Simon Johnson — Two Views of Finance

The first view is that “we have done a lot” since the global financial crisis erupted in 2008. According to this view, which is put forward on a regular basis by some US Treasury officials and their European counterparts, there may be a bit more to do in terms of implementing reforms, but our banks and other financial firms have already become much safer. The crisis of 2008 cannot soon be repeated.

The second view is that we are a long way from completing the far-reaching changes that we need. Even worse, on at least one key point, the very language used among policymakers and leading journalists to describe finance is badly broken.

The issues are complex and nuances abound, but much of what divides the two sides in this debate comes down to this: Is it acceptable to say that banks “hold” capital?

If you have been following MMT, you likely know that bank capital is equity rather than assets held in reserve against losses.

Project Syndicate
Two Views of Finance

Simon Johnson | former chief economist of the IMF, a professor at MIT Sloan, and a senior fellow at the Peterson Institute for International Economics

Brad DeLong — Delong (And Krugman) Smackdown Watch: Bill Black, Stephanie Kelton, And Randy Wray Are Justifiably Irate Modern Monetary Theory How Do Deficits Matter?: Monday Hoisted From Comments Weblogging

OMG! Brad DeLong does full-on MMT. We are hitting the turning point.

Grasping Reality with Both Hands
Delong (And Krugman) Smackdown Watch: Bill Black, Stephanie Kelton, And Randy Wray Are Justifiably Irate Modern Monetary Theory How Do Deficits Matter?: Monday Hoisted From Comments Weblogging
J. Bradford DeLong | Professor of Economics, University of California at Berkeley
(h/t Clonal Antibody via email)

Simon Johnson — The Koch Brothers, The Cato Institute, And Why Nations Fail

...the Acemoglu and Robinson point is not just about how things may become awful when the government goes off-track (a right-wing point). They are also more deeply concerned about how powerful people fight to grab control of the state and otherwise compete to exert influence over the rest of society (a left-wing perspective).

The outcome to fear is some form of “extractive institutions,” meaning a set-up in which most of society is pressed down by working arrangements – e.g., various forms of forced labor – or civil disorder or a more general lack of property rights. They provide many historical and contemporary examples of what this means in their book....

Read it at the Baseline Scenario
The Koch Brothers, The Cato Institute, And Why Nations Fail
by Simon Johnson | former chief economist of the International Monetary Fund, professor at the MIT Sloan School of Management, senior fellow at the Peterson Institute for International Economics, and a member of the CBO’s Panel of Economic Advisers.
(h/t Mark Thoma)

Simon Johnson blames Wall Street on The Rachel Maddow Show

Visit msnbc.com for breaking news, world news, and news about the economy

Related: Patrick Bryne, CEO of Overstock.com, a Libertarian, talks to Cenk Ugyar at Current TV (video). He agrees that Wall Street's capture of government is the problem, not capitalism, and he supports the message that Occupy Wall Street is sending about this.