078: Arnold Kling on the Hidden Story of How Markets Work, the Mortgage Crisis and How We Pay for Health Care

March 24, 2016 by Frank

078: Arnold Kling on the Hidden Story of How Markets Work, the Mortgage Crisis and How We Pay for Health Care

Arnold Kling is a Mercatus Center–affiliated senior scholar at George Mason University and a member of the Financial Markets Working Group.

Arnold specializes in housing-finance policy, financial institutions, macroeconomics, and the inside workings of America’s federal financial institutions. He also is an adjunct scholar at the Cato Institute in Washington, DC.

Arnold has testified before Congress on the collapse of Fannie Mae and Freddie Mac

He has authored five books, including Crisis of Abundance: Rethinking How We Pay for Health Care and Invisible Wealth: The Hidden Story of How Markets Work.

Arnold has published articles in the Economist, the Wall Street Journal, the New York Times, the Atlantic, and Forbes, among others, and he blogs at arnoldkling.com/blog/.

Previously, Arnold served as a senior economist at Freddie Mac and a staff economist on the Board of Governors of the Federal Reserve System.

He started Homefair, one of the first commercial websites on the Internet.

Arnold Kling received his PhD in economics from Massachusetts Institute of Technology.

“If you want to live a good lifestyle, you can find hobbies and interests that don’t cost very much. So it’s not hard to enjoy life. But if you want to make yourself miserable, watch politics.” – Arnold Kling

Economics:

In this episode, Arnold mentions and discusses: information rules, economic information, marginal cost of information, advertising, versioning, bundling, Austrian economics, risk measurement, capital, tax, mortgage-backed securities, loans, bubbles, crashes, excess leverage, marked-to-market, economics of health care, labor, capital, land, institutions.

Economists:

In this episode, Arnold mentions and discusses: Hal Varian, Carl Shapiro, Brad deLong, Tyler Cowen, Paul Krugman, Paul Volker, Douglass North, Robin Hanson, Bryan Caplan, James Buchanan, Adam Smith, F. A. Hayek and Robert Solow.

In this episode you will learn:

about Moore’s Law and what it means for the economy.

why economists are being lured into the world of start-ups and tech companies.

about the power of freemium and why companies need to build up trust to create a loyal customer base.

the difference between versioning and bundling.

what the future holds for the accessing information online.

about Arnold’s company online Homefair and how it was one of the first internet companies.

what really went on behind closed doors at Fannie Mae and Freddie Mac that resulted in their demise.

why Fannie Mae and Freddie Mac were bailed out.

how changing the culture at Freddie Mac caused its collapse.

about the state of health care in America today.

how Americans are to pay for the higher costs of health care.

about the fibre-bubble in the 1990s.

why we are richer today than a couple of hundred years ago.

why ideas are the foundation to economic growth and prosperity.

why nations like Cuba and North Korea are poor (bad institutions).

about the work being done at George Mason University.

Where to Find Arnold Kling:

www.arnoldkling.com/blog/

Books:

Crisis of Abundance: Rethinking How We Pay for Health Care by Arnold Kling
Invisible Wealth: The Hidden Story of How Markets Work by Arnold Kling
Information Rules: A Strategic Guide to the Network Economy by Carl Shapiro and Hal Varian
The Revolt of the Public and the Crisis of Authority in the New Millennium by Martin Gurri

076: Greg Ip on Foolproofing the Economy and Why Stability is Destabilizing

March 10, 2016 by Frank

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076: Greg Ip on Foolproofing the Economy and Why Stability is Destabilizing

Greg Ip is one of the best-known economics journalists in the US.

He is currently chief economics commentator of The Wall Street Journal and writes about U.S. and global economic developments and policy each week in the Capital Account column and on Real Time Economics, the Wall Street Journal’s economics blog.

From 2008 to January 2015, he was U.S. Economics Editor of The Economist magazine. Greg is the author of Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe as well as author of The Little Book of Economics: How the Economy Works in the Real World.

“Stability is Destabilising”- Hyman Minsky

Economics:

In this episode, Greg mentions and discusses: junk bonds, capitalism, investment, growth, financial crisis, bank deposits, loans, currency, gold, exchange rates, money market funds, bank run, exchange traded funds, recessions, unintended consequences and the Paradox of Thrift.

Economists:

In this episode, Greg mentions and discusses: Paul Volcker, Hyman Minsky, Gary Gorton, Joseph Schumpeter and John Maynard Keynes.

