Category Archives: Course material

David Bowie innovated in finance too

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 musical artist. I’ll add my own personal memories to the list. I think the first… Continue Reading

The IMF includes the RMB in the SDR basket

On 30 November 2015 the IMF voted to include the RMB (the Chinese “people’s currency” denominated in yuan) in the basket of currencies it uses to calculate the value of the Special Drawing Rights, from October 2016. This is largely symbolic but should encourage further international financial reform in China. * What does it actually… Continue Reading

The true story of the Euro crisis

Most economist agree on the causes of the repeated crises of the Eurozone but that explanation is not the one that many governments, and the European Commission, want you to believe. * The problems of the Eurozone – bank failures, sovereign debt crises and bailouts and above all a protracted recession and mass unemployment –… Continue Reading

Changes in the Federal Reserve’s measurement of short term interest rates

The Federal Reserve, the US central bank, is making some changes to the measurement and monitoring of the short term interest rate between banks, which is its key target for monetary policy, * Most central banks have goals such as low inflation and high employment. After experimenting over the years with tools to achieve these goals, most… Continue Reading

Cash remains king

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; and iii) a store of wealth. Physical cash does all of these rather well and… Continue Reading

Global foreign reserves are now falling

The foreign exchange reserves held by governments, having risen for over a decade, have recently fallen. This is mainly because they are being used, as intended, to protect against turbulence in financial markets that would otherwise hurt the developing economies. * Foreign reserves are assets held by governments as a safety net against abrupt changes… Continue Reading

Thinking about the risks to global economic growth

The fundamentals of global economic growth seem broadly positive but there are some reasons for caution, which can be understood through the savings-investment framework described in the previous blog. If savings are “too high” or investment “too low” then the equilibrium rate of interest that makes savings and investment equal may be negative. That means… Continue Reading

The elements of macro-finance

Macroeconomics is a complicated subject but it’s possible to understand quite a lot about the key questions in macro, and some of the policy challenges, by considering a few key concepts. This blog gives the elements of what ties macroeconomics to finance. I’ll apply these concepts in a follow-up blog to try to explain why there… Continue Reading

Greece repays IMF using the IMF’s own “currency”

Greece this week repaid €750m to the International Monetary Fund (IMF) which it funded by drawing on its SDR account at the IMF. This legitimate but unusual move caught many commentators by surprise and drew attention to the little known SDR. * The SDR – Special Drawing Right – is something of a curiosity in… Continue Reading