The Baseline ScenarioWhat happened to the global economy and what we can do about itSkip to contentHomeAboutFinancial Crisis for BeginnersDownload in PDFComment GuidelinesTech Support← Older postsWant More?Posted on June 7, 2010 by James Kwak | Comments OffFollow Simon and James on Twitter or Facebook. Get daily blog posts via email, RSS, or Kindle (get help here). Read White House Burning. Read our columns at Bloomberg, Economix (New York Times), Project Syndicate, or The Atlantic. Check out 13 Bankers. Read Simon’s papers.Comments OffPosted in CommentaryThe Cost of (Equity) CapitalPosted on May 6, 2013 by James Kwak | 48 CommentsBy James KwakFor years, the world’s largest banks have been up in arms over threats by regulators to increase their (equity) capital requirements. Making banks hold more capital, they argue, will force them to reduce lending and will increase their cost of funding, making credit more expensive throughout the economy. One of the chief defenders of the megabanks has been Josef Ackermann, CEO of Deutsche Bank until last year and also chair of the Institute of International Finance, which claimed that higher capital requirements would reduce economic output by a whopping 3.2 percent.Anat Admati and Martin Hellwig have been tirelessly debunking the myth that higher capital levels will force banks to curtail lending and torpedo the global economy, most recently in their excellent new book, The Banker’s New Clothes. Some of the arguments against higher capital requirements are simply incoherent, like the idea that banks would be forced to set aside capital instead of lending it. (Capital is the difference between assets and liabilities, not cash that you put somewhere for safekeeping; were it not for reserve requirements, which are something else, a bank could lend out 100 percent of the money it can raise.) Continue reading →→ 48 CommentsPosted in CommentaryTagged bank capital, Deutsche Bank, financeWith Great Power . . .Posted on May 1, 2013 by James Kwak | 15 CommentsBy James KwakA friend brought to my attention another example of how Excel may actually be a precursor of Skynet, after the London Whale trade and the Reinhart-Rogoff controversy. This comes to us in a research note from several years ago by several bioinformatics researchers titled “Mistaken Identifiers: Gene name errors can be introduced inadvertently when using Excel in bioinformatics.” The problem is that various genes have names like “DEC1″ or identifiers like “2310009E13.” When you important those text strings into Excel, by default, the former is converted into a date and the later is converted into scientific notation (2.310009 x 10^13). Since dates in Excel are really numbers behind the scenes (beginning with January 1, 1900), those text identifiers have been irretrievably converted into numbers.This problem is related to what makes Excel so popular: it’s powerful, intuitive, an