capital_markets  public_finance  profit  investment  technology  elite_culture  elites-self-destructive  capitalism-systemic_crisis  Veblen  Mumford  downloaded  EF-add 
october 2014 by dunnettreader
Nitzan, Jonathan - LSE Public Event: Can Capitalists Afford Recovery? -- Video and Paper (May 2014) | bnarchives
Presentation at the LSE Department of International Relations. 27 May 2014. -- Theorists and policymakers from all directions and of all persuasions remain obsessed with the prospect of recovery. For mainstream economists, the key question is how to bring about such a recovery. For heterodox political economists, the main issue is whether sustained growth is possible to start with. But there is a prior question that nobody seems to ask: can capitalists afford recovery in the first place? If we think of capital not as means of production but as a mode of power, we find that accumulation thrives not on growth and investment, but on unemployment and stagnation. And if accumulation depends on crisis, why should capitalists want to see a recovery? -- Video duration: 2:24 hours -- Keywords: crisis, differential accumulation, economic policy, economic theory, expectations, growth, income distribution, Keynesianism, Marxism, monetarism, neoclassical economics, profit, underconsumption -- Subjects: BN State & Government, BN Power, BN Region - North America, BN Business Enterprise, BN Value & Price, BN Crisis, BN Production, BN Macro, BN Conflict & Violence, BN Money & Finance, BN Ideology, BN Distribution, BN Methodology, BN Capital & Accumulation, BN Policy, BN Class, BN Labour, BN Growth -- links to LSE on YouTube -- downloaded pdf to Note
paper  video  Great_Recession  financial_crisis  economic_growth  capital_as_power  capitalism-systemic_crisis  economic_theory  economic_models  macroeconomics  neoclassical_economics  Keynesian  Marxist  monetarism  monetary_policy  fiscal_policy  austerity  sovereign_debt  public_finance  public_policy  productivity  production  consumer_demand  underconsumption  investment  profit  productivity-labor_share  distribution-income  distribution-wealth  finance_capital  financialization  capitalization  accumulation  accumulation-differential  elites-self-destructive  elite_culture  ruling_class  class_conflict  Labor_markets  inequality  unemployment 
october 2014 by dunnettreader
Hyeng-Joon Park - Korea’s Post-1997 Restructuring: An Analysis of Capital as Power | forthcoming in Review of Radical Political Economics (2015) pp. 1-44 | bnarchives
This paper aims to transcend current debates on Korea’s post-1997 restructuring, which rely on a dichotomy between domestic industrial capital and foreign financial capital, by adopting Nitzan and Bichler’s capital-as-power perspective. Based on this approach, the paper analyzes Korea’s recent political economic restructuring as the latest phase in the evolution of capitalist power and its transformative regimes of capital accumulation. -- Keywords: differential accumulation dominant capital chaebols transnationalization strategic sabotage -- Subjects: BN State & Government, BN Institutions, BN Power, BN International & Global, BN Region - Asia, BN Business Enterprise, BN Value & Price, BN Crisis, BN Production, BN Conflict & Violence, BN Money & Finance, BN Distribution, BN Comparative, BN Capital & Accumulation, BN Policy, BN Class, BN Labour, BN Growth -- downloaded from author's blog to Note
article  international_political_economy  capital_as_power  globalization  Korea  East_Asia  20thC  21stC  economic_history  1990s  2000s  2010s  Asian_crisis  Asia_Pacific  international_finance  FDI  finance_capital  financialization  emerging_markets  oligopoly  chaebols  crony_capitalism  industry  production  capitalism  capitalism-systemic_crisis  capitalization  accumulation  distribution-income  distribution-wealth  cross-border  trade  productivity-labor_share  class_conflict  labor_share  Labor_markets  unions  violence  economic_growth  sabotage-by_business  business-and-politics  business-norms  power-asymmetric  public_policy  public_goods  corporate_finance  corporate_ownership  investment  banking  political_culture  economic_culture  economic_reform  economic_policy  democracy  opposition  downloaded  EF-add 
october 2014 by dunnettreader
Bichler, Shimshon and Nitzan, Jonathan - Nonlinearities of the Sabotage-Redistribution Process - Working Paper May 2014 | bnarchives
The relationship between sabotage and redistribution is inherently nonlinear. This research note illustrates aspects of this nolinearity in the case of the United States. 5 pages - Web page has links to small Excel sheet and 5 jpegs of the graphs. -- Keywords: sabotage redistribution United States-- Subjects: BN Conflict & Violence, BN Data & Statistics, BN Methodology, BN Resistance, BN Power, BN Region - North America, BN Capital & Accumulation, BN Business Enterprise -- downloaded pdf to Note
paper  data  capital_as_power  US_economy  political_economy  political_culture  economic_culture  business-and-politics  corporations  profit  distribution-income  labor_share  oligopoly  MNCs  military-industrial_complex  financial_system  finance_capital  financialization  accumulation  capitalism  capitalism-systemic_crisis  elites-self-destructive  inequality  neoliberalism  public_goods  sabotage-by_business  privatization  power-asymmetric  downloaded  EF-add 
october 2014 by dunnettreader
Bichler, Shimshon and Nitzan, Jonathan - The Asymptotes of Power - Real-World Economics Review. No. 60. June 2012. pp. 18-53 | bnarchives
Article workup of earlier conference paper -- This is the latest in a series of articles we have been writing on the current crisis. The purpose of our previous papers was to characterize the crisis. We claimed that it was a 'systemic crisis', and that capitalists were gripped by 'systemic fear'. In this article, we seek to explain why. The problem that capitalists face today, we argue, is not that their power has withered, but, on the contrary, that their power has increased. Indeed, not only has their power increased, it has increased by so much that it might be approaching its asymptote. And since capitalists look not backward to the past but forward to the future, they have good reason to fear that, from now on, the most likely trajectory of this power will be not up, but down. The paper begins by setting up our general framework and key concepts. It continues with a step-by-step deconstruction of key power processes in the United States, attempting to assess how close these processes are to their asymptotes. And it concludes with brief observations about what may lie ahead. -- Keywords: capitalization distribution power, systemic crisis -- Subjects: BN Money & Finance, BN Conflict & Violence, BN Distribution, BN Resistance, BN Power, BN Region - North America, BN Business Enterprise, BN Capital & Accumulation, BN Value & Price, BN Class, BN Crisis -- downloaded pdf to Note, also Excel data sheet
article  international_political_economy  capital_as_power  financial_system  international_finance  global_economy  global_system  ruling_class  transnational_elites  elite_culture  elites-self-destructive  globalization  power-asymmetric  Great_Recession  financial_crisis  finance_capital  financialization  distribution-income  distribution-wealth  profit  labor_share  risk-systemic  inequality  plutocracy  1-percent  conflict  violence  class_conflict  neoliberalism  corporate_citizenship  systems-complex_adaptive  systems_theory  grassroots  opposition  democracy  democracy_deficit  accumulation  capitalization  US_politics  US_economy  political_economy  political_culture  economic_culture  elites  rebellion  failed_states  property_rights  business-and-politics  business-norms  economic_growth  fear  data  capitalism-systemic_crisis  downloaded  EF-add 
october 2014 by dunnettreader
William M. Dugger and William Waller - Radical Institutionalism: From Technological to Democratic Instrumentalism | JSTOR: Review of Social Economy, Vol. 54, No. 2 (SUMMER 1996), pp. 169-189
This article explains the nature and significance of radical institutionalism. Radical institutionalism does not represent a break with the institutionalist paradigm, but an attempt to move it beyond its outmoded, Ayresian philosophical foundation. Radical institutionalism involves the introduction of three new elements into the contemporary stream of institutionalist works. These three new elements include an emphasis on Veblenian fundamentals, a shift in research interests, and a reconsideration of the philosophical foundations of inquiry. -- useful bibliography of generations of institutionalist theorists -- downloaded pdf to Note
article  jstor  social_theory  intellectual_history  economic_theory  economic_history  institutional_economics  epistemology-social  sociology_of_knowledge  capitalism  corporations  welfare_state  democracy  Veblen  class_conflict  financialization  ruling_class  postmodern  Post-Keynesian  epistemology  critical_realism  bibliography  downloaded  EF-add 
october 2014 by dunnettreader
Michael Hudson - Veblen’s Institutionalist Elaboration of Rent Theory - Working Paper No. 729 | Levy Economics Institute - August 2012
As the heirs to classical political economy and the German historical school, the American institutionalists retained rent theory and its corollary idea of unearned income. More than any other institutionalist, Thorstein Veblen emphasized the dynamics of banks financing real estate speculation and Wall Street maneuvering to organize monopolies and trusts. Yet despite the popularity of his writings with the reading public, his contribution has remained isolated from the academic mainstream, and he did not leave behind a “school.” Veblen criticized academic economists for having fallen subject to “trained incapacity” as a result of being turned into factotums to defend rentier interests. Business schools were painting an unrealistic happy-face picture of the economy, teaching financial techniques but leaving out of account the need to reform the economy’s practices and institutions. In emphasizing how financial “predation” was hijacking the economy’s technological potential, Veblen’s vision was as materialist and culturally broad as that of the Marxists, and as dismissive of the status quo. Technological innovation was reducing costs but breeding monopolies as the finance, insurance, and real estate (FIRE) sectors joined forces to create a financial symbiosis cemented by political-insider dealings—and a trivialization of economic theory as it seeks to avoid dealing with society’s failure to achieve its technological potential. The fruits of rising productivity were used to finance robber barons who had no better use of their wealth than to reduce great artworks to the status of ownership trophies and achieve leisure-class status by funding business schools and colleges to promote a self-congratulatory but deceptive portrayal of their wealth-grabbing behavior. -- Associated Program: Explorations in Theory and Empirical Analysis -- downloaded pdf to Note
paper  intellectual_history  19thC  20thC  Veblen  entre_deux_guerres  economic_history  economic_theory  institutional_economics  political_economy  classical_economics  neoclassical_economics  marginalists  German_historical_school  professionalization  academia  philanthropy  Gilded_Age  robber_barons  finance_capital  technology  investment  monopolies  speculative_finance  financial_system  financialization  antitrust  history-and-social_sciences  rentiers  rent-seeking  business-and-politics  business-norms  busisness-ethics  business_schools  downloaded  EF-add 
october 2014 by dunnettreader
Sunanda Sen - The Meltdown of the Global Economy: A Keynes-Minsky Episode? - Working Paper No. 623 | Levy Economics Institute | September 2010
The paper begins with some theoretical concerns relating to factors that could trigger a crisis similar to the global economic crisis that began in 2008. The first concern relates to the deregulated financial institutions and the growing uncertainty that can be witnessed in these liberalized financial markets. The second relates to financial engineering with innovations in these markets, simultaneously providing cushions against risks while generating flows of liquidity that remain beyond the conventional sources of bank credit. Interpreting the role of uncertainty, one can observe the connections between investment and finance, both of which are subject to changes in the state of expectations. The initial formulation can be traced back to Keynes’s General Theory, where liquidity preference is linked to asset prices and new investments. The Keynesian analysis was reformulated in 1986 by Minsky, who introduced the possibility of sourcing external finance through debt, which further adds to the impact of uncertainty. Minsky’s characterization of deregulated financial markets considers the newfangled sources of nonbank credit, especially with the involvement of banks in the securities market under the universal banking model. As for the institutional arrangements that provide for profits on transactions, financial assets bought and sold in the primary market as initial public offerings of stocks are usually transacted later, in the secondary market, where these are no longer backed by physical assets.In the upswing, finance creates a myriad of financial claims and liabilities, and thus becomes increasingly remote from the real economy, while innovations to hedge and insulate assets continue to proliferate in the financial market, especially in the presence of uncertainty. The paper looks especially at the US. This is appended by a stylized account of the turn of events in terms of a theoretical model that highlights the role of uncertainty in the process. -- Associated Program: Monetary Policy and Financial Structure -- downloaded pdf to Note
