Thursday, February 07, 2008

Hillary subprimes it

I've heard that students in the U.S. have a new word to use when they fail a test: "I subprimed it."

Senator Clinton subprimes economics.

Senator Hillary Clinton she's got the experience to serve "from day one" if elected president. She's know as the candidate most knowledgable about public policy. She's also got plenty of hubris when it comes to her understanding of economic policy. She wants to abrograte home mortgage contracts when the terms hurt the "homeowner." Richard Thaler and Susan Woodward writing at The National Review take her on:
Senator Clinton's policy amounts to a command-and-control approach to economic policy in which the government announces prices and tells suppliers what to produce. Undertaking such an intervention can only raise interest rates on mortgages (and maybe other interest rates as well) as markets attempt to incorporate risk premiums to cope with possible future interventions. Promising the American people that you can fix things by just lowering their interest rates is dishonest, a fairy tale that won't come true.
Thanks to Newmark's Door for the pointer.

You'll remember Hillary and the cattle futures contract with no downside for Hillary the investor. But that was because her sugardaddy was willing to eat it.

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3 Comments:

Blogger Dubai Guy said...

Promising the American people that you can fix things by just lowering their interest rates is dishonest, a fairy tale that won't come true"

But Professor, if I am not wrong, one of the fathers of modern Macroeconomics, Keynes argued that in an ideal economy the interest rate should be zero. Interestingly, this is a view strongly recommended by Islam.

Don't you think it is the interest based economy which leads to events like the current subprime crisis or the recent Five Billion Euro scam in France?

I am doing some research on the subject & would be glad if you shared your thoughts on this topic :-)

2:20 PM  
Blogger rosh said...

DG: one word for ya - greed :)

10:25 PM  
Blogger John B. Chilton said...

DG, Islam still permits a return on investment and this amounts to the same thing, and the same potential for abuses.

What we have in the subprime scandal - and others - is predatory lenders, predatory borrowers, predatory employees, etc.

Fraud will always be with us, no matter what the economic system.

4:38 AM  

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