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I wouldn't get all too excited about Cochrane. He also believes that regulation is a waste of time and thinks fiscal deficits harm the Fed's power to regulate the economy. (He's got both backwards imo):
Cochrane is known for arguing against the popular view that more regulation is needed to fix the financial system; typically, he says, regulation ends up encouraging risk-taking. He has also studied the fiscal theory of the price level, the somewhat controversial view that large fiscal deficits can overpower the central bank's attempts to control inflation. His wide-ranging work has made Cochrane a key voice in the public policy debates of the last several years.
"The deeper problem is the idea that we just need more regulation — as if regulation is something you pour into a glass like water — not smarter and better designed regulation. Dodd-Frank is pretty bad in that department. It is a long and vague law that spawns a mountain of vague rules, which give regulators huge discretion to tell banks what to do. It’s a recipe for cronyism and for banks to game the system to limit competition."
Cochrane isn't opposed to ALL REGULATION. He favours the system advocated by Lawrence Kotlikoff and Milton Friedman under which the banking industry is split into two different types of institution. 1, there are full reserve institutions which simply accept deposits and don’t lend on or invest the money: perhaps they just deposit the money at the central bank. 2. There are institutions a bit like mutual funds which DO LEND ON depositors’ money, but depositors have to carry any losses made in the process. For Cochrane, Kotlikoff and Friedman, see respectively:
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I remember that one. I think the original piece from Cochrane is from about a year ago.
Nww to me. I guess I missed it.
I wouldn't get all too excited about Cochrane. He also believes that regulation is a waste of time and thinks fiscal deficits harm the Fed's power to regulate the economy. (He's got both backwards imo):
Cochrane is known for arguing against the popular view that more regulation is needed to fix the financial system; typically, he says, regulation ends up encouraging risk-taking. He has also studied the fiscal theory of the price level, the somewhat controversial view that large fiscal deficits can overpower the central bank's attempts to control inflation. His wide-ranging work has made Cochrane a key voice in the public policy debates of the last several years.
"The deeper problem is the idea that we just need more regulation — as if regulation is something you pour into a glass like water — not smarter and better designed regulation. Dodd-Frank is pretty bad in that department. It is a long and vague law that spawns a mountain of vague rules, which give regulators huge discretion to tell banks what to do. It’s a recipe for cronyism and for banks to game the system to limit competition."
Bill Black would freak out.
Cochrane isn't opposed to ALL REGULATION. He favours the system advocated by Lawrence Kotlikoff and Milton Friedman under which the banking industry is split into two different types of institution. 1, there are full reserve institutions which simply accept deposits and don’t lend on or invest the money: perhaps they just deposit the money at the central bank. 2. There are institutions a bit like mutual funds which DO LEND ON depositors’ money, but depositors have to carry any losses made in the process. For Cochrane, Kotlikoff and Friedman, see respectively:
http://www.hoover.org/news/daily-report/150171
http://www.bloomberg.com/news/2013-03-27/the-best-way-to-save-banking-is-to-kill-it.html
http://ralphanomics.blogspot.co.uk/2014/01/milton-friedman-set-out-positive-money.html
Oh, Kotlikoff...no THERE'S a thought leader!
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