Tag Archive for Grossman

Grossman Argues for Diversity at Central Banks

Professor of Economics Richard Grossman is the author of an op-ed titled, “The Monetary Cosmopolitans,” published March 27 on Project Syndicate, a website that publishes commentary “by global leaders and thinkers.” Grossman expresses support for a new trend toward countries appointing foreigners, and those with considerable foreign experience, to what is widely considered a country’s second most important post: that of the head of the central bank.

“This represents a major departure from the tradition of filling central banks’ top leadership positions with people who have spent most of their careers there—a tradition that, over time, allowed central banks to be taken over by ‘groupthink.’ With the entrenchment of a particular ideology or mode of thinking, monetary policymakers increasingly missed—by choice or inertia—opportunities to change, reinvigorate, and improve the running of these vital institutions.”

Read more here.

Grossman Speaks on Economic Policy Mistakes at Boston Public Library

Richard Grossman

Richard Grossman

Richard Grossman, professor of economics, spoke about the poor thinking behind nine of the worst economic policy mistakes of the past 200 years at Boston Public Library Dec. 4. Grossman is the author of the newly-published book, Wrong: Nine Economic Policy Disasters and What We Can Learn from Them.

He also spoke about economic policy mistakes at the Seminary Coop Bookstore in Chicago on Nov. 14 and the Museum of American Finance in New York on Nov. 21.

At Wesleyan, he teaches classes in American and European economic history, macroeconomics, and money and banking. Grossman also is a visiting scholar at the Institute for Quantitative Social Science at Harvard University.

 

 

 

3 Op-Eds by Grossman Published in National Media

Richard Grossman, professor of economics.

Richard Grossman, professor of economics.

Professor of Economics Richard Grossman recently had three op-eds published in major newspapers. All related in different ways to the U.S. Congress’ negotiations over the budget and debt ceiling, and the resulting shut down. Grossman is the author of a new book, Wrong: Nine Economic Policy Disasters and What We Can Learn from Them, published this month by Oxford University Press. Read more about it in this Wesleyan Connection story.

The Hartford Courant on Oct. 4 published an op-ed by Grossman arguing that the Republicans were on an “ideological crusade” in their refusal to pass a continuing budget resolution unless substantial changes were made to the Affordable Care Act. Pointing to examples as diverse as the 19th century Irish famine and Japan’s refusal to confront its ailing banks in the 1990s, Grossman writes: “Republicans should take a lesson from history, which has shown time and time again that such ideological crusades, when applied to economic policy, can have disastrous consequences.”

And on Oct. 19, USA Today published another op-ed calling upon policy makers to regularly conduct “autopsies” of economic policy—particularly when things go wrong, as with the recent government shut-down and near-breach of the debt ceiling. “Although the current shut-down is a pitiful attempt by the Republicans to reverse what is settled law and policy (Obamacare), it is not clear that the Democrats have advanced any sound agenda for solving our national budget issues during the last two years either,”  Grossman writes. “It is time to call in a pathologist. Even though digging through the viscera of the political stalemate in Washington would no doubt turn our collective national stomach, it’s an autopsy that is well worth conducting.”

And on Oct. 20, The Boston Globe published another op-ed by Grossman, in which he writes that October should be labeled “Financial Crisis Month.” Over the past two centuries in the U.S. and Europe, October—and, more generally, the autumn months—have seen a string of serious financial crises. Grossman explains the historical reasons behind this trend, from the timing of the harvest to the bursting of asset bubbles. Today, he writes, politicians returning from their summer vacations and doing “stupid things” is most likely to blame for the continued popularity of financial crises in October.

Grossman’s New Book Wrong on 9 Economic Policy Disasters

Book by Richard Grossman.

Book by Richard Grossman.

Richard Grossman, professor of economics, is the author of Wrong: Nine Economics Policy Disasters and What We Can Learn from Them, published by Oxford University Press in October 2013.

