Thursday, November 6, 2008

Another piece of the puzzle

Now that the election is over, let's get back to understanding what is going on in our economy. Pressures are getting ever stronger for Congress to "do something!" There is serious consideration of another stimulus package. Demands are getting stronger and more specific for a massive increase in regulation. Businesses are lining up for taxpayer bailouts (exmple: the automotive industry.) The stock market continues to fall. Central banks around the world are back to inflating the money supply.

Have the government actions to date been helpful or harmful? How is one supposed to evaluate this mess?

Here's a helpful discussion with Arnold Kling, currently with the Cato Institute, but in the he past has worked both at the Federal Reserve and at Freddie Mac. In the clip, he offers clear explanations of securitization, credit default swaps, the role of Fannie and Freddie in the mortgage market, and much more. His analysis comes across as informed and level-headed, adding some key background and perspective on how we got to where we are. If you are trying to understand what has been happening but have been confused by the jargon or in need of flushing out the historical context, this is a good place to start. To figure out the next best step, we first need to understand how we got here.

Free Will: Financial Apocalypse Explained Recorded: September 26

"Table of Contents":
Arnold (once of Freddie Mac) explains the housing bubble (12:58)
A brief history of Fannie and Freddie (14:14)
Was it really so unlikely that we’d end up in this kind of mess? (05:50)
Is there a method to the bailout madness? (05:14)
Surprise! The US is ruled by a technocratic elite (04:55)
Arnold blasts the Paulson plan as essentially corrupt (09:52)

If you think you have a handle on the basics, then here's a bit more technical discussion between Kling and economist Russ Roberts in a podcast from EconTalk.