On Eve of Scottish Vote, Another Look at Capital Markets

Unless the polls are systematically biased or there is a late-breaking surge in support for "Yes," the "No" campaign looks set to squeak by with a narrow victory in the Scottish independence referendum. On the betting markets, a "Yes" vote has plunged below an implied probability of 20%. What has this decline in the prospects …

Scottish Independence and the Markets

What can we learn from capital markets about the likely consequences of Scottish independence? A trio of recent polls has shown the "Yes" side to have pulled roughly even with "No." With momentum on their side, it's not unthinkable at all that "Yes" will pull it out, resulting in the first secession from a Western …

Intrade Banned in the U.S.

A casualty of "pro-consumer" financial regulation. John Stossel is on the story: Today, Americans were told that they must close their Intrade.com accounts. That happened because the federal government agency known as the "Commodity Futures Trading Commission" (CFTC) today sued the prediction market, where people from all over the world bet about things like who …

As a Dog Returns to its Vomit…

As the economy slowly claws its way out of the financial crisis and the deepest and most prolonged recession since the Great Depression, it is good to know that some of the lending practices that contributed to the collapse are once again being deployed. As Jessica Silver-Greenberg and Tara Siegel explain in today’s NYT: as financial …

Financial Liberalization: Is It Really Risky for Developing Countries?

Since the East Asian financial crisis of the late 1990s, a consensus among even free-market economists has been developing: financial liberalization for developing countries usually don't make sense. The financial crisis of 2008 and the ongoing Eurozone crisis have only fortified this consensus. The mainstream economic position seems to be that, at least for developing …

Rate of Return on Bank Lobbying

This working paper is already getting substantial attention, and it's not hard to see why. They find that banks that lobbied more in the years leading up to the Troubled Asset Relief Program (TARP) of 2008 received more money through TARP. What's particularly astounding is the rate of return, which they estimate at between $485 …

The Money Obsession

There are many more important issues than abolishing the Federal Reserve.

Bailouts and the Optimal Size of States

Risk-pooling in an era of frequent financial crisis is not as good an argument against Scottish independence as Tyler Cowen thinks it is. First off, bailing out is a policy choice to which there are alternatives. Second, financial governance matters. Who had a worse financial crisis in 2008: the United States (population 300 million) or …

Interposition:Part Five: Assuming Powers from National Bank to Seditious Libel

Not long after the ratification of the Constitution, Madison came to have serious doubts about his former Federalist friends. Particularly, he came to suspect the sincerity of many who had asserted that the new government would possess only those powers specifically delegated to it. The first disappointment came with Hamilton’s championing of the incorporation of …

The Fed giveth and the Fed taketh away

Following yesterday's meeting, the Fed's Federal Open Market Committee seems to be relatively optimistic that (1) the recovery is underway (even if employment figures are less than one might hope) and (2) despite rising commodity prices, inflation expectations “remain stable.” As a result, some are predicting that the Fed will not continue quantitative easing past …

Iceland: Letting Die and Living High?

Guido Fawkes makes the case for letting banks fail, comparing the trajectories of two economies massively damaged by the financial crisis: Iceland and Ireland. Iceland let its banks fail, while Ireland has bailed out its banks, to massive expense: The Irish bail-out plan will cost €54,800 per Irish household. Ireland’s future thus looks a lot …