1. Michael Spence argues that the nature of the current crisis will determine the regulatory reaction. Scope of regulation will increase.
The current crisis has come to be called a “balance-sheet recession” of global scope and tremendous depth and destructive power because of its origins in the balance sheets of the financial and household sectors. Extreme balance-sheet destruction is what made it distinctive. In the future, central banks and regulators will not be able to afford a narrow focus on (goods and services) inflation, growth, and employment (the real economy) while letting the balance-sheet side fend for itself.
2. Robert Shiller attributes the cause of the current economic crisis ultimately to a misunderstanding of home prices. Speculation is fueled by many false beliefs including the idea that the world is running out of land.
This misunderstanding may also contribute to an increase in home prices again, after the crisis ends. Indeed, some people are already starting to salivate at the speculative possibilities of buying homes in currently depressed markets.
3. Nouriel Roubini identifies signs of recovery and asks whether they mean a sustainable recovery. He is skeptical and finds the increase in asset prices troubling. Too much liquidity may be creating another asset bubble.
Moreover, the sharp rise in some asset prices threatens the recovery of a global economy that has not yet hit bottom.
