Notes on the Financial Crisis

For those of you who are tired of listening to politicians and journalists with little grasp of the topic, here's a list of articles and podcasts that help explain the current financial crisis:

• Harvard economist Ed Glaeser on housing prices
• Yale economist Robert Shiller discussing the housing bubble (econtalk podcast)
• George Mason economist Arnold Kling talking about the roles of Fannie Mae and Freddie Mac (econtak podcast)
  
• U Chicago economist John Cochraine on the bailout
• Harvard economist Ken Rogoff on the bailout
• Harvard historian Nail Ferguson on parallels with the Great Depression

As for the parallels with the Great Depression, it's important to remember the policy choices that deepened the crisis. Among these are the Fed's decision to contract the money supply, the Hoover administration's decision to raise taxes in order to balance the budget, and the passing of the Smoot-Hawley Tariff Act, which ushered in a period of disastrous trade wars and further halted economies throughout the world.

Governments in the US and Europe have the tools and the knowledge that should help avert anything akin to the Great Depression. That said, we are likely in for the most serious recession in the last 30 years. And, as Barry Eichengreen warns, 10% unemployment is not out of the question.