A roundup of economic news from around the Web.
- Capital Markets: Karen Johnson, a former top Fed international economist, asks whether the capital markets failed us. “Securitization forged links between banking and capital markets. It broke down the differences in forms of financial intermediation that had characterized markets previously, especially in the United States, where regulation had put commercial banking in a separate category. Changes in regulation enhanced this process. As a result, U.S. financial markets became even more unified and national — further reducing some persistent inefficiencies. Securitization was an important and useful innovation. However, capital markets are not well-suited to do all the financial intermediation in the economy.”
- Social Security: Diane Lim Rogers talks about what needs to be done to fix Social Security. “Not doing anything about Social Security now would be fine if either: (i) we knew what to do with the much bigger challenge of much more rapidly rising Medicare spending (i.e., we knew how to flatten that health cost curve and were really on the way to doing it), or (ii) we didnt know what to do to close the much smaller Social Security deficit. But the fact is that its hard to know how to solve the Medicare problem and relatively easy (mathematically and economically) to solve the Social Security problem. We know how to solve the latter, and I think most Americans in hearing what some of these solutions are , would think they were no big deal. Why, just this week my (very socially-conscious) 17-year old daughter, Emily, brought up the unsustainable fiscal outlook and said she didnt understand why we dont just raise the retirement agewhich is what both Bill Gale (of the liberal-leaning Brookings Institution) and Andrew Biggs (of the conservative-leaning American Enterprise Institute ok, perhaps more than leaning, but more on the David Frum story later) recommend in the NYTimes piece. Emily spoke of raising the retirement age as a no brainer–and not because Ive brain-washed her but perhaps because she knows her mom will be working forever anyway just to pay for her and her three siblings college educations ”
- Job Losses: Mark Thoma points to the Minneapolis Fed’s chart of job losses in postwar recessions. The current downturn in jobs stands out, and not in a good way.
Compiled by Phil Izzo