paper  economic_theory  financial_crisis  bubbles  Great_Recession  financial_system  finance_capital  financialization  financial_innovation  banking  financial_regulation  derivatives  risk  risk-systemic  uncertainty  expectations  capital_markets  NBFI  intermediation  speculative_finance  securitization  Glass-Steagal  investment  investors  asset_management  real_economy  real_estate  Keynes  liquidity  Minsky  credit  debt  deleverage  leverage  asset_prices  banking-universal  disintermediation  money_market  Ponzi_finance  IPOs  secondary_markets  fragility  resilience  downloaded  EF-add 
october 2014 by dunnettreader
Cassandra Does Tokyo: Sympathy For The Devil -July 2014
Brilliantly horrifying mock CV of a senior executive moving through all the financial ibdustry's greatest "hits" of the past quarter century, starting with Citibank generating loan deals in the NICs to recycle pétrodollars, through Drexel stuffing LBO junk bonds in related fiduciaries, Long Term Capital, dot com bubble, commodity "swaps" as low risk uncorrelated asset class, of course mortgage securitization, HFT "liquidity provision" via order sniffing, front running, dark pools, selective "market making", and designing equity portfolio insurance for post crash terrified institutional investors (who would lose the entire upside of past 5 years stock prices, plus a few ywists, especially from the '90s involving derivatives, the Nikkei, etc that were off my radar screen. Only thing I think he left out were the various municipal finance scams.
20thC  post-Cold_War  21stC  economic_history  financialization  Great_Recession  financial_innovation  bubbles  busisness-ethics  institutional_investors  derivatives  securitization  HFT  emerging_markets  fraud  fiduciaries  financial_regulation  finance_capital 
september 2014 by dunnettreader
David Fields - NAKED KEYNESIANISM: Ben Fine on the Material Culture of Financialisation
A FESSUD Working paper by Ben Fine. -- From the abstract: -- The purpose of this paper is threefold. First is to comment upon the nature of financialisation. Second is to frame how this leads financialisation to be understood whether consciously or otherwise. And, third, is to draw out implications for surveying households as their experiences and understandings of, and reactions to, financialisation without specifically designing a questionnaire itself for this purpose. As should already be apparent, underpinning this contribution is the presumption that financialisation is a characteristic of contemporary capitalism (and that the term is also an appropriate category for representing this characteristic). The material culture of financialisation is addressed by drawing upon the 10 Cs approach that was developed for the study of consumption, highlighting how it is Constructed, Construed, Commodified, Conforming, Contextual, Contradictory, Closed, Contested, Collective, and Chaotic. - downloaded pdf to Note
economic_culture  financialization  social_theory  consumers  finance_capital  downloaded  EF-add 
september 2014 by dunnettreader
Coen Teulings, Richard Baldwin - Secular stagnation: Facts, causes, and cures – a new Vox eBook | vox 10 September 2014
The CEPR Press eBook on secular stagnation has been viewed over 80,000 times since it was published on 15 August 2014. -- Six years after the Crisis and the recovery is still anaemic despite years of zero interest rates. Is ‘secular stagnation’ to blame? Introduction - Coen Teulings and Richard Baldwin **--** I. Opening the debate -- 1. Reflections on the ‘New Secular Stagnation Hypothesis’, Laurence H Summers. **--** II. Three issues: Potential growth, effective demand, and sclerosis -- 2. Secular stagnation: A review of the issues, Barry Eichengreen -- 3. The turtle’s progress: Secular stagnation meets the headwinds, Robert J Gordon -- 4 Four observations on secular stagnation, Paul Krugman. -- 5. Secular joblessness, Edward L Glaeser. **--** III. Further on potential growth. -- 6. Secular stagnation? Not in your life - Joel Mokyr. -- 7 Secular stagnation: US hypochondria, European disease?, Nicholas Crafts. **--** IV. Further on effective demand. -- 8. A prolonged period of low real interest rates?, Olivier Blanchard, Davide Furceri and Andrea Pescatori. -- 9. On the role of safe asset shortages in secular stagnation, Ricardo J Caballero and Emmanuel Farhi. -- 10. A model of secular stagnation, Gauti B. Eggertsson and Neil Mehrotra. -- 11. Balance sheet recession is the reason for secular stagnation, Richard C Koo. -- 12. Monetary policy cannot solve secular stagnation alone
Guntram B Wolff. **--** V. Further on sclerosis -- 13. Secular stagnation: A view from the Eurozone, Juan F. Jimeno, Frank Smets and Jonathan Yiangou -- downloaded pdf to Note
books  etexts  kindle-available  economic_history  18thC  19thC  20thC  21stC  economic_theory  economic_growth  Great_Recession  stagnation  international_political_economy  capitalism  financialization  productivity  investment  technology  Labor_markets  unemployment  demand-side  supply-side  infrastructure  welfare_state  sovereign_debt  fiscal_policy  monetary_policy  central_banks  leverage  risk  uncertainty  macroeconomics  macroprudential_policies  international_monetary_system  global_economy  global_imbalance  interest_rates  profit  wages  Eurozone  US_economy  downloaded  EF-add 
september 2014 by dunnettreader
The People vs. Federal Bank Settlements and Liquidity Rules | Demos - September 2014
The Big Six settlements are negligible compared to the damage their practices (and the practices of the investment banks they bought at the onset of the crisis rendering them bigger) considering that since 2006, there have been foreclosure actions brought against nearly 15 million homes. With an average value of about $191,000 per home, the total value represented by those foreclosure actions is approximately $2.8 trillion - a far cry from $106 billion. Let this sink in. Our government and bankers settled on $32 billion in maybe-aid to borrowers relative to $2.8 trillion of foreclosed properties many of which are being scooped up by hedge and private equity funds financed by the same big banks. Not only that. These banks have been able to access money at close to 0 percent interest courtesy of the Federal Reserve for nearly six years. Yet, rather than reducing mortgage principals with that extra cheap money, they stockpiled a record volume of $2.5 trillion in excess reserves at the Federal Reserve for which they are reaping 0.25% interest – higher interest than they give their mere mortal customers. -- and the banks are throwing a tizzy fit over increasing liquidity from 1 to 2% of assets -- post also gives figures on obscene consolidation of US banking since the crisis in BofA, Wells Fargo and JPMorganChase
US_economy  US_government  Fed  financial_regulation  banking  Great_Recession  housing  regulation-enforcement  financialization  financial_crisis  inequality  antitrust  oligarchy  political_economy  EF-add 
september 2014 by dunnettreader
Matthew Klein - BIS says we should follow the money | FT Alphaville - September 2014
Quote "In the case of European banks intermediating US dollar funding, the boundary defined for national income accounting is traversed twice, so that the usual net flows do not capture the activities of the financial intermediaries engaging in the maturity transformation in the mortgage market… If the objective is to gauge credit conditions and overall financial vulnerability, the current account was of very limited use. Rather than the global saving glut, a more plausible culprit for subprime lending in the United States was the global banking glut. / end quote - (The short version of the “global banking glut” theory is that the creation of the euro caused risk premiums in the single currency zone to collapse and encouraged banks to dramatically increase both their leverage and their absolute size. The net effect was excessive credit growth to the US, UK, Spain, Ireland, and Greece.) The paper concludes by making an appeal for changing the way economists think about the relationship between the macroeconomy and the financial system: Quote: "One should not ask what the real side of the equation means for its financial counterpart, but what the financial side means for its real counterpart. The starting point should be what happens in financial asset markets rather than in the goods markets, domestically and internationally. Otherwise, there is a risk that the financial side will be neglected." //end quote -- downloaded pdf to Note
economic_history  economic_theory  Great_Recession  Great_Depression  financialization  capital_markets  money_market  banking  capital_flows  international_political_economy  international_finance  downloaded  EF-add 
september 2014 by dunnettreader
Steve Denning - The Copernican Revolution In Management - Forbes - July 2013
Today’s hierarchical bureaucracies are so out-of-step with the current marketplace in which power has shifted from seller to buyer that we cannot wait for the results of definitive long-term scientific studies. As Don Tapscott said in this column last week, “The fundamental problem facing all our institutions today, including government, is not related to conjunctural economic changes. It’s not a business cycle that we are going through. It’s not a cyclical change. It’s a secular change. We are at a punctuation point in human history where the industrial age and institutions have finally come to their logical conclusion. They have essentially run out of gas.” The shareholder value theory is thus only a small part of the problem. It is part of a web of obsolete management ideas that no longer fit the 21st Century marketplace. As noted below, other once-sacred truths in management are part of the same failing paradigm. Absorbing even a couple of these fundamental shifts will take time. Absorbing them all, and acquiring the skills and attitudes necessary to implement them, will not be easy or quick. -- large number of links to recent articles, papers etc
globalization  global_economy  business  management  corporate_governance  technology  networks-business  hierarchy  shareholder_value  capital_markets  investors  financialization  Labor_markets  Innovation  capitalism  executive_compensation  1-percent  inequality  links 
august 2014 by dunnettreader
Steve Denning - HBR Blows The Lid Off C-Suite Over-Compensation - Forbes - Feb 2012
At the heart of the disaster, according to Desai, is market-based compensation—the idea that the C-Suite and financial managers should be compensated by the issuance of stock. The idea was intended to align managers’ interests with those of shareholders, but the result has been the opposite. According to Desai, the idea is “intellectually flawed” and “a foundational myth.” That’s because in implementing market-based compensation, there is a failure to distinguish results due to sheer luck (beta) from the results due to skill (alpha). Moreover those who should be monitoring compensation—pension funds, mutual funds and foundations—have not only been asleep at the wheel: they have been actively complicit in the debacle. They have “readily outsourced performance evaluation and compensation in order to avoid their obligation to make tough decisions and bring pay into line with performance.” “The combination of a foundational myth and absent monitors over the past 2 decades gave rise to harmful incentives, asymmetrical payoffs and windfall compensation levels… The result has been the creation of perhaps the largest and most pernicious bubble of all: a giant financial incentive bubble.” This in turn results in “the twin crises of American capitalism: repeated governance failures, which lead many to question the stewardship abilities of American managers and investors and rising income inequality.” Even worse, the skewed incentives and huge unearned windfalls have given rise to righteous but unwarranted belief in entitlement: the individuals “now consider themselves entitled to such rewards. Until the financial incentives bubble is popped, we can expect mis-allocations of financial, real and human capital to continue.” -- Desai is pessimistic re reforms - Denning continues with things Desai left out
capitalism  management  executive_compensation  financialization  corporate_governance  capital_markets  shareholders  shareholder_value  investors  norms-business  1-percent  inequality 
august 2014 by dunnettreader
Steve Denning - From CEO 'Takers' To CEO 'Makers': The Great Transformation - Forbes - August 2014
CEOs, through the pervasive use of share buybacks, have become takers, not makers. Instead of creating value for their organizations and society, they are extracting value. Pervasive share buybacks are an economic, social and moral disaster: they contribute to loss of shareholder value, crippled capacity to innovate, runaway executive compensation, destruction of jobs, rapidly increasing inequality and sustained economic stagnation. Yet share buybacks have become “an unhealthy corporate obsession,” even “an addiction.” The situation is one of fundamental institutional failure. CEOs are extracting value from their firms. Business schools are teaching them how to do it. Institutional shareholders are complicit in what the CEOs are doing. Regulators pursue individuals but remain indifferent to systemic failure. Rating agencies reward malfeasance. Analysts applaud short-term gains and ignore obvious long-term rot. Politicians stand by and watch. In a great betrayal, the very leaders who should be fixing the system are complicit in its continuance. Unless our society reverses course, it is heading for a cataclysm. The solution to fundamental institutional failure goes beyond passing a few regulations or changing the behavior of a few CEOs. It involves changes in behavior in a whole set of institutions and actors: -- Change won’t happen merely by pointing out that shareholder primacy is a bad idea. Bad ideas don’t die just because they are bad. They hang around until a consensus forms around another idea that is better. Fortunately, a consensus is emerging around a better idea. The idea isn’t new. It’s Peter Drucker’s foundational insight of 1973: the only valid purpose of a firm is to create a customer. It’s through providing value to customers that firms justify their existence. Profits and share price increases are the result, not the goal of a firm’s activities
