Archive for the ‘Financial Markets/ Finance’ Category

Why is Nouriel Roubini so surprised over surging markets?

October 1, 2014

Well, this has been the story for a very long time. Economic prospects have declined (age of diminishing expectations as Prof Krugman wrote) and continue to decline but markets remain as great as ever. So why is Nouriel Roubini surprised? I mean he even saw this irrationality build-up before the crisis .  This should not be anything new to him…

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Time for helicopter drop of money?

October 1, 2014

Biagio Bossone, Thomas Fazi and Richard Wood say none of the policies are working. We need to look at Friedman (or Bernanke) idea of Helicopter drop of money.

But the traditional Friedman view of central bank directly providing money to people cannot work. We instead need a government helicopter drop:

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Reconstructing macro theory to manage maco policy

September 30, 2014

Prof Joseph Stiglitz chips into the debate over state of macro.

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Why US yields trending lower despite Fed intending to exit?

September 30, 2014

These are the recent trends in US treasury yields:

  • US 10 Year started the year at 3% and is currently at 2.5%.
  • 30 year at 3.92% and currently at 3.18%.
  • 5 year is steady starting at 1.72% and currently at 1.77%.

Jérémie Cohen-Setton of Bruegel Blog wonders why is this happening? As Fed is expected to go off the stimulus, the yields should actually be rising. We are staring at the same problem as seen in 2005 called Greenspan conundrum (then most macro things were named after him).

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Connections between NY Fed and Wall Street (read Goldman) getting exposed

September 29, 2014

Over the weekend, some really interesting and scandalous story broke out. Propublica’s Jake Bernstein wrote this long article showing how the cosy relationship between NY Fed and Wall Street. As if this was anything new really. Michael Lewis adds more to the story.

The difference is Bernstein gets this former NY Fed  regulator Carmen Segarra to speak up. Segarra was an onsite supervisor a Goldman Sachs. Onsite regulators are those who actually sit in the office of the regulated entity. She was assigned Goldman Sachs and in act of bravado she taped her conversations while being in conversation with NY Fed and Goldman officials. The tapes show how NY Fed officials were just so afraid to ask Goldman to behave.

And this was after NY Fed actually appointed someone to sort its culture right. Lewis adds:

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Thinking about the yield curve in Euroarea..

September 26, 2014

An oldish speech by Vítor Constâncio of ECB, which I missed linking.

Euroarea is both frustrating and interesting in most matters. It does not change when we think about the yield curve.

First, what is it about the yield curve?

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When economic policy becomes a crime and policymakers criminals…

September 25, 2014

Prof. Michael Boskin reflects on the recent reaction by Venezuelan polity on Prof Ricardo Hausmann. Prof Ricardo Hausmann questioning economic policy in Venezuela in this article Should Venezuela Default?” Hausmann is a former minister of Venezuela and currently a Prof at Kennedy School.

Prof Boskin says this is getting bizarre:

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Fed has a problem buying private sector assets and ECB has a problem buying govt. assets….

September 23, 2014

Economists differ greatly on what a central bank can do and not do. Adam Posen is in the camp

In this oldish speech released recently, he reflects on recent ECB measures. He says somehow the bad ideas that central banks cannot stimulate economies keeps coming back:

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Book Review: Wall Street – A History (From its beginnigs to the fall of Enron)

September 23, 2014

Certain books never really get the publicity despite their importance. Charles Geisst of Manhattan College has written one such book on Wall Street’s history. The book is pretty timely as well given Wall Street’s shocking display ethics and behavior in recent times. As per the author, this is the first history of wall street but I have hardly seen anyone recommending the book.

I mean just like most history books, if people had read Geisst’s book they would have said this time is nothing different. Wall Street has been like this for a long time. Ironically, the street that gets its name from the Wall constructed by Dutch to protect them from English, the world is now trying to create a wall to save them from the excesses of the wall street.

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UK Finance sector wages: explaining their high level and growth..

September 22, 2014

Joanne Lindley and Steven McIntosh research the high wage premium in UK finance sector.  Earlier researchers at HBS looks at French finance sector.

