http://www.loc.gov/mods/v3 http://www.loc.gov/standards/mods/v3/mods-3-2.xsd
how faulty monetary statistics undermine the Fed, the financial system, and the economy
xxxi, 322 pages : illustrations ; 23 cm.
Blame for the recent financial crisis and subsequent recession has commonly been assigned to everyone from Wall Street firms to individual homeowners. It has been widely argued that the crisis and recession were caused by "greed" and the failure of mainstream economics. In this book, leading economist William Barnett argues instead that there was too little use of the relevant economics, especially from the literature on economic measurement. Barnett contends that as financial instruments became more complex, the simple-sum monetary aggregation formulas used by central banks, including the U.S. Federal Reserve, became obsolete. Instead, a major increase in public availability of best-practice data was needed. Households, firms, and governments, lacking the requisite information, incorrectly assessed systemic risk and significantly increased their leverage and risk-taking activities. Better financial data, Barnett argues, could have signaled the misperceptions and prevented the erroneous systemic-risk assessments. When extensive, best-practice information is not available from the central bank, increased regulation can constrain the adverse consequences of ill-informed decisions. Instead, there was deregulation. The result, Barnett argues, was a worst-case toxic mix: increasing complexity of financial instruments, inadequate and poor-quality data, and declining regulation. Following his accessible narrative of the deep causes of the crisis and the long history of private and public errors, Barnett provides technical appendixes, containing the mathematical analysis supporting his arguments. -- Back Cover
Foreword: Macroeconomics / Apostolos Serletis.
I. The facts without the math: -- 1. Introduction: -- Whose greed?: Ponzi games, transversality, and the fraud explosion; Conditional expectations; Regulation in history and in theory -- The great modernization -- The maestro -- Paradoxes -- Conclusion; -- 2. Monetary aggregation theory: -- Adding apples and oranges -- Dural price aggregation -- Financial aggregation -- The Commerce Department and the Department of Labor -- The major academic players: Iriving Fisher; Francois Divisa; Henri Theil; Dale Jorgenson; Milton Friedman; W. Erwin Diewert; James Poterba and Julio Rotemberg -- Banks throughout the world: Federal Reserve Board; The Bank of Japan; The St. Louis Federal Reserve Bank; The Bank of England; The European Central Bank; The International Monetary Fund -- Mechanism design: why is the Fed getting it wrong?: The theory; NASA's Space Program; The locked office; The relationship between the Board's staff, the Governors, the FOMC, and the Regional Banks; The right and wrong kinds of reform; The Office of Financial Research; A quiz: answer true or false -- Conclusion; -- 3. The history: -- The 1960s and 1970s -- The monetarist experiment: October 1979 to September 1982 -- The end of the Monetarist experiment: 1983-1984 -- The rise of risk adjustment concerns: 1984-1993 -- The Y2K computer bug: 1999 to 2000 -- Conclusion; -- 4. Current policy problems: -- European ECB data -- The most recent data: would you believe this? -- The current crisis: Prior to April 14, 2006; Subsequent to April 14, 2006; The revised MSI data -- Conclusion; -- 5. Summary and conclusion.
II. Mathematical appendixes: -- A. Monetary aggregation theory under perfect certainty: -- Introduction -- Supply of monetary assets by financial intermediaries -- Demand for monetary assets by manufacturing firms -- Aggregation theory under homogeneity -- Index-number theory under homogeneity -- Aggregation theory without homogeneity -- Index-number theory under nonhomogeneity -- Aggregation over consumers and firms -- Technological change -- Value added -- Macroeconomic and general equilibrium theory -- Aggregation error from simple sum aggregation -- Conclusion; -- B. Discounted capital stock of money with risk neutrality: -- Introduction -- Economic stock of money (ESM) under perfect foresight -- Extension to risk -- CE and simple sum as special cases of ESM -- Measurement of the economic stock of money; -- C. Multilateral aggregation within a multicountry economic union: -- Introduction -- Definition of variables -- Aggregation within countries -- Aggregation over countries -- Special cases -- Interest rate aggregation -- Divisia second moments -- Conclusion; -- D. Extension to risk aversion: -- Introduction -- Consumer demand for monetary assets -- The perfect-certainty case -- The new generalized Divisia Index -- The CCAPM special case -- The magnitude of the adjustment -- Intertemporal nonseperability -- Consumer's nonseperable optimization problem -- Extended risk-adjusted user cost of monetary assets -- Conclusion; -- E. The middle ground : understanding Divisia aggregation: -- Introduction -- The Divisia Index -- The weights -- Is it a quantity or Price Index? -- Stocks versus flows -- Conclusion.
Includes bibliographical references (pages [299]-311) and index.