“Zapatero is not a good driver. It’s like a boat, which in calm waters steers fine, but when it gets bumpy, they are not prepared.” The same could be said for many of the world’s C-level leaders, so it’s perhaps not surprising that both companies and countries are finding out the hard way that credit can dry up when the sea gets choppy…

A perennial hot ticket on the lecture circuit at economic clubs and grad schools around the planet, Paul Volcker’s influence is finally starting to resonate where it counts: at both ends of Pennsylvania Avenue. As his testimony in front of the Senate Banking Committee looms, the broader premise of a more responsible financial services sector pursuing sustainable, profitable growth needs to get out in clear journalistic prose from a messenger untarnished by the last 18 months of political and economic triage. This Sunday NYTimes op-ed attempts to do just that, despite the complexity of the topic. Unfortunately, it falls a little short for those either too stubborn or greedy to listen or too impatient to digest his astute commentary on the benefits and challenges…

As rare proof that not all ex-Goldman bankers are great vampire squids wrapped around the face of humanity, Bank of Canada Governor Mark Carney turns his gaze toward households as the holidays approach with some keen macro observations and their implications for micro decision-making. Though the central bank recently raised flags about Canadian household finances and talk of a real estate bubble has begun to resurface, this public address seems measured both in its observations and its conclusions, and reflects well on the current poster child of responsible 21st century monetary governance…

For all its flaws, one of the great strengths of the American political system is the degree to which competing perspectives fight to the death in Washington’s marketplace of ideas. A perfect example is the recent exchange between Senate Banking Committee member (and Baseball Hall of Famer) Jim Bunning and his monetary nemesis Fed Chairman Bernanke on the eve of a controversial re-nomination…

Commentators often question how recent events in global capital markets could possibly sneak up on the world’s leading economists and policymakers. One possible explanation begins with the premise that the average citizen is reasonably unaware of even the most basic financial and economic concepts – like fractional reserve banking and the time value of money. As a result, generations of otherwise sophisticated individuals have grown up trusting that our economic plumbing and the individuals who manage it are fundamentally sound.

Much like the shifting partisan politics which rules Washington in 2- to 4-year cycles, stewardship of the Federal Reserve has ebbed and flowed between neo-Keynsians and Austrians since the birth of American central banking nearly 90 years ago. Two of the Fed’s greatest leaders and keenest minds have crafted American monetary policy for most of the last three decades, and yet they couldn’t be more different.

This is their story.

This type of geopolitical conspiracy would be easy to dismiss from any other source, but speculation of an imminent de-dollarization by some of the world’s largest oil consumers is even more chilling when it’s penned by one of Britain’s most celebrated international journalists…

Exploring the recent economic “upheaval” through the lens of history helps in at least two ways: 1) it assures us that humanity has faced similar dangers in the past and somehow lived to tell the tale, and 2) it suggests that the same entrepreneurial instincts that led us into trouble (yet again) also hold the key to restoring stability and growth. This speech by the President of the World Bank highlights a series of events that presaged the crisis — like the “emergence” of emerging economies, the popularity of leveraged finance, and growing imbalances of trade — focusing less on the outcome and more on the decades of unbridled expansion that inspired it…

A comprehensive if somewhat subjective view of the two years since the credit crisis first broke, direct from the horse’s mouth. Perhaps more interesting than any insider account of the Fed’s frantic response to the meltdown of the banking system is the degree to which the Chairman was concerned with the human impact of his macroeconomic policy-making…

Armchair financial quarterbacks would do well to tune out the mass media every so often and tune into the real global dialogue on the nature of the recent crisis and our prospects for a sustainable recovery. It is no coincidence that those whose perspective is truly global consider the fundamental nature of our modern political economy in terms of decades not days, systems not statistics, and welfare not wealth.

In this speech, given just weeks before the March 2008 arranged marriage of Bear Stearns and JPMorgan, this banker to central bankers dissects the credit crisis of 2007 and calls attention to dangerous fault-lines that presaged the apocalyptic deleveraging of the next 18 months…

In the midst of a global financial pandemic, private enterprise finds itself under the public microscope yet again — as it did during the 1930s after a century of unbridled growth and later in the 1970s after decades of stifling regulatory oversight. With this 21st century changing of the guard, the theoretical bases for free market capitalism are now under academic and legislative review. At the heart of the debate is the accuracy of the economic models taught to college students around the planet as though they were immutable physical laws.

