People are often surprised when they ask economists, what is money, and the reply is, well, anything that fulfills the functions of money is money: money is as money does. The classic definition of money is anything that is: i) … Continued
P2P (peer-to-peer) lending is the biggest and most developed form of alternative finance. But does it have any enduring value to add in the financial system? * P2P lending platforms have sprung up in many countries since the global financial crisis, … Continued
As we commemorate the 10th anniversary of the Lehman Brothers bankruptcy, which marked the point where the US financial system truly moved into crisis, it’s worth reviewing the innovations that led to the real estate bubble that lay behind Lehman’s … Continued
A bond is a long term debt security, which can be issued by a government, company or even a charity. This post describes the main features of bonds. * A bond is a debt security for which the term (maturity) … Continued
One of the three purposes of a financial system is to join savers to investors, to allow funds to flow from people who have a surplus to those who have a deficit (the others are to manage risk and to facilitate … Continued
Another way to classify funds that are provided by a saver to an investor is whether they are in the form of debt or equity. These are the two main forms of contract through which one person or company can provide funding to … Continued
Securities are a very important and useful piece of financial technology, including bank notes, shares and bonds. They make possible a wide range of financial transactions and provide competition to the other main source of funding, banks. * A security … Continued
David Bowie, among his many other creative achievements, was an innovator in finance, with the first ever intellectual property rights securitisation. * Nearly everyone seems to have been affected by the death of David Bowie, a uniquely creative and influential … Continued
Despite the increasing ease of electronic payments, cash remains popular in the UK, according to the Bank of England. * Money is anything that fulfils the three functions of money: i) a means of payment; ii) a unit of account; … Continued
Evidence from Nigeria shows that access to finance can help households reduce the impact of bad luck, reducing the fall in consumption that they suffer. * Yesterday I was part of a group discussing a draft research paper on the ethics … Continued
Pretty much all financial crises involve too much debt. The global financial crisis was triggered by excessive lending for US property purchase. The slow recovery from the crisis is probably because of too much debt. China’s successful plan to insulate … Continued
Major world historical events such as the financial crisis that swept much of the world in 2007-09 typically have multiple causes. In 2014 there was an outpouring of new books about the causes of the First World War which started … Continued
We take it for granted that capitalists hire workers rather than workers hiring capital, but why? The main reason is the difficulty of diversifying labour, which means that workers ideally require some form of insurance to offset their concentration of … Continued
CDOs – collateralised debt obligations – were widely seen as the main villain of the financial crisis. CDO issuance peaked in 2007, collapsed in 2008 and is now gradually recovering. Should we be worried? * The latest Bank for International … Continued
The asset management industry is huge, growing in size, especially in Asia, and increasingly dominated by a small number of giant companies. Asset management includes traditional “institutional” investors such as pension funds, insurance companies, mutual funds and money management companies, … Continued