Jackson Hole

Next month in Jackson Hole, central bankers and various hangers on will assemble for the social event of the year, if you’re a person who likes to discuss monetary policy over canapés. This time around, though, economists from Goldman Sachs, Morgan Stanley, and other banks won’t be in attendance, because in a fit of oh no they di’nt-ness from the hosts at the Kansas City Fed, they weren’t invited. Read more »

The Kansas City Fed chief wants the son of a bitch at Merrill Lynch who spoiled the secrecy surrounding her underwhelming ski-vacation-and-symposium caught before he finds his way to Moscow or Ecuador. Read more »

Ben Bernanke gave another Augustinian give-us-QEn-but-not-yet* speech at Jackson Hole today and you could go read it but honestly why would you, you know what it says, which is “everything is bad, but not as bad as it could be, and we want to make it a bit better, but only once it’s gotten a bit worse.” Moving right along.

To Andrew Haldane’s speech, which is a treat! It is here and its title is “The dog and the frisbee,” so obviously he had Dealbreaker on his side right there. Haldane, the Bank of England’s financial-stability guy, basically argues that while the financial system is complex, it should be regulated simply – “As you do not fight fire with fire, you do not fight complexity with complexity” – just as a dog uses only elementary trigonometry and differential calculus to solve the complex and multivariate problem of catching a frisbee.**

Haldane’s main example of overcomplexity in regulation is risk-based capital regulation, in which the Basel accords have moved from simple leverage tests – common equity divided by total assets – to complicated tests where the numerator is made up of different tiers of capital and the denominator uses risk-weights that are largely driven by the bank’s own models of riskiness. One thing you could do is compare the performance of those measures in the recent crisis, so he did. Here is how Basel risk-based capital did:

That looks bad and also is bad, with no statistically significant difference between banks that blew up and banks that did not. This is just boring leverage: Read more »

Mr. Bernanke said the U.S. recovery, now more than two-and-a-half years old, continues to be “modest.” He conceded the pace of growth has been slower than what the Fed expected. But he was more optimistic about the long run, saying the economy hasn’t been permanently scarred by the financial crisis. “Although important problems certainly exist, the growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years,” the Fed chief told the gathering, which this year focuses on long-term growth prospects for the global economy. [WSJ]

The artist formerly known as Paul McCulley has some ideas. Read more »

What has Bill and Hil Clinton’s son-in-law been up to lately? Fresh off his summer nuptials to their daughter, Marc Mezvinsky has been apparently maxing and relaxing in Jackson Hole. According to the Post, the former Goldman Sachs investment banker has taken a li’l sabbatical from his gig at 3G Capital to “hit the slopes for a few months.” Read more »