Brad DeLong — Misdiagnosis of 2008 and the Fed

Alan Greenspan revisited.

WCEG — The Equitablog
Misdiagnosis of 2008 and the Fed: Inflation Targeting Was Not the Problem. An Unwillingness to Vaporize Asset Values Was Not the Problem…
Brad DeLong

Izabella Kaminska — Fintech and banking risk; cognitive dissonance de semaine

Thank god for the stream-lined logic of Mariana Mazzucato, innovation economist at Sussex University, who was on hand on Wednesday in the fintech session to remind the evangelists how financial innovation tends to increase not diminish rent extraction from the economic system.

Must-read on financing innovation. If pressed for time, you can just skip down to the above quote and read the rest on MM.

Short-termism goes hand and hand with rent-seeking. Real innovation rather than puff is long haul, the result of strategic investment.

The Financial Times — FT Alphaville
Fintech and banking risk; cognitive dissonance de semaine
Izabella Kaminska

Antoine Martin and Susan — Financial Innovation: The Origins of the Tri-Party Repo Market

First in a two-part series 

The conventional wisdom about financial innovation is that it is typically undertaken as a way to increase profits. However, financial innovation can also occur as a response to the need to reduce risk. Tri-party repo is an example of such innovation. While tri-party repo ultimately evolved in ways that created and amplified systemic risk (as we will describe in our next post), its origin was as a solution to inefficiencies and risks associated with the repo settlement arrangements prevailing at the time.

FRBNY— Liberty Street Economics
Financial Innovation: The Origins of the Tri-Party Repo Market

Antoine Martin, vice president in the Federal Reserve Bank of New York’s Research and Statistics Group, and Susan McLaughlin, senior vice president in the Bank’s Markets Group

Steve Roth — Encouraging Deadly Financial Viruses

Steve quotes Randy Wray.

Read it at Asymptosis
Encouraging Deadly Financial Viruses (short)

by Steve Roth