business  busisness-ethics  norms-business  corporate_governance  corporate_finance  investment  investors  management  financialization  finance_capital  capital_markets  inequality  1-percent  Drucker_Peter  Friedman_Milton  shareholder_value  profit 
august 2014 by dunnettreader
Joshua Clover, review essay - Autumn of the Empire [post the Great Recession] | The Los Angeles Review of Books July 2011
Books discussed - Richard Duncan, The Dollar Crisis: Causes, Consequences, Cures *--* Robert Brenner, The Economics of Global Turbulence *--* Giovanni Arrighi, The Long Twentieth Century: Money, Power and the Origins of Our Times *--* Giovanni Arrighi, Adam Smith in Beijing *--*--*--* All three authors are heterodox from view of what passes for informed discourse about economic theory or political economy - by the conclusion of the essay, Giovanni Arrighi's longue-durée of transitions of a succession of capitalist empires becomes the vantage point for discussions of how we got to the Great Recession as well as where we have to start thinking about another way of understanding the geopolitical dynamics of global capitalism (or the global capitalist dynamics of geopolitics) Other TAGGED AUTHORS - Jill Ciment, Paul Krugman, Fernand Braudel, Joseph Schumpeter, John Maynard Keynes, Karl Marx, T.S. Eliot *--* Other TAGGED BOOKS - Reinhardt and Rogoff, This Time It's Different, *--* Michael Lewis, The Big Short: Inside the Doomsday Machine
books  reviews  global_economy  globalization  international_political_economy  financialization  financial_crisis  economic_history  geopolitics  empires  empire-and_business  world_history  world_systems  cycles  15thC  16thC  17thC  18thC  19thC  20thC  Genoa  city_states  Dutch_Revolt  Dutch  British_Empire  US-China  US-empire  imperialism  imperial_overreach  trade  trading_companies  production  productivity  capitalism  competition  profit  investment  international_monetary_system  translatio_imperii  Annales  bubbles  labor  off-shoring  investors  American_exceptionalism  EF-add 
august 2014 by dunnettreader
The Slack Wire: The Nonexistent Rise in Household Consumption
Did you know that about 10 percent of private consumption in the US consists of Medicare and Medicaid? Despite the fact that these are payments by the government to health care providers, they are counted by the BEA both as income and consumption spending for households. I bet you didn't know that. I bet plenty of people who work with the national income accounts for a living don't know that. I know I didn't know it, until I read this new working paper by Barry Cynamon and Steve Fazzari. I've often thought that the best macroeconomics is just accounting plus history. This paper is an accounting tour de force. What they've done is go through the national accounts and separate out the components of household income and expenditure that represent cashflows received and made by households, from everything else. -- long discussion of paper at SSRN - didn't download -- downloaded pdf to Note of Mason paper showing household debt not from borrowing for consumption but effects of high interest and disinflation
paper  SSRN  economic_history  US_economy  consumers  debt  wages  financialization  housing  health_care  statistics  downloaded  EF-add 
may 2014 by dunnettreader
Rajiv Sethi: Superfluous Financial Intermediation - April 2014
I'm only about halfway through Flash Boys but have already come across a couple of striking examples of what might charitably be called superfluous financial intermediation. This is the practice of inserting oneself between a buyer and a seller of an asset, when both parties have already communicated to the market a willingness to trade at a mutually acceptable price. If the intermediary were simply absent from the marketplace, a trade would occur between the parties virtually instantaneously at a single price that is acceptable to both. Instead, both parties trade against the intermediary, at different prices. The intermediary captures the spread at the expense of the parties who wish to transact, adds nothing to liquidity in the market for the asset, and doubles the notional volume of trade.
capital_markets  HFT  financialization  financial_regulation  books  reviews  kindle-available  EF-add 
may 2014 by dunnettreader
James Galbraith - review of Thomas Piketty - Kapital for the Twenty-First Century? | Dissent Magazine
Very useful critique of notion of "capital" used by Piketty. Doesn't quarrel with the accumulation dynamics but the attempt to tie rates of return on "capital" and growth rates (presumably reflecting capital labor ratio). What Piketty is really measuring isn't capital in the production function (which in any event Galbraith dings per the Cambridge capital theorists), but financial wealth, which varies with asset prices. The historical pattern of the ratio of wealth to GDP is accurate, but not the causal story.
books  reviews  capital  capitalism  inequality  economic_growth  economic_history  economic_theory  taxes  interest_rates  rentiers  plutocracy  financialization  finance_capital  EF-add 
april 2014 by dunnettreader
Antill, Hou & Sarkar - The Growth of Murky Finance - Liberty Street Economics March 2014
In series on large, complex financial institutions -- By either measure, the financial sector has been a growing part of the economy. It has mostly increased in relative size over the past four decades, interrupted in a major way only by the recent financial crisis (see chart below). On average, the financial sector has accounted for about 50 percent of the asset values of publicly listed firms, but roughly 70 percent of total business sector liabilities. Hence, one reason to worry about the size of this sector is its high representation among private firms that have virtually no transparency.
financial_system  international_finance  banking  shadow_banking  financial_regulation  financialization  capital_markets  leverage  EF-add 
april 2014 by dunnettreader
Nauro F Campos, Stefan Dercon - The finance and growth nexus in low-income countries | vox March 2014
Financial development and growth have long been linked. This column argues that there remain fundamental lacunae in our understanding of the finance-growth nexus. Three main areas for future research are identified: aid, institutions and technology. DFID linked paper -- Five recent findings are worth mentioning. One is that the long-run effect of finance on growth is indeed positive and dominates the short-term effect that tends to be negative. This was first uncovered on a cross-country setting by Kaminsky and Schmukler (2003) and Loayza and Ranciere (2006) (see Campos et al. 2012 for within-country evidence.) The second is that the relationship may be non-linear. Beyond a certain threshold (calculated to be above 100% of GDP) finance is associated with negative growth (Berkes et al. 2012). A noteworthy third finding refers to distribution. Who gets credit matters. Household credit seems to have little growth payoffs, while private sector credit has large growth payoffs (see Beck, 2013, and references therein). Fourth, financial development reduces income inequality and exerts a disproportionally positive impact on the bottom quintile. One may think finance is pro-growth and pro-rich but evidence only supports the former (Beck et al. 2007). Fifth and finally, different financial liberalisation policies have contrasting effects on income inequality. For instance, Delis et al. (forthcoming) reports that capital stringency and supervisory power regulation lower inequality, while market discipline and activity restrictions may exacerbate it.
financial_sector_development  emerging_markets  capital_markets  banking  microfinance  capital_flows  financial_regulation  financial_system  financialization  financial_innovation  EF-add 
march 2014 by dunnettreader
Thomas Palley » Blog Archive » Explaining Stagnation: Why it Matters
Welcoming Summers and Krugman attention to secular stagnation -- links to his papers and books -- That report [New America Foundation] became a core chapter in my 2012 book, From Financial Crisis to Stagnation, the blurb for which reads: “The U.S. economy today is confronted with the prospect of extended stagnation. This book explores why…. Financial deregulation and the house price bubble kept the economy going by making ever more credit available. As the economy cannibalized itself by undercutting income distribution and accumulating debt, it needed larger speculative bubbles to grow. That process ended when the housing bubble burst. The earlier post–World War II economic model based on rising middle-class incomes has been dismantled, while the new neoliberal model has imploded. Absent a change of policy paradigm, the logical next step is stagnation. The political challenge we face now is how to achieve paradigm change.”
US_economy  international_political_economy  neoliberalism  financial_crisis  financialization  Great_Recession  macroeconomics  stagnation  EF-add 
february 2014 by dunnettreader
Howard Davies - The Banks that Ate the Economy - Project Syndicate Feb 2014
Links to 3 papers downloaded to Note -- Bank of England Governor Mark Carney surprised his audience at a conference late last year by speculating that banking assets in London could grow to more than nine times Britain’s GDP by 2050. His forecast represented a simple extrapolation of two trends: continued financial deepening worldwide (that is, faster growth of financial assets than of the real economy), and London’s maintenance of its share of the global financial business.
These may be reasonable assumptions, but the estimate was deeply unsettling to many. Hosting a huge financial center, with outsize domestic banks, can be costly to taxpayers. In Iceland and Ireland, banks outgrew their governments’ ability to support them when needed. The result was disastrous.
paper  economic_growth  financialization  financial_innovation  financial_sector_development  financial_system  financial_regulation  financial_crisis  finance_capital  bubbles  productivity  downloaded  EF-add 
february 2014 by dunnettreader
Dani Rodrik - the fundamental lessons about emerging economies that economists have refused to learn. - Project Syndicate Feb 2014
The deeper problem lies with the excessive financialization of the global economy that has occurred since the 1990’s. The policy dilemmas that have resulted – rising inequality, greater volatility, reduced room to manage the real economy – will continue to preoccupy policymakers in the decades ahead. It is true, but unhelpful, to say that governments have only themselves to blame for having recklessly rushed into this wild ride. It is now time to think about how the world can create a saner balance between finance and the real economy
emerging_markets  international_finance  international_political_economy  capital_flows  financial_sector_development  FX  financialization 
february 2014 by dunnettreader
Simon Wren-Lewis - mainly macro: UK banks and the productivity puzzle: it may not just be about limited lending
However there may be another process behind the UK's productivity puzzle that has to do with banks, but not the volume of bank lending. About a third of bank lending to SMEs is accounted for by one bank: the Royal Bank of Scotland. (At the time of the financial crisis its market share was 40%: see the Independent Lending Review commissioned by RBS, page 25.) It has become increasingly clear that the RBS has been a seriously mismanaged bank. At the end of 2011 the Financial Services Authority issued a report which was extremely critical of the quality of management at RBS. Part of that poor management included a huge expansion in property based loans before the financial crisis. When those loans went bad, it was many of their SME customers who took the hit, according to a report just issued by Lawrence Tomlinson, the "entrepreneur in residence" at the Business, Innovation and Skills Department. Among other things the report alleges that RBS has been forcing viable businesses with short-term cash flow problems into its corporate restructuring arm with the aim of forcing foreclosure and then making a profit from selling off property assets.. ... Hamish McRae argues that gradually this ‘duty of care’ that banks once had with their customers has been replaced by a desire to flog products. And as the PPI scandal illustrates, banks seem not to worry about whether their customers need these products, as long as the sale is made. In terms of SMEs, some of the major damage may have been done by interest rate swaps: often complex hedging products which buyers may have not understood, or may have been missold. RBS appears to be heavily exposed to compensation claims involving these products.
UK_economy  banking  financialization  financial_regulation  SMEs  productivity 
december 2013 by dunnettreader
Simon Wren-Lewis - mainly macro: Stages of Economic Recovery in the UK - Nov 2013
Lots of links -- Presentation re 3 stages of economic recovery and why UK stalled for 3 years in not getting Stage 2 bounce back growth due to austerity after returning to growth in 2010 - and fears won't reach Stage 3, maintenance of high growth for long period to return to pre recession productive capacity trend line. Banks as a central worry

