Readings on the Financial Crisis

For those of you interested at home, here's a list of important blog posts on the topic before us:

McArdle - The Nightmare Scenario if the financial markets collapse.

Credit Crunch or Not?
Yes:
McArdle - There is a Credit Crunch
Brad Delong - Real side of the economy feeling the pain
Ezra Klein - Commenter "Profane & Informed" says Frak Yeah theres a crunch.
Arnold Kling - Comments on Higgs & McArdle's takes on the Crunch

No:
Landsburgh - Not buying the crisis.
David Johnston - Where's the beef?
Robert Higgs (Boson) - No Credit Crunch.
Alex Tabarrok - No Crunch.

Ezra Klein:
Economists say don't be hasty on intervention.
Markets not acting as though the crisis is dire.
Proposed bailout is at best a half solution.
Talk about 'Assets' ultimately mean housing.

Alex Tabarrok
Supply-side approach to the crisis.

Mindles Dreck (via Tyler Cowen)
Regulations that make derivatives more complex = a douchebanker's best friend. (i.e. I-banker)

Luigi Zingales
Why Paulson is Wrong.

Aaron Edlin
Dr Strangeloan.
Questioning the $700 billion blank check.

Arnold Kling (for Treasury Secretary)
Case Against the Bailout.
The Paulson Plan is based on ignorance.
Hold-to-Maturity Pricing.
A simpler solution (lower capital requirements).
Open Letter to Bernanke - Shrink the Industry.

Brad DeLong:
Saving Capitalism from the Capitalists.

Megan McArdle
Should the Feds should just seize foreclosed houses & keep making the payments?
What MM thinks of the bailout proposal.
Why some sort of bailout is needed.

Randal O'Toole
Blame Urban Planning.

Russell Roberts
Krugman wrong on Fannie and Freddie.
Role of the CRA in causing the crisis. -
Affordable = Subprime.

Volokh Conspiracy
Full chain post on Crony Capitalism.

Ilya Somin
Commentary on Landsburg's on the Bailout.
Gotta take both possible sides of a catastrophe into account when envisioning worst case scenarios.
Moral Hazard contagion (bailout in every pot / slippery slope).

Will Wilkinson
You got Govt in my Markets/ Markets in my Govt!
Whats an incrementalist market liberal to think?
Vulgar? The benign rule of our elite economists.

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As they say, read the whole thing. (All of them!) Discussion will follow...

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Another reading

David Friedman puts his two cents in.

urban planning

I agree that zoning is a big part of the problem. Zoning restrictions make the land less valuable and nonconforming existing uses and structures more valuable. To get his money's worth out of zoned land, a land owner must build the maximum allowable structure.

The only way around this that I can dream up is, instead of zoning land, set the tax rate structure to accomplish the goal instead of the zoning. If the desire of the planners is to increase the use density of the land then raise the taxes on the dirt and minimize taxes on the structure.

For example, say a city wants to "renew" a section with higher density residences above retail shops and businesses. If all new construction was taxed as if it had a 6 story structure and floors above the 6th level was taxed at a decreasing rate up to the 12th story then the builder would be encouraged to wait until the additional capacity was rentable/sellable. If vacant land was then taxed at lower rate if left as open space/mini parks . . . .

Discussion

"Discussion will follow..."

I already discussed the unfolding of this fiasco back in 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006 and 2007. Plus most of 2008. It was predictable.

I don't think I'm going to have the energy to discuss the unfolding of this mess for the rest of 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023, 2024, 2025, 2026, 2027, 2028, 2029, and 2030.

But

Where the fuck were you in '96, when we could have done something?

Transaction Costs

Due to informational transactions costs I wasn't yet aware of the stupid decisions being made a the top.

I have found an algorithm that reduces my transaction costs now. I just assume that whenever I read one of those articles it will contain some stupid prescription for the problem that's way to late to help.

Basically, we're all screwed somehow. Except for the guys at the top, and the leaders of ACORN.