Tag Archive for OUPblog

Grossman: Madoff Pales Next to “Forex” Scandal

Though Bernie Madoff’s Ponzi scheme shocked the nation and grabbed headlines in the months following the subprime crisis, in his latest post on OUPblog, Professor of Economics Richard Grossman draws readers’ attention to two far more economically significant scandals: Libor and forex (foreign exchange). He writes:

 The Libor and forex scandals have several especially troubling aspects in common. First, unlike Madoff, they did not require asset booms in order to succeed: profits could be made on days when a particular currency rose or fell. That is, no prolonged asset bubble was required for forex manipulation to succeed—nor would the scheme collapse if an asset bubble collapsed. In theory, forex manipulation could have continued indefinitely.

Second, unlike Madoff, who only required his own wits and the gullibility of investors to succeed, the forex scandal was a conspiracy—or rather a series of conspiracies. […]

Finally, the forex scandal is especially troubling because it persisted for more than two years after the Libor scandal was exposed.

Grossman on Transparency at the Fed

Professor of Economics Richard Grossman writes in OUPBlog, the blog of Oxford University Press, that the financial world’s fervent “Fed watching” used to be a lot more difficult. In contrast to the regular press conferences now held by the Federal Reserve chair to explain recent policy actions, the body governing monetary policy was, for much of its history, quite secretive not only about its future actions, but also its current ones. He writes:

The Fed’s monetary policymaking body, the Federal Open Market Committee (FOMC), was created under the Banking Act of 1935. For the first three decades of its existence, it published brief summaries of its policy actions only in the Fed’s annual report. Thus, policy decisions might not become public for as long as a year after they were made.

But, beginning in the 1960s, the Fed gradually became more transparent about its policymaking, and other central banks followed suit. Grossman thinks this is a good thing:

Despite disagreements over how much transparency is desirable, it is clear that the steps taken by the Fed have been positive ones. Rather than making the public and financial professionals waste time trying to figure out what the central bank plans to do—which, back in the 1980s took a lot of time and effort and often led to incorrect guesses—the Fed just tells us. This make monetary policy more certain and, therefore, more effective.

Greater transparency also reduces uncertainty and the risk of violent market fluctuations based on incorrect expectations of what the Fed will do. Transparency makes Fed policy more credible and, at the same time, pressures the Fed to adhere to its stated policy. And when circumstances force the Fed to deviate from the stated policy or undertake extraordinary measures, as it has done in the wake of the financial crisis, it allows it to do so with a minimum of disruption to financial markets.

The Never-Ending Assault by Microbes

Firshein

William Firshein’s book, published by Oxford University Press in January 2014

“Of the approximately ten million cells that make up the human body, there are billions of microbes that come along with them.”

In a post on OUPblog (the blog of Oxford University Press), William Firshein, the Daniel Ayres Professor of Biology, emeritus, reminds readers of the multitude of microbes that can make us sick, including antibiotic resistant pathogens that infect more than 2 million people in the U.S. each year. Given the constant assault we’re under from these pathogens, how do our bodies defend us? In this blog–and in a new book titled The Infectious Microbe, published by Oxford University Press in January–Firshein walks readers through the biological processes involved in warding off pathogens.

He writes: “How does the body interact with these ‘foreign’ entities? The immune system must protect the body from attack by pathogens and also from the formation of abnormal cells which could turn cancerous. Two types of immune responses exist. One is under the control of antibodies (proteins which circulate in the blood stream) that resist and inactivate invading pathogens by binding to them. The other is mediated by a certain type of white blood cell called a lymphocyte that destroys abnormal (potentially cancerous) cells and viral infected cells. Together, with other white blood cells, they present a formidable defense against infection and abnormality.”

Government Shutdown: Not the Constitution’s Fault

Blogging for Oxford University Press, Associate Professor of Government Elvin Lim writes that modern commentators are wrong to blame the Constitution for government’s failures, such as the recent government shutdown. In fact, he writes, the Constitution was designed to prevent a small faction, like the modern-day Tea Party, from exerting too much control over the workings of government.

Writes Lim: “So when President Barack Obama proclaimed that ‘one faction of one party in one house of Congress in one branch of government doesn’t get to shut down the entire government just to refight the results of an election,’ he was on very firm constitutional ground, and pointedly — I think also consciously — using ‘faction’ exactly as the framers intended it in the eighteenth-century sense. Today’s self-proclaimed ‘originalists’ are picking and choosing what part of history to affirm. ‘Faction’ and ‘partisanship’ were foul words to the framers, for precisely the reasons we are experiencing today. President Obama has no obligation, under the original meaning and intent of the Constitution, to negotiate with a faction; indeed he in on good ground to try to rein it in.”

Lim on Obama’s State of the Union

Writing on the OUPblog, Associate Professor of Government Elvin Lim gave a close read of President Obama’s State of the Union Address earlier this month. Lim writes that Obama “has already signaled unabashedly that he will make the tough decisions” on issues such as climate change, the minimum wage, immigration, and the sequester. But though “the televised address makes it look like the president is legislator-in-chief, he is anything but that. He can only execute the law; but to make the law he wants to execute, he needs Congress.”