Greenspan on U.S. foreign balance

Bradford DeLong jbdelong at uclink.berkeley.edu
Thu Mar 14 09:03:05 PST 2002



>Bradford DeLong wrote:
>
>>The Treasury, the SEC, and the Federal Reserve care. I don't know
>>whether they knew. I hope they did...
>
>They may care enough to worry, but do they care enough to do anything?
>
>Doug

It--large unhedged derivative books that transform the U.S. foreign debt from something denominated in $$$$ to something denominated in pounds or euros or yen--is the obvious point failure source for the U.S. macroeconomy. Peter Fisher, John Taylor, and Glenn Hubbard are highly competent, none of them is attached to the belief that competitive financial markets work well (indeed, Glenn made his reputation on studies of how the capital market did not work well and hence on firms' preference for financing investment from internal cash-flow rather than external market-raised finance), and are as good as (or better than) me at judging risks and regulatory mechanisms.

But their political mastes are not competent, and may not be persuadable...

Brad DeLong, moving another four boxes of girl scout cookies and a twelve-pack of diet coke under his desk...



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