-- quote-- So answering the productivity puzzle is the key to knowing what kind of recovery we will have. My suspicion, shared by others at the Bank of England and elsewhere, is that some of the answer is to be found back where the recession began – with UK banks. Bank lending to firms is important in increasing productivity, because it allows the productive firms to expand (at home and overseas), and the new start ups to displace the older, less efficient firms. So when bank lending collapsed in the recession, productivity collapsed. If banks start lending again to these new and more productive (but also more risky) firms, we may be able to make up a good deal of that lost ground......

So how are we with fixing the banks? The honest answer is I do not know, but let me end with a concern. So this is a recession created by banks, and there is a real danger that the power banks have over governments, and this government in particular, may mean we never make up the ground we have lost.
21stC  UK_economy  Great_Recession  banking  financialization  financial_regulation  rent-seeking  risk  austerity  productivity  unemployment  wages  capital  investment  links  EF-add 
december 2013 by dunnettreader
Matt Levine - Financial Innovation Is Depressing - Bloomberg Nov 2013
Riffing off a Dealbook special section on Wall Street innovation -- There are basically three categories of financial innovation here:
Cut costs by providing less and worse service.
Better marketing of old, possibly unpleasant things.
Clever new fraud.

Followed by a roundup of what's passed for innovation and the destruction wrought over the past few decades.
financial_innovation  capital_markets  banking  investment  financial_crisis  financialization  fraud  EF-add 
november 2013 by dunnettreader
Kari Polanyi Levitt - From the Great Transformation to the Great Financialization (2013) | | Fernwood Publishing
On Karl Polanyi and Other Essays -- Four years into the unfolding of the most serious economic crisis since the 1930s, Karl Polanyi’s prediction of the fateful consequences of unleashing the destructive power of unregulated market capitalism on peoples, nations and the natural environment has assumed new urgency and relevance. The system of unregulated or free market capitalism has a propensity towards crisis, which is reflected in both the dynamics of the Great Depression of the 1930s and the advent of the new world order of neoliberal globalization of the 1980s, ushering in “the great financialization.”

