Money and Finance
- John Mauldin: You Can’t Be Serious
I admit to being surprised by Cyprus. Oh, not the banking crisis or the sovereign debt crisis or the fact that its banks were eight times larger than the country itself or even the fact that the banks were bloated with Greek debt that had been written...
- Ultra Easy Monetary Policy And The Law Of Unintended Consequences – By William R. White
AbstractIn this paper, an attempt is made to evaluate the desirability of ultra easy monetary policy by weighing up the balance of the desirable short run effects and the undesirable longer run effects – the unintended consequences. The conclusion is...
- John Mauldin: The Cancer Of Debt And Deficits
We are coming to the point in the United States when even the US government will no longer be able to borrow at very low long-term rates. That point is a few years off, and we have time to change paths; but as I have shown in previous letters, the longer...
- John Mauldin: European Summit: A Plan With No Details
Exactly what happened in Europe yesterday? The market reacted like it was the Second Coming of the Solution to End All Solutions. No problem here! The European debt crisis is solved! But if you look deeply (almost always dangerous when it comes to Europe)...
- John Mauldin: The Ride Of The Keynesian Cowboys
Let Us Count the Unintended ConsequencesIs there a chance that it could work? The short answer is, "Yes, but I doubt it." The whole purpose of QE2 is to try and get consumers and businesses spending. For a Keynesian, it is all about stimulating final...
Money and Finance
John Mauldin: Unintended Consequences
Let me introduce Mauldin's Rule of Thumb Concerning Unintended Consequences:
For every government law hurriedly passed in response to a current or recent crisis, there will be two or more unintended consequences, which will have equal or greater negative effects then the problem it was designed to fix. A corollary is that unelected institutions are at least as bad and possibly worse than elected governments. A further corollary is that laws passed to appease a particular group, whether voters or a particular industry, will have at least three unintended consequences, most of which will eventually have the opposite effect than the intended outcomes and transfer costs to innocent bystanders.
This week we wonder about the consequences of the European Central Bank (ECB) issuing over €1 trillion in short-term loans to try and postpone a banking credit crisis and lower sovereign debt costs for certain peripheral countries in Europe. What if, instead of holding the European Monetary Union (EMU or Eurozone) together, that actually makes a breakup more likely? That would certainly fall under the rubric of unintended consequences, and be worth our time to contemplate in this week's letter.
Further, what if the group that oversees credit default swaps declares an actual sovereign debt default not to be a technical default in order to avoid a credit crisis because CDSs would have to be paid? Could that actually undermine the ability of smaller countries to borrow money at lower cost, if they could even borrow it at all? Thus making the eventual outcome even worse? We will explore these perplexing questions and more as we once again turn our attention to Europe.
- John Mauldin: You Can’t Be Serious
I admit to being surprised by Cyprus. Oh, not the banking crisis or the sovereign debt crisis or the fact that its banks were eight times larger than the country itself or even the fact that the banks were bloated with Greek debt that had been written...
- Ultra Easy Monetary Policy And The Law Of Unintended Consequences – By William R. White
AbstractIn this paper, an attempt is made to evaluate the desirability of ultra easy monetary policy by weighing up the balance of the desirable short run effects and the undesirable longer run effects – the unintended consequences. The conclusion is...
- John Mauldin: The Cancer Of Debt And Deficits
We are coming to the point in the United States when even the US government will no longer be able to borrow at very low long-term rates. That point is a few years off, and we have time to change paths; but as I have shown in previous letters, the longer...
- John Mauldin: European Summit: A Plan With No Details
Exactly what happened in Europe yesterday? The market reacted like it was the Second Coming of the Solution to End All Solutions. No problem here! The European debt crisis is solved! But if you look deeply (almost always dangerous when it comes to Europe)...
- John Mauldin: The Ride Of The Keynesian Cowboys
Let Us Count the Unintended ConsequencesIs there a chance that it could work? The short answer is, "Yes, but I doubt it." The whole purpose of QE2 is to try and get consumers and businesses spending. For a Keynesian, it is all about stimulating final...