Dirk Niepelt

In a paper, Larry Ball argues that inadequate collateral and lack of legal authority were not the reasons that the Fed let Lehman fail. … … the primary decision maker was Treasury Secretary Henry Paulson–even though he had no legal authority over the Fed’s lending decisions. … evidence supports the common theory that Paulson was influenced by the strong political opposition to financial rescues. … Another factor is that both Paulson and Fed officials, although worried about the effects of...

Adjusted for GDP, The Economist’s Big Mac Index suggests that the Swiss Franc is 9 percent over valued relative to the US Dollar while the Euro is 17 percent under valued.

The Economist reviews core ideas in economics. The introductory article points out that economists’ fundamental mission is not to forecast recessions but to explain how the world works. It argues that economists have delivered and it discusses six exemplary areas of economic research: Nash equilibrium; Mundell-Fleming trilemma; Minsky financial-instability; Stopper-Samuelson effect of trade on wages; Keynes fiscal-multiplier; and Akerlof’s and others’ work on information asymmetries....

Finanz und Wirtschaft, July 20, 2016. PDF. In a perfect world, monetary and fiscal policy are coordinated. In the real world with its political frictions they are not. So much on helicopter money.

In the FT, Edward Luce worries about a loss of dignity that is reflected in contemporary politics. Republicans generally favour liberty over equality and Democrats the reverse. Other people’s dignity is not up for grabs. Mr Trump’s hostile takeover of the Republican party has shredded that equation. … “You walked out of a Reagan rally in a spirit of optimism,” says Stuart Stevens, an adviser to Republican nominee Mitt Romney. “You leave a Trump rally ready for a fight.” … … Luigi...

In the Daily Local News, Sue Buchel and Parry Desmond report about a Liechtenstein born immigrant to the US who died on his way back to Europe, 134 years ago.

In the FT, Edward Luce writes about America’s class distinctions. The real story, as depicted by historian Nancy Isenberg, author of White Trash, is that America was founded amid highly conscious class distinctions. African slaves were not the only group to be disenfranchised. … It would be difficult to read America’s history — or decode the 2016 presidential election — without reference to the struggle between poor whites and the descendants of former slaves. Lyndon Baines Johnson, who...

In the FT, Eric Platt reports that US Congress has passed emergency legislation allowing Puerto Rico to restructure its debt. Unlike US cities and municipalities, Puerto Rico and other territories do not have access to protections under the US bankruptcy code. The legislation gives the island and its debt-issuing entities that right, so long as they have made “good-faith” efforts to negotiate with creditors and have received sign-off from the control board. With the deal, Puerto Rico...

Luigi Zingales argues that this is the underlying reason for the Brexit vote and the rise of Donald Trump.

Letters to the editor of The Economist lay out the pros and cons of curbing free speech. Some views: Who is “just” offensive should not be prosecuted.  Insulting religious feelings is ok, but not at a place of worship. Freedom of speech for the purpose of debate needs to protected, but not if it is only “intended to insult or inflame passions.” Clark Kerr, president of the University of California (1958–1967), defended free speech on campus with the wordsThe university is not engaged in...