Part I. Polanyi on Capitalism, Socialism, and Democracy Transformations: Past, Present, and Future?
• Hayek from Vienna to Chicago: Architect of the Neoliberal Creed
• The Roots of Polanyi’s Socialist Vision
• Back to the Future: The World Economic Crisis of the 1930s
• Keynes and Polanyi: The 1920s and the 1990s
• Leading Concepts in the Work of Karl Polanyi and Their Contemporary Relevance
• Culture and Economy
• Social Dividend as a Citizen Right

Part II. The Global South from Conquest and Exploitation to Self-reliant Development Structural Continuity and Economic Dependence in the Capitalist World System
• Mercantilist Origins of Capitalism and Its Legacies: Decline of the West and Rise of the Rest
• The Great Financialization
• Development Economics in Perspective
• Reclaiming Policy Space for Equitable Economic Development
• Intellectual Independence and Transformative Change in the South
• Postscript on Globalization and Development
• Epilogue
books  global_economy  political_economy  international_political_economy  development  mercantilism  economic_culture  economic_sociology  Polanyi  capitalism  Great_Recession  financial_crisis  financialization  intellectual_history  20thC  Keynes 
october 2013 by dunnettreader
L. Randall Wray - Minsky’s Money Manager Capitalism and the Global Financial Crisis - Levy Economics Institute | WORKING PAPER NO. 661 | March 2011
The world’s worst economic crisis since the 1930s is now well into its third year. All sorts of explanations have been proffered for the causes of the crisis, from lax regulation and oversight to excessive global liquidity. Unfortunately, these narratives do not take into account the systemic nature of the global crisis. This is why so many observers are misled into pronouncing that recovery is on the way—or even under way already. I believe they are incorrect. We are, perhaps, in round three of a nine-round bout. It is still conceivable that Minsky’s “it”—a full-fledged debt deflation with failure of most of the largest financial institutions—could happen again.

Indeed, Minsky’s work has enjoyed unprecedented interest, with many calling this a “Minsky moment” or “Minsky crisis.” However, most of those who channel Minsky locate the beginnings of the crisis in the 2000s. I argue that we should not view this as a “moment” that can be traced to recent developments. Rather, as Minsky argued for nearly 50 years, we have seen a slow realignment of the global financial system toward “money manager capitalism.” Minsky’s analysis correctly links postwar developments with the prewar “finance capitalism” analyzed by Rudolf Hilferding, Thorstein Veblen, and John Maynard Keynes—and later by John Kenneth Galbraith. In an important sense, over the past quarter century we created conditions similar to those that existed in the run-up to the Great Depression, with a similar outcome. Getting out of this mess will require radical policy changes no less significant than those adopted in the New Deal.
20thC  21stC  Great_Recession  intellectual_history  finance_capital  financialization  investment  capitalism  Veblen  Minsky  institutional_economics  economic_theory  economic_culture  downloaded  EF-add 
september 2013 by dunnettreader
Beyond the Minsky Moment: Where We’ve Been, Why We Can’t Go Back, and the Road Ahead for Financial Reform - Levy Economics Institute | EBOOK | April 2012
In December 2007, when most analysts were confident that the subprime mortgage crisis would be “contained” without major impact on the financial system, a working paper issued by the Levy Institute concluded, “The stage is set for a typical Minsky debt deflation in which position has to be sold to make position—that is, the underlying assets have to be sold in order to repay investors. . . . Retrenchment of consumer spending may become a reality, buttressed by the continued decline in the dollar. . . . That, along with rising petroleum prices, will further reduce real incomes and make meeting mortgage debt service that much more difficult. The system thus seems poised for a Minsky-Fisher style debt deflation that further interest rate reductions will be powerless to stop.”

