Lok Sang Ho

Financial Regulatory Reform: The Good, Bad and Ugly

It does seem that getting the compensation structure right is not the job of the government. However, if the compensation structure engenders short term behavior, even anti-social behavior, and the cost is external to the Board or Shareholders, then it does make sense for the government to ensure that incentives that compromise the social interest are not embodied in the compensation structure.

Let's Just Say It: Print More Money

I agree with the spirit of your analysis. But how does money flow into the system? It goes into the system either as the private sector borrows from the banking sector and spends it, or as the government borrows from the Fed and spends it. If the private sector is not borrowing and the banks are not lending, the only way money can get into the circular flow is for the government to borrow and spend it, preferably on projects that are productive and beneficial over the long run. This is exactly what the government needs to do now. I advocated buying homes below the national median price from existing homeowners at the appraised market price as of some cut-off date to prevent housing prices from slipping further and damaging the economy, and I still think this is the best way to deal with the current crisis. I first made this proposal last October, and if the Federal Government had done as I said the US and the global economies would have been much stronger.

Let's Just Say It: Print More Money

I agree with the spirit of your analysis. But how does money flow into the system? It goes into the system either as the private sector borrows from the banking sector and spends it, or as the government borrows from the Fed and spends it. If the private sector is not borrowing and the banks are not lending, the only way money can get into the circular flow is for the government to borrow and spend it, preferably on projects that are productive and beneficial over the long run. This is exactly what the government needs to do now. I advocated buying homes below the national median price from existing homeowners at the appraised market price as of some cut-off date to prevent housing prices from slipping further and damaging the economy, and I still think this is the best way to deal with the current crisis. I first made this proposal last October, and if the Federal Government had done as I said the US and the global economies would have been much stronger.

Wall Street Breakfast: Must-Know News

The prognosis is quite positive in 2009 as the Fed and the Federal Government both adopt aggressive measures to contain the crisis. The approach adopted by the FDIC is yet another example of sealing further losses that I have commented on previously. This is working and will prevent the economy from an otherwise quite possible downward spin as portrayed by Roubini and others.

Five Ways the Global Economy Is Rebounding

The strength of the US dollar is bad for American exports. Last year, the weak US dollar helped make exports the bright spot of the economy. The new-found strength, in part reflecting flight to the most liquid and accepted international means of settlement, and in part reflecting the unwinding of positions taken by hedge funds, actually hurts American exports when the wealth effect is undercutting American consumption. The Fed should quickly reduce interest rates and attempt to soften the appreciation of the US dollar. In any case, today the world needs lower lending rates, the sooner the better. Too much is at stake.