The aftermath of the global financial crisis left many people with an impression of modern finance as extraordinarily complex, a web of multi-layered securities financed through strange off-balance sheet vehicles and held together by impenetrable mathematical formulas. There is something … Continued
A lot of hedge fund managers seem to believe that the Fed and other central banks that have been using unconventional monetary policy, specifically “quantitative easing” (see note 1), are dooming us to much higher inflation in future. Some believe … Continued
In natural (real) science you can do experiments where you can measure the influence of A on B while holding other things constant. No matter how good a theory is, it’s only taken seriously if there is an experiment that … Continued
A recent speaker on the MFin mentioned, almost in passing, that he didn’t think the Basel III regulatory system would actually be implemented, so flawed was its approach. I thought this sounded a little exaggerated but a recent speech from … Continued
The economics blogosphere and now the mainstream financial press are full of discussion about the flaws in widely cited research done by Professors Ken Rogoff and Carmen Reinhart. These authors produced an excellent and path-breaking book This Time Is Different which … Continued
The Cambridge MFin careers report came out a few weeks ago. It showed that for the class of 2011/12, 11% were without jobs as of January 2013, four months after the end of the degree programme. Actually the figure should … Continued
The latest data on China’s foreign exchange reserves, showing a rise of $130 billion to $3.4 trillion, suggest that capital is flowing into China again after an apparent outflow ahead of the change of government in late 2012. There is also … Continued
A New York Times article recently reported data from Rosenblatt Securities showing that the percentage of total US stock trading done “off-exchange” has risen from about 15% in 2008 to over 35% in 2013 and occasionally as high as 40%. What … Continued
A great piece of research from the authors at the University of Michigan and Princeton University (*) tests the hypothesis that the bankers inside the sub-prime mortgage bubble knew it was all too good to last. They find the hypothesis false. … Continued
A sovereign wealth fund (SWF) is an organisation that manages financial and other assets on behalf of a government or nation. But what about the holdings of foreign exchange reserves by central banks? These assets, often much larger in size, … Continued
I make the point in classroom discussions of the US fiscal outlook that, simplifying only a little, the problem of US federal spending reduces to the problem of the US health care system. All rich countries face an increase in … Continued
A key feature of macroeconomic analysis is the relationship between a country’s savings and investment rates. Savings represent income that is not consumed. Investment means spending on assets that will last for some period of time, such as factories, houses, … Continued
In economics and finance it is important to be clear about when we’re discussing a stock – the amount of something at a point in time – and when we’re referring to a flow – the volume of something during … Continued
Financial markets set the prices of assets such as stocks and bonds through the interaction of demand and supply. Deliberate attempts to fix or distort those prices, termed “market abuse” in the EU, are therefore usually illegal. But there is … Continued
Perhaps I’m a bit naive, but in my years in the finance business I met very few people who struck me as unethical. Selfish, blinkered, dull and sometimes even quite stupid, yes, but seldom really bad. Perhaps they were good … Continued