Clearly, Levy Institute scholars expected an alternative evolution of events, one that would threaten the very foundations of the financial system and confirm Hyman Minsky’s thesis that financial crises are the endogenous result of system operations. Events proved them right, and as the crisis evolved and the need for regulatory change became obvious, they built on Minsky’s financial instability hypothesis to begin developing viable proposals for systemic reform.

This ebook traces the roots of the 2008 financial meltdown to the structural and regulatory changes leading from the 1933 Glass-Steagall Act to the Financial Services Modernization Act of 1999, and on through to the subprime-triggered crash. It evaluates the regulatory reactions to the global financial crisis—most notably, the 2010 Dodd-Frank Act—and, with the help of Minsky’s work, sketches a way forward in terms of stabilizing the financial system and providing for the capital development of the economy.
books  online_texts  21stC  economic_history  Great_Recession  financial_crisis  financialization  financial_regulation  disintermediation  banking  capital_markets  macroeconomics  economic_theory  investment  finance_capital  EF-add 
september 2013 by dunnettreader
Philip Arestis, Ana Rosa. González Óscar Dejuán - Investment, Financial Markets, and Uncertainty WORKING PAPER NO. 743 | December 2012 - Levy Economics Institute | Publications
This paper provides a theoretical explanation of the accumulation process, which accounts for the developments in the financial markets over the recent past. Specifically, our approach is focused on the presence of correlations between physical and financial investment, and how the latter could affect the former. In order to achieve this objective, two assets are considered: equities and bonds. This choice permits us to account for two extreme alternative possibilities: taking risk in the short run with unknown profits, or undertaking a commitment to the long run with known yields. This proposal also accounts for the influence of the cost of external finance and the impact of financial uncertainty, as proxied by the interest rate in the former case and the exchange rate in the latter case; thereby utilizing the Keynesian notion of conventions in the determination of investment. The model thus formulated is subsequently estimated by applying the difference GMM and the system GMM in a panel of 14 OECD countries from 1970 to 2010.
20thC  21stC  post-WWII  economic_history  OECD_economies  financialization  economic_models  investment  equity  debt  risk  capital  Keynesianism  EF-add 
september 2013 by dunnettreader
Eileen Appelbaum, Rose Batt, Ian Clark - Financial Capitalism and Employment Relations: Evidence from Breach of Trust and Implicit Contracts in Private Equity Buyouts - 2013 - | Wiley Online Library
British Journal of Industrial Relations
Across Boundaries: The Global Challenges Facing Workers and Employment Research 50th Anniversary Special Issue
Volume 51, Issue 3, pages 498–518, September 2

An increasing share of the economy is organized around financial capitalism, where capital market actors actively manage their claims on wealth creation and distribution to maximize shareholder value. Drawing on four case studies of private equity buyouts, we challenge agency theory interpretations that they are ‘welfare neutral’ and show that an alternative source of shareholder value is breach of trust and implicit contracts. We show why management and employment relations scholars need to investigate the mechanisms of financial capitalism to provide a more accurate analysis of the emergence of new forms of class relations and to help us move beyond the limits of the varieties of capitalism approach to comparative institutional analysis.
article  Wiley  21stC  finance_capital  financialization  private_equity  firms-theory  corporate_governance  corporate_finance  Labor_markets  labor 
september 2013 by dunnettreader
The True Size of the Shadow Banking System Revealed (Spoiler: Humongous) — The Physics arXiv Blog — Medium
New technique devised by econophysicits - Uses power law, which unlike other sectors doesn't fit the financial sector, to estimate how much is "missing" from the visible activity of the largest firms, assuming power law fits total financial sector activity:visible+ shadow banking. -- factoid - even using only the visible activity the global economy is totally financialized - "global economy is dominated by financial firms. On the Forbes Global 2000 list of the world’s largest companies, the first non-financial firm is General Electric, which ranks 44th." Yikes!
global_economy  financialization  shadow_banking 
september 2013 by dunnettreader
Financial Innovation: The Bright and the Dark Sides by Thorsten Beck, Tao Chen, Chen Lin, Frank M. Song :: SSRN October 2012
Beck, Thorsten and Chen, Tao and Lin, Chen and Song, Frank M., Financial Innovation: The Bright and the Dark Sides (January 25, 2012). Available at SSRN: http://ssrn.com/abstract=1991216 or http://dx.doi.org/10.2139/ssrn.1991216 -- Date posted: January 25, 2012 ; Last revised: October 7, 2012 -- downloaded pdf to Note -- The financial turmoil from 2007 onwards has spurred renewed debates on the “bright” and “dark” sides of financial innovation. Using bank-, industry- and country-level data for 32, mostly high-income, countries between 1996 and 2006, this paper is the first to explicitly assess the relationship between financial innovation in the banking sector and (i) real sector growth, (ii) real sector volatility, and (iii) bank fragility. We find evidence for both bright and dark sides of financial innovation. On the one hand, we find that a higher level of financial innovation is associated with a stronger relationship between a country’s growth opportunities and capital and GDP per capita growth and with higher growth rates in industries that rely more on external financing and depend more on innovation. On the other hand, we find that financial innovation is associated with higher growth volatility among industries more dependent on external financing and on innovation and with higher idiosyncratic bank fragility, higher bank profit volatility and higher bank losses during the recent crisis.

