Author Archive | Eric Posner

Walter Block posts a response to my earlier post. He still says that borrowing money from a depositor is like selling a

A lot of wishful thinkers hope so; visions of perp-walking Bushies dance in their head. There are plenty of reasons for thinking that this won

The U.S. was supposed to become a normal country again. The Bush administration

I ran across this odd debate between Bryan Caplan and Walter Block. Here is Block’s argument (“frb” means fractional reserve banking): Consider this: A deposits 10 ounces of gold in B’s bank; B gives A a demand deposit for these 10 ounces. B turns around and lends C 9 of these ounces, giving C a […]

Ilya says yes, drawing on this very interesting article of his. Here is his explanation (inspired by Derek Parfit): Assume that Uv = the expected utility of voting; Cv = the cost of voting; and D = the expected difference in welfare per person if the voter’s preferred candidate defeats her opponent. Let us further […]

international law, and the emergence of Europe as a state (or not), here.

Many commentators have argued that the Bush administration’s response to 9/11 was driven by fear. They were never precise about what they meant, but a number of interpretations suggested themselves. (1) That members of the public panicked and demanded that the government “do something” regardless of whether a particular action was rational. (2) That members […]

The original TARP idea was to hold reverse auctions for mortgage-backed securities. The government would hold them to maturity or resell them. Whatever one thinks of this plan, it puts relatively little burden on government decisionmakers. However, one criticism of the plan was that government agents would not be able to set the price correctly, […]

There have been many stories like this: [I]f market conditions continue to deteriorate, [Treasury] could make use of another tool at its disposal: investing directly in troubled companies. Treasury has the power to directly inject capital into a failing firm by taking a significant equity stake. In an unusual statement issued Monday, the President’s Working […]

Latest news is that the Fed will take over the commercial paper market. Big corporations raise funds by selling debt securities as well as borrowing from banks. But no one wants to buy these securities—“commercial paper”—because no one knows whether the corporations can pay them back. So big corporations like GE suddenly find themselves unable […]

Why do many economists prefer nationalization (or some more modest version where government takes control of financial institutions) to the bailout approach? Under the bailout approach, Treasury purchases mortgage-related securities from banks in a reverse auction. Currently, these securities are not being traded even though they clearly are worth something (they give holders the right […]

No! You might think otherwise from various incautious commentaries, including the economist’s letter written a while back. (The letter said “go slow”; it didn’t say “do nothing.”) And it is true that most economists don’t like the original Paulson plan, and also don’t like the plan passed by the Senate. But the view that we […]

Many commentators responded to my earlier post along the following lines (this passage is from timd): Bush, Paulson, Bernanke, Pelosi, Obama, McCain – None of them have presented the facts in a way that makes it clear (a) which current symptoms are indicating the potential for a meltdown, (b) what a meltdown would look like […]

All of our political leaders believe that the bailout plan is proper, but they were unable to persuade the public, and it was because of public pressure that Congress voted down the plan. Could the leadership have done a better job? This story attributes their failure to an inadequate effort to scare people: why, despite […]

The Times says today that because of the failure of the Bailout Bill, Treasury and the Fed will have to dig deeper into their toolkits, which really means just lending more and more money to distressed firms. “We have a lot of money to play with,” said Kenneth Rogoff, an international economist at Harvard. “As […]