The use of a growing array of derivatives and the related application of more-sophisticated approaches to measuring and managing risk are key factors underpinning the greater resilience of our largest financial institutions... Derivatives have permitted the unbundling of financial risks.
Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?
Significantly opening up immigration to skilled workers solves two problems. The companies could hire the educated workers they need. And those workers would compete with high-income people, driving more income equality.
The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake.
The recent evidence increasingly suggests that an economic expansion is already well under way, although an array of influences unique to this business cycle seems likely to moderate its speed.
Developing protectionism regarding trade and our reluctance to place fiscal policy on a more sustainable path are threatening what may well be our most valued policy asset: the increased flexibility of our economy, which has fostered our extraordinary resilience to shocks.
I don't think it's possible for the Fed to end its easy-money policies in a trouble-free manner. Recent episodes in which Fed officials hinted at a shift toward higher interest rates have unleashed significant volatility in markets, so there is no reason to suspect that the actual process of boosting rates would be any different. I think that real pressure is going to occur not by the initiation by the Federal Reserve, but by the markets themselves.
Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices, ... This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.
While local economies may experience significant price imbalances, a national severe price distortion seems most unlikely in the United States, given its size and diversity.
I have long argued that paying down the national debt is beneficial for the economy: it keeps interest rates lower than they otherwise would be and frees savings to finance increases in the capital stock, thereby boosting productivity and real incomes.
A decline in the national housing price level would need to be substantial to trigger a significant rise in foreclosures, because the vast majority of homeowners have built up substantial equity in their homes despite large mortgage-market financed withdrawals of home equity in recent years.
There is nothing to guarantee the superior judgment, knowledge, and integrity of an inspector or a bureaucrat-and the deadly consequences of entrusting him with arbitrary power are obvious.
Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.