Number of Pages in PDF File: 69

Keywords: Financial Innovation, Financial R&D Intensity, Bank Risk Taking, Financial Crisis, Industrial Growth, Finance and Growth
paper  SSRN  financial_system  financial_innovation  economic_growth  development  risk  banking  capital_markets  financial_regulation  financial_crisis  financialization  Innovation  industry  corporate_finance  downloaded  EF-add 
september 2013 by dunnettreader
Bruce G. Carruthers and Jeong-Chul Kim: The Sociology of Finance (2011)
JSTOR: Annual Review of Sociology, Vol. 37 (2011), pp. 239-259 -- paywall but jstor has the full list of references cited -- The economic crisis of 2008-2010 stimulated an already growing sociological interest in finance. Before the crisis, disintermediation and securitization changed how the U.S. financial system operated, as bank operations shifted from the traditional originate-and-hold model to originate-and-distribute. During the 1980s and 1990s, the overall size and profitability of the financial system grew as deregulation unleashed financial innovation and reorganization. Global shifts toward capital market integration and liberalization created greater global interdependence. Households in the years before the crisis also altered their relationship to the financial system, increasing debt loads and overall exposure to the stock market. Research reveals the importance of politics for many financial market developments, various implications for corporate governance, the continuing significance of social factors within finance, and the role of theoretical and material devices in shaping financial practices. Key directions for future research focus on finance in relation to social inequality, informal sectors, valuation, and social networks.
article  jstor  lit_survey  economic_sociology  financial_system  financialization  financial_crisis  finance_capital  markets  networks  corporate_governance  political_economy  capital_markets  globalization  politics-and-money  disintermediation  securitization  bibliography  EF-add 
september 2013 by dunnettreader
Jürgen Kädtler: Financialisation of Capitalist Economies — Bargaining on Conventional Economic Rationalities (2011)
JSTOR: Historical Social Research / Historische Sozialforschung, Vol. 36, No. 4 (138) (2011), pp. 169-191 -- Special Issue: Conventions and Institutions from a Historical Perspective -- downloaded pdf to Note -- The paper deals with financialisation of capitalist economies since the 1990s drawing on a conventional concept of economic rationalities. It is argued that financial rationality is not the mere outcome of relations of power rooted elsewhere but a power resource on its own. It is analysed as one type of bounded rationality among others, the recent predominance of which traces back mainly to a paradigmatic shift in economics. However predominance does not mean unambiguousness. It is demonstrated that financial rationality on the level of companies or companies' strategies always has to be interpreted and specified in the perspective of other rationalities. And effective financialised strategies are always the outcome of bargaining between social actors bringing into play various interests, power resources, and rationalities. The financial and economic crisis since 2007 is perceived as symptomatic for a new kind of systemic instabilities caused by the predominance of financial rationality.
article  jstor  social_theory  economic_sociology  historical_sociology  institutional_economics  markets  financial_system  financialization  rationality-economics  power  financial_crisis  downloaded  EF-add 
september 2013 by dunnettreader
Symposium: The Growth of the Financial Sector - JSTOR: The Journal of Economic Perspectives, Vol. 27, No. 2, Spring 2013
The Growth of Finance (pp. 3-28)  Robin Greenwood and David Scharfstein..... Finance: Function Matters, Not Size (pp. 29-49)  John H. Cochrane..... Moore's Law versus Murphy's Law: Algorithmic Trading and Its Discontents (pp. 51-72)  Andrei A. Kirilenko and Andrew W. Lo..... An International Look at the Growth of Modern Finance (pp. 73-96)  Thomas Philippon and Ariell Reshef..... Asset Management Fees and the Growth of Finance (pp. 97-108)  Burton G. Malkiel
article  jstor  financial_system  financial_regulation  financial_crisis  financialization  institutional_economics  capital_markets  money_market  banking  international_finance  political_economy  international_political_economy  20thC  21stC  Great_Recession  EF-add 
august 2013 by dunnettreader
Stiglitz: 6 Lessons of the Credit Crisis | The Big Picture
17 min video from YouTube plus a list of Stiglitz references (books and papers) and a summary of main points. Range from loss of notion of just what financial system is supposed to be good for (hint, should include funneling credit to SMEs and entrepreneurs); finance and credit missing from macroeconomics; credit is more important than "money" for practical and theoretical applications, including understanding and managing financial crises; term structure as important as short term interest rates and should be incorporated into goals and tools of central banks.
financial_system  financial_crisis  financialization  capital_markets  banking  SMEs  macroeconomics  monetary_policy  central_banks  video  EF-add 
august 2013 by dunnettreader
 Jérémie Cohen-Setton: Blogs review: The renationalization of European finance | Bruegel - The Brussels-based think tank August 2013
Links roundup ...... The financial crisis brought the era of rapid financial globalization to a halt. While qualitatively similar than for the rest of the world, this retrenchment has been quantitatively larger and more persistent for Europe, where the dislocation is still affecting the very short-term euro are money markets. Interestingly a similar pattern of regional financial fragmentation also took place in the recovery from the Great Depression in the US.
financial_system  financialization  globalization  international_political_economy  banking  capital_markets  Great_Recession  financial_regulation  Eurozone  financial_crisis  links  EF-add 
august 2013 by dunnettreader
Robert Brenner: What is Good for Goldman Sachs is Good for America - The Origins of the Present Crisis [eScholarship] October 2009
Robert Brenner outlines the long-term causes of the present economic crisis. Rather than understanding the current downturn as merely a function of financial incompetence and miscalculation, he demonstrates that the US economy and that of the G7 has been slower growth in most of the major indices with each passing business cycle since the 1970s. In the last two cycles, asset bubbles inclined US consumers to take on more debt in order to spend and achieve limited GDP growth. Brenner outlines in detail how and why the financial sector played a key role in the creation and inflation of debt bubbles with new financial instruments. The implications for the US and the global economy are also outlined including the US current account deficit, trade imbalances, the rise of China and the East Asian economies as well as declining investment in the real economy and overcapacity in manufacturing worldwide.

Downloaded pdf to Note
economic_history  financialization  international_finance  international_political_economy  capitalism  investment  profit  Labor_markets  Great_Recession  banking  FX  competition  bubbles  financial_crisis  emerging_markets  China  downloaded  EF-add 
august 2013 by dunnettreader
Robert Boyer: Origins and Ways Out of the Euro Crisis: Supranational Institution Building in the Era of Global Finance July 2013
Contrib Pol Economy (2013) 32 (1): 97-126. doi: 10.1093/cpe/bzt007
Downloaded pdf to Note


The article describes the complex process of emergence of the Euro, led by a rather functionalist conception of supranational institution building, in interaction with financial innovation and globalisation. The easy financing of public deficits and households' real estate in the early 2000s hides the structural macroeconomic inbalances generated by the Euro. This mismatch generates quite an inefficient allocation of credit across the Eurozone. The present crisis is the outcome of the cumulative and perverse spillovers between a dysfunctional division of competence within the EU and member States on one side, and a surrender of politics to the power of global finance on the other. The present muddling through could last until a major breakthrough opens the road to a bifurcation that might be regressive as well as progressive. This framework suggests quite contrasting possible ways out of the Euro crisis.
article  economic_history  Great_Recession  austerity  Eurozone  political_economy  international_political_economy  financialization  globalization  global_governance  downloaded  EF-add 
july 2013 by dunnettreader
Bruce Bartlett: 'Financialization' as a Cause of Economic Malaise - NYTimes.com
Economists are still searching for answers to the slow growth of the United States economy. Some are now focusing on the issue of “financialization,” also an important factor in the growth of income inequality, which is also a culprit in slow growth.

Lots of links - DeLong picked up most - see his Project Syndicate
Also ILO Global Wage Report downloaded to Note - see esp p52 re financialization as source of decline in labor share - The report estimates that 46 percent of labor’s falling share resulted from financialization, 19 percent from globalization, 10 percent from technological change and 25 percent from institutional factors.

Ozgur Orhangazi of Roosevelt University has found that investment in the real sector of the economy falls when financialization rises. Downloaded pdf to Note

Adair Turner - chapter in Future of Finance: What do banks do? Why do credit booms and busts occur and what can public policy do about it? - downloaded pdf to Note

Nick Hanauer Congressional testimony June 2013 - - downloaded pdf to Note

Jon Bakija, Adam Cole and Bradley T. Heim, financialization is a principal driver of the rising share of income going to the ultrawealthy – the top 0.1 percent of the income distribution. - downloaded pdf to Note

University of Michigan sociologist Greta R. Krippner supports this position. Paper from 2005 downloaded to Note

One main source of income for financial executives is fees paid to financial asset managers, according to the Princeton economist Burton G. Malkiel. Among the best compensated of these are hedge-fund operators, who typically receive 2 percent of the assets under their control plus 20 percent of any increase, annually.  Downloaded pdf to Note
US_economy  economic_growth  financialization  financial_system  financial_crisis  financial_regulation  banking  capital_markets  money_market  institutional_investors  monetary_policy  inequality  capitalism  corporate_governance  middle_class  development  EF-add  links  downloaded 
july 2013 by dunnettreader
Thomas Philippon, Ariell Reshef : Wages and Human Capital in the U.S. Financial Industry: 1909-2006 | NBER
Paper available for download $

We use detailed information about wages, education and occupations to shed light on the evolution of the U.S. financial sector over the past century. We uncover a set of new, interrelated stylized facts: financial jobs were relatively skill intensive, complex, and highly paid until the 1930s and after the 1980s, but not in the interim period. We investigate the determinants of this evolution and find that financial deregulation and corporate activities linked to IPOs and credit risk increase the demand for skills in financial jobs. Computers and information technology play a more limited role. Our analysis also shows that wages in finance were excessively high around 1930 and from the mid 1990s until 2006. For the recent period we estimate that rents accounted for 30% to 50% of the wage differential between the financial sector and the rest of the private sector.
US_economy  economic_history  20thC  financial_regulation  financial_system  financialization  inequality  plutocracy 
july 2013 by dunnettreader
Stephen G Cecchetti and Enisse Kharroubi: Reassessing the impact of finance on growth |BIS Working Paper 2012
Downloaded pdf to Note
This paper investigates how financial development affects aggregate productivity growth. Based on a sample of developed and emerging economies, we first show that the level of financial development is good only up to a point, after which it becomes a drag on growth. Second, focusing on advanced economies, we show that a fast-growing financial sector is detrimental to aggregate productivity growth.
development  financial_system  financialization  economic_growth  EF-add  emerging_markets  OECD_economies  downloaded 
july 2013 by dunnettreader
Starving the Squid by J. Bradford DeLong - Project Syndicate 6-28-13
the correlations between economic growth and financial deepening on which I relied do indeed vanish when countries’ financial systems move beyond banks, electronic funds transfer, and bond markets to more sophisticated instruments.