In this episode you will learn:

about the theme behind Greg Ip’s latest book Foolproof.
when the pursuit of safety lead us into danger?
what forest fires have to do with Wall Street.
about the relationship between the financial market (and its potential for a crisis) and ecological systems.
the way we publicly and privately try to cope with risk and danger and how those choices can create unintended consequences.
about the Fallacy of Composition: Things you do that are safe actually end up making other people less safe.

what American Football can teach us about the Fallacy of Composition.

how making American Football safe with the introduction of helmets has created increased risk taking and more injuries.

what past economic and financial crises have in common.

how the financial system succeeded too well in making people feel their money was safe.

how banking regulations and capital controls introduced after the financial crisis will create risks in other parts of the economy and financial markets.
if savings is actually bad for the economy.
about Keynes’ Paradox of Thrift and how savings forces others to borrow.

whether exchange traded funds (ETFs) will be the next financial catastrophe.

about the Peltzman Effect on anti-lock brakes.
how Paul Volcker‘s regulation of capital flows caused the growth of shadow banking.
how The Great Moderation changed attitudes about debt and how relaxed laws allowed high-risk households to borrow for mortgages.
about Gary Gorton of Yale and his explanation for a financial crisis.

how being present in danger can remind ourselves of the things that aren’t always safe.

whether the finance industry could take the lessons learned about safety and regulation in the airline industry.

why the Lehman Brothers collapse surprised many due to the US government indicating to the market that banks and mortgage companies would be bailed out.

how German savers were much to blame for the euro crisis than their European counterparts that borrowed.

why we continue to build cities near water which can cause devastation in the form of floods and tidal waves.

why The Netherlands, with their ‘Room For The River’ programme, is destroying dykes and allowing their lands to flood.

why Greg Ip is worried about the situation in China and how the stability that the government is trying to maintain will eventually lead to instability.

“If banks are limited from lending then lending activity will migrate elsewhere. We see this happening at exchange traded funds and other shadowy parts of the financial system. And you worry that risks are starting to grow there.” – Greg IP

“One way to protect ourselves against disaster is to make use of the presence of danger to remind ourselves that things aren’t always safe and to take steps that keep us safe”. – Greg IP

“What I worry about more is that the pendulum has swung too far against risk taking. And the risks that are been taken are being channeled too far in the direction of financial risk and not real economy risk – people starting new businesses or buying new homes.” – Greg Ip

“What I worry about China is that they have leadership that is worried about political and economic stability.”

Where to Find Greg Ip:

Books:

Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe by Greg Ip
The Little Book of Economics: How the Economy Works in the Real World by Greg Ip

003: Erin Lowry on Millennials, College Debt and Asking for the Order

November 12, 2014 by Frank

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Episode 003: Erin Lowry on Millennials, College Debt and Asking for the Order

Erin Lowry is a double major in journalism and theatre and writes on finance and money related matters for the millennial generation. She lives in New York and is founder of brokemillennial.com where she is on a mission to explain financial concepts and money saving tips to her fellow Millennials using a little humor along the way. Erin is also a freelance writer for both Daily Finance and US News and World Report. Erin has deservedly been recognized for her astounding contribution to the finance and money industry, being voted ‘Top Finance Blog’ and winner of the ‘Best Personal Finance Blog for Young Adults’. Erin has also been featured on Forbes and Reuters, as well making appearances on TV, radio and other podcasts for her advice.

Economics and Finance Themes:

In this interview, Erin mentions and discusses: millennials, Generation Y, student loan debt, credit card debt, savings, habits, business startups, money, returns, net profit, incentives and perfect competition.

Erin’s Influencers:

Her Mum and Dad, Warren Buffett, Bill Gates, Mark Cuban and Magic Johnson.

Find out:

how a Krispee Kreme gave Erin her biggest lesson in understanding finance, money and net profit at the tender age of seven.

how living in Japan and China during her childhood developed a different money mindset to her fellow consumer-led American peers.

how Erin left college debt-free.

who are millennials, if you are one and, if so, are you narcissistic and lazy?

about the massive student loan and credit card debt taken on by this generation and what you can do about it.

the money-saving tips that you can use in college or at work.

how saving a little, even $2, from a paycheck now will develop into a powerful life habit.

the importance of having a mentor in your life, particularly as a young adult.

the importance of networking for millennials.

how ‘Asking for the Order’ can help you succeed.

some money-saving dating tips.

how you can use your free-time between college classes or in the evenings to become creative and generate supplementary income.

how to manage your credit card and to use it to your advantage.

about the importance of list-making and how this can empower you.

about the ‘Snowball Method’ and how it can make you feel good.

Advice:

‘As soon as you get your pay cheque, the first thing you do is pay yourself’ – Erin Lowry

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If you felt an outcome was unfair, ‘Ask for the Order’. If you don’t tell people what you want, they can’t read your mind and the worse someone can tell you is ‘No’..
I find that list writing helps me organize my thoughts and then when I cross something off, it’s just such a satisfying feeling.
If you are having debt problems, talk about it to your loved ones, to your closest friends, to a credible financial planner or to a priest.

Personal Habits:

A respect for money was instilled in Erin at a young age by her father, which she carried right through into her adult life. As a head-strong decision-maker, Erin was faced with an ‘economic’ choice in adolescence which resulted in her finishing college debt-free! These traits, coupled with her mother’s mantra ‘Ask for the Order’ has given Erin enough social and financial clout too pursue her love of personal finance and helping fellow millennials to straighten out their finances.

‘Ask for the Order’ – Erin Lowry

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Takeaway:

‘Your relationship with your parents and how they treat money is huge because we started learning about money from an incredibly young age’.

‘I find very fascinating… men and women that are able to go out and start their own companies and start with very little money and even not necessarily a lot of knowledge about something, and they teach themselves and they just go out and work really, really hard and I think that that’s the realization of the American dream and that it still really is possible.’