In recent years, the world has been rocked by major economic crises, most notably the devastating collapse of Lehman Brothers, the largest bankruptcy in American history, which triggered the breathtakingly destructive sub-prime disaster. What sparks these vast economic calamities? Why do our economic policy makers fail to protect us from such upheavals?

In Wrong, Grossman addresses such questions, shining a light on the poor thinking behind nine of the worst economic policy mistakes of the past 200 years, missteps whose outcomes ranged from appalling to tragic. Grossman tells the story behind each misconceived economic move, explaining why the policy was adopted, how it was implemented, and its short- and long-term consequences. In each case, he shows that the main culprits were policy makers who were guided by ideology rather than economics.

Grossman’s Op-Ed: Replace Libor with Fair Alternative

Professor of Economics Richard Grossman’s op-ed, “The Best Way to Reform Libor: Scrap It,” was published in The Wall Street Journal on July 25. “The British have learned nothing from the recent Libor scandal”  involving the manipulation by banks of a vitally important interest-rate benchmark, writes GrossmanThis is clear from a recent decision by a British government-appointed committee to hand over control of Libor to NYSE Euronext, a company that owns the New York Stock Exchange, the London International Financial Futures and Options Exchange, and a number of other stock, bond, and derivatives exchanges. “In other words, the company that will be responsible for making sure that Libor is set responsibly and fairly will be in a position to profit like no one else from even the slightest movements in Libor.”

The only solution, writes Grossman, is to scrap Libor and devise alternative market-determined benchmark rates, which cannot be manipulated. He concludes, “The incentive to game an benchmark rate such as Libor is just too high to risk putting it in the hands of a single private entity, however committed that entity may be to restoring its credibility. Replacing Libor with a transparent, fair, market-based alternative is the only sensible solution.”

The op-ed can be read on The Wall Street Journal website by those in the Wesleyan network, and WSJ subscribers.

Grossman Presents Paper at Financial History Workshop

Professor of Economics Richard Grossman presented a paper during the Workshop on Monetary and Financial History, held June 26 at the at the Federal Reserve Bank of Atlanta. The paper he presented, titled, “Bloody Foreigners! Overseas Equity on the London Stock Exchange, 1870-1913,” considers data on capital gains, dividend, and total returns for domestic and overseas equities listed on the London Stock Exchange during 1870-1913. The paper is available to read here.

Grossman to Study Banking Regulation as 2013 Guggenheim Fellow

Richard Grossman, professor of economics.

Professor of Economics Richard Grossman has been named a 2013 Guggenheim Fellow. He will work on a project about the evolution of banking regulation across the industrialized world.

Awarded by the John Simon Guggenheim Memorial Foundation, the fellowship assists research and artistic creation “for men and women who have already demonstrated exceptional capacity for productive scholarship or exceptional creative ability in the arts.” This year, 175 scholars, artists and scientists were selected to receive fellowships from a group of almost 3,000 applicants from the U.S. and Canada.

“The Guggenheim Foundation has been giving awards to distinguished scholars and artists for nearly 90 years, including Nobel laureates, Pulitzer Prize winners, a winners of a host of other important awards. It is an honor to be in such company,” said Grossman. “It is particularly meaningful to be the only member of the 2013 class of Guggenheim Fellows who is an economist.”

Describing his project, Grossman said, “I will be looking in particular at how historical evolution affects current day banking regulation—what those in the business call, ‘path dependence.’ So, for example, if California had particularly liberal banking laws (eg. Easy entry into banking, a minimum of restrictions on how banks can conduct business) in the 19th century, and if Connecticut had particularly stringent laws (eg. High barriers to entry, many restrictions on banking operations), how likely is it that the relative stringency of their laws will remain today?”

He added, “I am excited about this research. When banks work well, they contribute to economic prosperity; when they don’t, things can go very wrong. This research will help identify which regulatory regimes have been conducive to economic growth and stability and which have not. I hope that the results will provide guidance to policy makers in the U.S., Europe, and Japan who are currently crafting new regulations.”

