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Prompted by this poll, decided to finally read #CrisisEconomics , 8-9 years after I bought it and let it rest on the bookshelf. Must read, of course, and noting down a few thoughts that came to mind as I read the book. For personal record, noting these thoughts here. (1/n) https://twitter.com/Nouriel/status/1246063496263065600
Starting with the most trivial, can't help but note that some figurative titles are going to assume literal meaning when Roubini does an update of his book.
During crisis, central bankers become not merely lenders but sometimes investors of last resort. In the most dramatic example of this kind, HK monetary authorities bought 5% of shares being traded on the local stock exchange.
(Could this happen somewhere, sometime now?) (3/n)
(Could this happen somewhere, sometime now?) (3/n)
Pp23: R is talking about the Great Depression and events that preceded it. To me, some of these (moral bits) sound kind of familiar: Indian, contemporary voices, if you know what I mean. (4/n)
Thought you might find this interesting @1shankarsharma @devinamehra
Thought you might find this interesting @1shankarsharma @devinamehra
Pp184-186: revision of the principal agent problem and how sometimes, in banks, actually the interests of the shareholders and the management are aligned to destructive effect. This alignment/ misalignment is actually more a feature of leveraged firms, more often banks. (5/n)
The principal agent problem is often told too simply. Not all shareholders are after long term returns. So, there is a shareholder vs shareholder conflict as well, ones that care about short term do dominate, and affect management decisions, perhaps more. (6/n)
In such circumstance, the highly leveraged firm has a higher likelihood of doing significant damage to the shareholder than does a less leveraged firm. IMO, this is one good reason for people to be happier investing in less leveraged (zero debt craze investors) firms. (7/n)
#CrisisEconomics on central bankers treatment of bubbles. Can't help but say, this is the spirit with which several policy makers have also treated the COVID-19 threat. Rather than trying to control with measures that have unintended consequences (such as lockdown)..(8/n)
..they have chosen to wait it out and see how bad the situation may get, and do their best afterward. This is a fundamental difference in the way that Roubini and several others look at the world vs Greenspan, Bernanke, and (!) Trump. (9/n)
This “common sense” that Roubini appeals to, is, well scary if it becomes the common sense among policy makers. If some stock prices doubles in a few months, you should necessarily see a bubble doesn’t make sense to me. (10/n)