They say it is basically because the sector distributes a higher share its profits within employees compared to other sectors:

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T.L.T.R.O. is Too Low To Resuscitate Optimism

September 22, 2014

Silvia Meiser of Bruegel reflects on the low bidding for TLTRO funds.

Out of the expected EUR 180 bn of funds, banks only bid for EUR 83 bn:

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Making sense of dissents: a history of FOMC dissents..

September 22, 2014

Dissent is part of human life. People assenting or dissenting to other’s views is quite common. However, when it comes to central banking it becomes quite abnormal and generates significant hype.

Daniel  Thornton and David Wheelock of St. Louis Fed have this superb paper tracking history of FOMC dissents.

This article presents a record of dissents on Federal Open Market Committee (FOMC) monetary policy votes from the Committee’s inception in its modern form in 1936 through 2013. Dissents were rare during the Committee’s first 20 years but began to increase in the late 1950s. The number of dissents increased sharply during the late 1970s and early 1980s, when both inflation and unemploy- ment were unusually high. However, at other times, the number of dissents was not correlated with either inflation or the unemployment rate. A review of FOMC records and published statements indicates that dissents often reflect fundamental disagreement about (i) how to achieve the Committee’s macroeconomic objectives and (ii) the current stance of policy. The number of dissents also appears to have been influenced by the language used by the FOMC to communicate instructions to the manager of the System Open Market Account.

There is a lot of trivia and interesting stuff in the paper:

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Are the Most Talented Employees the Highest Paid? Yes—If They’re Bankers

September 18, 2014

Carmen Nobel reports on a recent research by Claire Célérier and Boris Vallée of HBS.

They look at France and see what kind of students go to which kind of sectors post graduation. They figure the financial industry not just gets the most talented but also pays them the most:

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Global Billionaires Political Power Index..

September 17, 2014

Darrell West has developed this interesting index called Global Billionaire’s political power index.

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What we didn’t learn (and learnt) from the recent crisis?

September 17, 2014

Plenty of books etc being written on a crisis which is not over yet. Like Great Depression, this crisis will haunt and keep econs going till another bug crisis comes.

Martin Wolf has also written a recent book on the crisis. Here is his interview. He says economic teaching should be more humble.

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Regulating managerial pays in Banks..(Should variable pays of private sector bank chiefs be cut?)

September 16, 2014

Prof TT Rammohan of IIMA reviews the various laws which have come to curb salaries etc of bankers (also called as banksters).

There are two broad approaches to regulating bank salaries — One from Europe and other from US/UK (we call anything from these two as global solutions):

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Believing the macro data…A case of Aus employment data

September 12, 2014

James Glynn at WSJ Blog points to this interesting issue from Aus.

Analysts/people are questioning the unemp data released by stats agency. The agency shows employment  growth higher than what people see.

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How more beer consumption is expected to lower mortality in Russia..

September 12, 2014

Well, that is just a  cheesy and feel good title. As much of economics is around relative prices etc., this post is relative too.

So beer here is with respect to vodka. Lorenz Kueng and Evgeny Yakovlev in this fab post point how consumption in beer has increased in Russia since its break-up. As people mostly consumed Vodka earlier this led to many deaths. With rise in beer, the mortality due to alcohol is expected to decline:

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How Wall Street is missing Chavez?

September 11, 2014

An interesting piece by Sebastian Boyd on Chavez and Wall Street. As the new President is not as authoritative and has been unable to keep the economy from sliding, Wall Street returns from Venezuela has declined:

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How the committee that saved the world ended up nearly destroying it..

September 11, 2014

Adam White has this stirring piece in City Journal. article is a review of Geithner’s recent book.

This is a piece which all the policymakers in economics and finance shot current should read. The central message is never take yourself too seriously. Don’t let current successes turn into hubris as you never know when it will all come crashing down. One major reason why we saw such spectacular failures in economic policy-making in West apart from dubious economics was enormous amount of arrogance and belief that I know all. When the luck runs out it all becomes too ugly.

There should be far more humility than we see in financial elites across the world. All of them come from very similar backgrounds and education profiles. Much of the differences they try and show are just a hogwash. Most of the time, they try and take credit for much of that is happening across their economies and the world. We are seeing plenty of this in India too.

The committee of Rubin, Greenspan and Geithner (add Summers too) was seen as the thing in 1990s:

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