Grossman Discusses Treasury Supply at Capital Structures Conference

Richard Grossman, professor of economics.

Professor of Economics Richard Grossman was an invited discussant at a conference on “Understanding the Capital Structures of Non-Financial and Financial Corporations,” sponsored by the National Bureau of Economic Research. The conference took place in Cambridge, Mass. on April 5-6.

Grossman discussed a paper titled “Short-Term Debt and Financial Crises: What can we Learn from Treasury Supply,” by Arvind Krishnamurthy and Annette Vissing-Jorgensen, both of Northwestern University.  For more information see the conference’s website.

 

 

Grossman’s Fiscal Cliff Op-Ed Published in Hartford Courant

Richard Grossman

Professor of Economics Richard Grossman had an op-ed in The Hartford Courant on Jan. 5 about negotiations over the “fiscal cliff” in Washington. He writes that though reasonable people may disagree over what top marginal tax rate is ideal for the economy, the stubborn resistance of Congressional Republicans to any tax increases is the product of ideology, not reason. Looking back over history, he writes, the “abdication of sound economic reasoning in favor of ideology” has resulted in numerous policy mistakes with long-lasting economic impacts.

As an historical example, Grossman cites Britain’s decision to return to the gold standard following World War I out of nostalgia for a former all-powerful empire. This decision was made “despite structural changes that rendered the gold standard inappropriate in the postwar world,” and helped usher in the Great Depression, he writes.

Grossman Chairs Session at Banking Conference in Munich

On Sept. 14 and 15, Professor of Economics Richard Grossman attended a conference in Munich jointly sponsored by the Bundesbank (the German central bank) and a Munich-based research institute called CESifo. Grossman chaired a session and acted as a discussant at the conference, whose focus was, “The Banking Sector and the State.” According to the conference website: “The current financial and sovereign debt crisis has shown once again that the banking sector and the state are intertwined in many ways: On the one hand, the state lends support to distressed banks and accepts risks from the private sector; in this way banks quite often fall under public ownership. On the other hand, banks are important lenders and thus an indirect source of funding for the state in that they hold large amounts of government bonds. The conference will analyse the resulting interactions, the risks and the potential impact on the stability of the financial system.”

More information on the conference is available here.

In addition, on Aug. 29, The Los Angeles Times published an op-ed by Grossman on the Republican Party platform’s call for a commission to study restoring the link between the dollar and gold. Grossman writes that as an academic, he’s all for scientific study—but actually re-establishing the gold standard would be disastrous.

Grossman explains, “History provides ample evidence that the gold standard is a bad idea. After World War I, the major industrialized nations established the gold standard, which is widely seen as having contributed to the spread and intensification of the Great Depression. The gold standard tied the hands of monetary policymakers, forcing them to maintain high interest rates in order to maintain the price of gold, thereby making a bad economic situation even worse.

Had we been on the gold standard when the subprime crisis broke, the Federal Reserve would have had to raise interest rates instead of lowering them. Given that our economy was — and still is — struggling despite historically low interest rates, higher interest rates would have been devastating.”

Grossman’s Op-Ed on the Libor Banking Scandal in the Courant

Richard Grossman, professor of economics.

Professor of Economics Richard Grossman published an op-ed in The Hartford Courant on August 7 about the global “Libor” banking scandal. Taking a lesson from the old mob-run “numbers racket,” Grossman proposes an elegant solution to fixing deficits in the Libor, and renewing public confidence in the banking system.

The Libor (London Interbank Offered Rate) is currently calculated by asking a group of banks to self-report the cost for them to borrow money from other banks. The highest and lowest 25 percent of submitted estimates are thrown out, and the average of the remaining submissions is the Libor. Banks are supposed to submit their best estimate of their borrowing costs, but incentives to cheat are enormous, with millions of dollars in profits at stake, Grossman argues. Therefore, the Libor—the world’s leading benchmark interest rate—should be based on a market-determined figure, such as the recently launched GCF Repo index, published by the Depository Trust & Clearing Corp.