For nearly a quarter century, Milton Friedman’s monetarists and their acolytes at the Federal Reserve have pursued American prosperity on the assumption that the sheer quantity of money in the economy, along with the degree to which it turns over annually, are the principal levers shaping macroeconomic fundamentals. For the better part of the 20th century that assumption held true as money supply was carefully managed, rising when the economy needed a boost and contracting when it was overheating.

The theory draws its roots from a colossal failure by the Federal Reserve during the Great Depression.

This counter-factual analysis of China’s path toward capitalism reveals that the country’s biggest cities aren’t necessarily the engines of dynamic Asian progress that modern commentators have suggested, and that the country’s future may lie in rural areas where entrepreneurship and competition have thrived since Deng Xiaoping’s Four Modernizations…

Faith in the underlying mechanics of portfolio theory and market efficiency has certainly contributed to humanity’s recent leap forward in wealth, productivity, private innovation, and global integration. But that same numerology has since crippled our aging financial system and triggered the worst global recession in nearly a century. Perhaps it’s time to reassess the value – and the logic – of bleeding edge finance.

As Professor Janeway points out in the following interview, treating securities like molecules, subject to the same variable distributions, “random walks”, differential equations, and reductionist math simply compounds the short-sighted actions of a few scientists-turned-gamblers. Not only does it greatly overstate the predictive power of econometric analysis, but it also understates the tremendous dangers of financial engineering.…

Keynesian reflections from 1919 on the first era of true globalization, complete with bountiful trade, unparalleled upward mobility, liquid labor markets, secure international travel, and a blissful ignorance of the fragility of this new 20th Century World Order…

What an extraordinary episode in the economic progress of man that age was which came to an end in August 1914! The greater part of the population, it is true, worked hard and lived at a low standard of comfort, yet were, to all appearances, reasonably contented with this lot. But escape was possible, for any man of capacity or character at all exceeding the average, into the middle and upper classes, for whom life offered, at a low cost and with the least…

Even market cheerleaders are struggling to find good news to rally around these days. With labor, capital, finance, real estate, and consumer markets all reeling from a half-decade of credit-fueled gluttony, and commodities markets cresting near all-time highs, it might seem a bit clichéd to highlight yet another bearish commentator — unless that bear is David Rosenberg, one of the few bulge-bracket economists to voice frequent and convincing skepticism about the “resilience” of modern capital markets and highlight the irrational optimism of the average investor.

It’s no surprise that financial crises – like intercourse, pro sports, and agriculture – run in alternating cycles of boom and bust. Classical economic theory suggests that such cyclicality can be overcome through innovations in resource use, factor productivity, and leverage. Classical history suggests otherwise. In the following rant, celebrity economist Jeff Sachs tackles the two-headed plague of stagflation — part stagnant economic growth, part inflation — and offers the 1970s as an illustrative case study in how to keep a resource-hungry, debt-ridden, war-wearied hegemon from spinning its economic wheels…

Further commentary on the interconnected themes of income disparity, agricultural inflation, and selective de-globalization, this time by Nobel Prize-winning economist Amartya Sen. Perhaps most compelling is the charge that a rising tide doesn’t lift all ships, and those who have benefited least from a “flattening” of our economic superstructure are often the most exposed to rising prices and shifting patterns of supply and demand. Also of note is the graphic artist chosen to visualize our scramble for scarce natural resources, yet another gifted Walrus alum…

As financial institutions continue to navel gaze in the aftermath of the credit crisis, confidence in their ability to self-regulate continues to decline. With little trust in their assets, their markets, or even their peers, these global banking titans have sworn off their independence and, like disenchanted teens, are returning home to be cared for by risk-averse, populist policy-makers and their never-ending pool of taxpayers’ dough. The danger here is that both sides are still reacting to deeds already done, and nobody has yet proposed a solution to avoid similar financial chaos going forward. With threats to global income in the order of nearly a trillion dollars, whoever ultimately grabs this hot potato better have pretty thick skin…

In this recent Times OpEd, Rochester economics professor Steve Landsburg points out how easily John Q. Public overlooks cause and effect in 21st century markets.

Let’s review: 1) goods and services require labor and capital to produce; 2) the price of labor and capital impact an item’s ultimate price; 3) factors of production are much less expensive in the developing world; 4) a decades-long public war on inflation in the developed world has prevented the price of goods from increasing in step with wages; however, 5) wage growth is now slowing and inflation has reached a 17-year high; thus 6) in their quest to find the lowest price, consumers who rebel against off-shoring jobs are simply biting the hand that feeds them,…