Downloaded linked paper " The Growth of Finance" by Robin Greenwood and David Scharfstein from JEP 2013

Thus, any assessment of whether and in what ways society benefted from the
growth of the fnancial sector depends in large part on an evaluation of professional
asset management and the increase in household credit.
financial_crisis  financial_system  financialization  financial_regulation  EF-add  development  downloaded  economic_growth  institutional_investors 
july 2013 by dunnettreader
Finance and the Preservation of Wealth by Nicola Gennaioli, Andrei Shleifer, Robert W. Vishny :: SSRN June 2013
SSRN briefcase NBER $
Abstract:      We introduce the model of asset management developed in Gennaioli, Shleifer, and Vishny (2012) into a Solow-style neoclassical growth model with diminishing returns to capital. Savers rely on trusted intermediaries to manage their wealth (claims on capital stock), who can charge fees above costs to trusting investors. In this model, the size of the financial sector rises with aggregate wealth, and wealth grows relative to GDP. As a consequence, the ratio of financial income to GDP rises over time, even though fees for given financial services decline. Because the size of the financial sector fluctuates with changes in investor trust, the model can account for the sharp decline of finance in the Great Depression, as well as its slow recovery afterwards. Entry by financial intermediaries as wealth increased in recent years may have further deepened investor trust and encouraged growth of financial income.
Number of Pages in PDF File: 40

Gennaioli, Nicola, Shleifer, Andrei and Vishny, Robert W., Finance and the Preservation of Wealth (June 2013). NBER Working Paper No. w19117. Available at SSRN: http://ssrn.com/abstract=2280969
macroeconomics  economic_growth  capital  institutional_investors  financialization  economic_history  20thC  21stC  economic_models  behavioral_economics  trust  EF-add 
july 2013 by dunnettreader
Money Doctors by Nicola Gennaioli, Andrei Shleifer, Robert W. Vishny :: SSRN June 2012
SSRN briefcase

Abstract:      We present a new model of money management, in which investors delegate portfolio management to professionals based not only on performance, but also on trust. Trust in the manager reduces an investor’s perception of the riskiness of a given investment, and allows managers to charge higher fees to investors who trust them more. Money managers compete for investor funds by setting their fees, but because of trust the fees do not fall to costs. In the model, 1) managers consistently underperform the market net of fees but investors still prefer to delegate money management to taking risk on their own, 2) fees involve sharing of expected returns between managers and investors, with higher fees in riskier products, 3) managers pander to investors when investors exhibit biases in their beliefs, and do not correct misperceptions, and 4) despite long run benefits from better performance, the profits from pandering to trusting investors discourage managers from pursuing contrarian strategies relative to the case with no trust. We show how trust-mediated money management renders arbitrage less effective, and may help destabilize financial markets.

Number of Pages in PDF File: 41

Gennaioli, Nicola, Shleifer, Andrei and Vishny, Robert W., Money Doctors (June 11, 2012). Chicago Booth Research Paper No. 12-39; Fama-Miller Working Paper. Available at SSRN: http://ssrn.com/abstract=2133429 or http://dx.doi.org/10.2139/ssrn.2133429
capital_markets  institutional_investors  institutional_economics  behavioral_economics  financialization  financial_system  trust  EF-add 
july 2013 by dunnettreader
Competition for Attention by Pedro Bordalo, Nicola Gennaioli, Andrei Shleifer :: SSRN May 2013
SSRN briefcase NBER $
 We present a model of market competition and product differentiation in which consumers' attention is drawn to the products' most salient attributes. Firms compete for consumer attention via their choices of quality and price. With salience, strategic positioning of each product affects how all other products are perceived. With this attention externality, depending on the cost of producing quality some markets exhibit “commoditized” price salient equilibria, while others exhibit “de-commoditized” quality salient equilibria. When the cost of producing quality changes, innovation can lead to a radical change in markets. In the context of financial innovation, the model generates the well documented phenomenon of “reaching for yield”.

Number of Pages in PDF File: 59

Bordalo, Pedro, Gennaioli, Nicola and Shleifer, Andrei, Competition for Attention (May 2013). NBER Working Paper No. w19076. Available at SSRN: http://ssrn.com/abstract=2269529
markets  Innovation  competition  financial_system  capital_markets  behavioral_economics  financial_crisis  financialization  EF-add 
july 2013 by dunnettreader
Claude Fischer: Inequality Update | MADE IN AMERICA June 2013
Good overview on research highlights with pdf links. His observations include:
* Our attention to income inequality sometimes leads us to miss the deeper trends regarding wealth inequality. If we set aside homeowners’ equity in their houses – the bulk of wealth for most Americans – wealth inequality is yet higher and grew yet faster, by 11% over the last 40 years. More strikingly, the One Percent reaped 38% of the growth in the nation’s wealth between 1983 and 2010, while the bottom Sixty Percent of households actually lost wealth.

* Weaker unions, especially in industries that had once been highly unionized, meant a growing wage gap among employees and more of the gains going to the employers.

* Ken-Hou Lin and Donald Tomaskovic-Devey add another factor: the rise of “financialization.” ...The more that an industry turned to finance after 1970, the greater the share of its income that owners, top management, and top workers got, and the less that average workers got.

* Over the last 30 years, jobs calling for computer or quantitative skills did not (other things being equal) see an especially notable rise in wages, as some have suggested, nor did jobs requiring creativity, as others have suggested. Wages rose notably for jobs requiring managerial and nurturing skills and rose especially rapidly for jobs requiring “analytical” skills – reasoning, synthesizing, assessing ideas (for example, scientists, engineers, CEOs, and doctors). Too much attention has focused, Liu and Grusky argue, on computerization as the driver of inequality, when institutional changes in the economy are more important – a point consistent with the findings about financialization. 

* Two recent studies show how inequality is increasingly separating people residentially. One, by Kendra Bischoff and Sean Reardon, I reported earlier here.  They show how American neighborhoods have gotten increasingly segregated – the rich here and the others there – over the last 40 years. More recently, Ann Owens and Rob Sampson showed that the Great Recession exacerbated those trends. Unemployment and other indicators of distress grew most in already disadvantaged neighborhoods, accentuating the spatial inequality of America.

* Hout and Hastings show how experiencing  job loss or financial loss (which, again, hit the worse-off harder) strongly depressed respondents’ feelings of happiness.
US_economy  US_society  inequality  financialization  Labor_markets  technology  plutocracy  links  EF-add 
june 2013 by dunnettreader
Paul Krugman: Profits Without Production - NYTimes.com June 21 2013
rising monopoly rents can and arguably have had the effect of simultaneously depressing both wages and the perceived return on investment.

You might suspect that this can’t be good for the broader economy, and you’d be right. If household income and hence household spending is held down because labor gets an ever-smaller share of national income, while corporations, despite soaring profits, have little incentive to invest, you have a recipe for persistently depressed demand
US_economy  political_economy  rents  capitalism  financialization  intellectual_property  plutocracy  Labor_markets 
june 2013 by dunnettreader
C Freeland: Economic worries and the global elite | Reuters blog 6-17-13
Reporting from TED global in Edinburgh - are elites starting to get nervous that the current economic structures are failing to deliver for all but the top and losing their legitimacy? See comment by Renaissance Capital economist
international_political_economy  elites  plutocracy  neoliberalism  capitalism  financialization  inequality 
june 2013 by dunnettreader

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