Category Archives: MFin

What has the world economy ever done for us? – EMBA elective reading 2 (*)

A lot of people in the richer economies appear doubtful that economic globalisation has been good for them. But there are hundreds of millions in the rest of the world for whom globalisation has been a critical part of their escape from poverty. * Globalisation means the greater international movement of goods and services, finance,… Continue Reading

Why hyperinflation is thankfully rare

Venezuela’s economic difficulties include very high inflation which threatens to become another example of hyperinflation. But what is this and why is it historically quite rare? * Inflation in Venezuela has recently been reported as reaching 46,000% with the IMF projecting it could reach 1,000,000% by the end of 2018. An article in The Spectator… Continue Reading

What’s the future for peer-to-peer lending?

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, particularly in China, where they are now in crisis. According to research from the Cambridge… Continue Reading

Financial innovations behind the US real estate boom and bust of 2002-2008

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 (and Bear Stearns’) problems: the separation of mortgage origination from who owned the debt; securitisation;… Continue Reading

Trade and the global economy

In part of my new MFin elective Understanding the Global Economy and Financial System I explore the changing views of economists on international trade, which has been one of the most powerful causes of global economic growth over centuries. * The traditional view of trade – correct but incomplete The reason why trade works is specialisation. If… Continue Reading

Why are some countries richer than others?

The first part of my new MFin elective Understanding the World Economy and Financial System next term will explore the question, why are some countries richer than others? * One of the most important, interesting but hotly contested questions in economics is, why are some countries richer than others? The world is astonishingly unequal; the life… Continue Reading

Three interesting facts about Chinese monetary history

Former IMF Chief Economist Eswar Prasad’s excellent book Gaining Currency – The Rise of The Renminbi starts with a fascinating chapter on China’s monetary history, the longest by far of any country. The book is ultimately a persuasive answer to the question, will the RMB become a leading international currency? His answer is yes, but only… Continue Reading

What is helicopter money?

The possibility that central banks might resort to extreme monetary measures, including helicopter money, is much debated in monetary policy circles. But what is “helicopter money”? * In normal times, central banks in developed countries try to control inflation and the level of economic activity by controlling the short term interest rate. But since the… Continue Reading

Classifying funds: the type of contract – is it equity or debt?

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 another. Note that governments, which are very important actors in the financial system, can only… Continue Reading

Key financial concepts: securities

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 is a certificate representing a contract between two or more people which promises to pay… Continue Reading

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