Rice University economist available to discuss financial crisis

September 25, 2008

Mahmoud El-Gamal, chair of Rice University's economics department, is available for media interviews this week and into the weekend to discuss the current financial crisis and action Congress is likely to take.

El-Gamal and Amy Myers Jaffe of Rice University's Baker Institute are near completion of a forthcoming book, tentatively titled "Oil, Dollars, Debt and Crises." The book closely examines the world financial marketplace. "It's a book about the petrodollar and the worldwide financial system," said El-Gamal.

He received his bachelor's degree in economics from American University in Cairo, his master's degree in statistics from Stanford and his doctorate in economics from Northwestern. Prior to coming to Rice, he taught economics at the University of Rochester, Cal Tech and the University of Wisconsin-Madison. He has also worked at the International Monetary Fund and the U.S. Department of Treasury.

El-Gamal said, "The current financial crisis is first and foremost a crisis of confidence. The tip of the iceberg may be the subprime mortgage crisis and its immediate aftermath, but the roots of the crisis have to do with unsustainable dual deficits (fiscal and trade) that have resulted in gargantuan levels of U.S. debt, both private and public.

"Ultimately, we have to recognize that a financial system built on credit cannot survive if the issuer of that credit continues to pile up debt. For years now, we in the U.S. have been consuming beyond our means, relying on Asian and oil-exporting countries to finance our expenditures with their trade surpluses and other savings. A long-term solution to this problem can only come from careful rebalancing of global production and consumption patterns. We need to produce and save more; Asians need to consume more of our goods.

"Unfortunately, our government's approach has been to use duct tape to fix structural problems, promising to introduce proper long-term solutions after the crisis subsides. Once the immediate symptoms of the problem are addressed, however, lobbyists and high-rolling financiers make sure that the rules of the game, which favor them richly, remain the same.

"Congress is correct in putting the brakes on the current $700 billion duct-tape solution. Privatized profits and socialized losses may in the end be inevitable, given the brinksmanship of the current game. If this duct-tape fix works for a while, i.e., if the gravely ill patient becomes temporarily nonsymptomatic, we're likely to forget about the long-term debt crisis and go back to business as usual. If it doesn't, then Congress will likely be asked to provide more duct-tape financing, appealing to the 'sunk-cost fallacy' that we've already spent so much on the problem and we just need a bit more.

"Unfortunately, failing to provide the duct tape may in fact be as catastrophic as the Treasury Department and the Fed would have us believe. Conversely, providing the temporary fix and eventually ignoring the problem until it flares up again (with larger magnitude) may be equally disastrous. Congress seems wise to exercise double brinksmanship in trying to force the administration to accept more oversight and restrictions on executive pay, thus reducing the incentive to gamble with other people's money," said El-Gamal.

Rice University

Related Rice Articles from Brightsurf:

C4 rice's first wobbly steps towards reality
An international long-term research collaboration aimed at creating high yielding and water use efficient rice varieties, has successfully installed part of the photosynthetic machinery from maize into rice.

Rice has many fathers but only two mothers
University of Queensland scientists studied more than 3000 rice genotypes and found diversity was inherited through two maternal genomes identified in all rice varieties.

Rice rolls out next-gen nanocars
Rice University researchers continue to advance the science of single-molecule machines with a new lineup of nanocars, in anticipation of the next international Nanocar Race in 2022.

3D camera earns its stripes at Rice
The Hyperspectral Stripe Projector captures spectroscopic and 3D imaging data for applications like machine vision, crop monitoring, self-driving cars and corrosion detection.

Climate change could increase rice yields
Research reveals how rice ratooning practices can help Japanese farmers increase rice yields.

Breeding new rice varieties will help farmers in Asia
New research shows enormous potential for developing improved short-duration rice varieties.

High-protein rice brings value, nutrition
A new advanced line of rice, with higher yield, is ready for final field testing prior to release.

Rice plants engineered to be better at photosynthesis make more rice
A new bioengineering approach for boosting photosynthesis in rice plants could increase grain yield by up to 27 percent, according to a study publishing January 10, 2019 in the journal Molecular Plant.

Can rice filter water from ag fields?
While it's an important part of our diets, new research shows that rice plants can be used in a different way, too: to clean runoff from farms before it gets into rivers, lakes, and streams.

Rice plants evolve to adapt to flooding
Although water is essential for plant growth, excessive amounts can waterlog and kill a plant.

Read More: Rice News and Rice Current Events
Brightsurf.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.