Sorting out the details of the response will be messy but the principles are now clear and policy is forming around them. First, address illiquidity in the market for mortgage-backed securities. Second, inject public capital on a huge scale, drawing in new private capital at the same time. Third, revive the inter-bank market with temporary guarantees. Fourth, especially in the US, step up efforts to slow mortgage foreclosures, to relieve the distress and stop house prices undershooting.
Creative Destruction in a Nutshell
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A good figure from the Nobel Prize Foundation’s Scientific Background to
the Mokyr, Aghion and Howitt Nobel. The figure shows that firm exit rates
and jo...
2 hours ago
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