Archive for the ‘Financial Markets/ Finance’ Category

Promoting Hong Kong as a hub for Corporate Treasury: Issues and Solutions

September 20, 2017

A nice speech from Normal TL Chan, CEO of the Hong Kong Monetary Authority.

He points how HKMA found out that taxation prevented Corporates to set up Treasuries in HK. Then they urged the govt to rectify the same:

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Bundesbank at 60: each country gets the inflation it deserves…

September 19, 2017

I just wrote y’day about how much Bundesbank matters to ECB policy and yet no German central banker is primed for the top job at ECB.

Least did I realise that year 2017 happens to be 60th anniversary of Bundesbank. Jens Weidmann, the chief of the central bank pays tribute and shares some fascinating history:

The Bundesbank first saw the light of the world on 4 July 1957, the day on which Germany’s Bundestag adopted the Bundesbank Act – alongside the Antitrust Act. Writing at the time, the Frankfurter Allgemeine Zeitung newspaper remarked that this day had witnessed “the adoption of two crucially important pieces of basic legislation for our entire economic system”.

When the Bundesbank Act came into force on 1 August 1957, the Bank deutscher Länder, the Land Central Banks and the Berlin Central Bank were merged to form a single institution, the Deutsche Bundesbank.

This new institution took over the headquarters of the Bank deutscher Länder in Frankfurt am Main. I wonder if you are aware that it almost ended up being based in Hamburg. Back then, the British forces were pushing for the Bank deutscher Länder to make Hamburg its home. But as it turned out, the Americans got their way, and the institution was established in their preferred location of Frankfurt, inside the US occupation zone.

That marked a major turning point for Frankfurt. The city evolved into Germany’s financial centre and later also succeeded in attracting the European Central Bank. But I don’t think Hamburg lost out in any way – Hamburg is an appealing, vibrant and economically successful location as it is.

He says though location of Frankfurt has little to do with Bundesbank’s success:

One thing I am quite certain about is that the choice of location did not influence the Bundesbank’s success, which I think can be put down to three key factors:

  • Its narrow mandate to preserve price stability,
  • Its independence, which allows it to pursue this objective even against political influence, if need be, and
  • An appreciation of the need for stability throughout much of the German population, which gave the Bundesbank the popular backing it needed to pursue its monetary policy objectives.

Ladies and gentlemen, the fundamental problem facing monetary policymakers is that they are caught in a conflict of objectives. In the short run, staving off inflation can sap economic momentum and drag on employment. On the other hand, the central bank can temporarily dampen unemployment if it tolerates a higher rate of inflation. This phenomenon is what economists call the Phillips curve relationship. It is a concept which crops up in a famous remark uttered by Helmut Schmidt in the early 1970s, when he once said that “I would rather have 5% inflation than 5% unemployment”.

An inverse relationship exists between inflation and joblessness because an unexpected increase in inflation pushes down real wages, lowers the price of labour, and thus tends to lead to a drop in unemployment.

But that only happens in the short run. Because employees will push for the higher rate of inflation to be offset, thus moving real wages and unemployment back to where they were before. There is a shift in the Phillips curve.

And if the unions, fearing a further increase in the rate of inflation, push through even higher wage increases, unemployment will rise as a result.

Let me use an everyday situation to shed more light on how this principle works. Imagine a person who is habitually late for work. Now, their partner might be able to outsmart them once by moving the hands of the kitchen clock forward by five minutes. But in the long run, that person will get used to the new time, so the clock will have to be put forward even more to prevent that person from leaving the house late in future.

That’s exactly how it is with monetary policy. If you fire up the printing presses to fend off unemployment, you will end up mired in high inflation and high unemployment.

He brings some episodes from German history which affirmed this fight for price stability:

Bearing that in mind, it was undoubtedly crucial that the Bundesbank, just like its predecessor, the Bank deutscher Länder, had independence from political control. Because German post-war history also bears witness to a number of situations in which the Bank was forced to head off political demands to loosen monetary policy.

One such situation that springs to mind is the famous “Gürzenich speech” which Konrad Adenauer delivered shortly before the Bundesbank was established. At that time, the Bank deutscher Länder had switched to a tight monetary policy stance because there was a risk that the brisk external demand might cause Germany’s economy to overheat. Konrad Adenauer, speaking in 1956 at Cologne’s Gürzenich Hall, warned that the tight policy would be “disastrous … for the man on the street”. A year later, the SPIEGEL magazine looked back at these events and wrote: “What is more, the credit constraints later turned out to be absolutely correct; they came just in time to prevent the boom from morphing into an inflationary economic gallop.”

Another situation I can think of occurred in the year 1979, when the government drummed up sentiment against an increase in the discount and Lombard rates. Manfred Lahnstein, State Secretary in the Federal Ministry of Finance, presented his critique before the Central Bank Council and then went public with his misgivings. He expressed concerns that the policy rate hikes might endanger the economic upswing. As it turned out, the German economy expanded at a real rate of 4½% in 1979, even though policy rates were increased. The Bundesbank, then, did well to prevent the global inflationary tendencies from spilling over into Germany more strongly than they did.

Because the Bundesbank held its ground in both these cases and refused to be knocked off course, the Die Welt newspaper once dubbed it in retrospect the “bulwark on the Main”.

That was praise indeed for the Bundesbank, of course. For it had resisted the political pressure not because it was indifferent to the macroeconomic prospects, but it firmly believed, even back then, that monetary stability is the best contribution a central bank can make in the long run towards high levels of employment and sustained economic growth.

He also adds that what is also central to this is people’s appreciation of merits of stable currency.

But I am convinced that the Bundesbank only prevailed in its skirmishes with politicians because it could count on the general public’s appreciation of the merits of a stable currency. This brings me to the third of the key factors in the Bank’s success which I mentioned earlier on. A policy strictly geared to stability only stands a chance of success if the general public is sufficiently aware of the merits of stability. That’s because, in the long run, it is not right for democratic states to have a monetary policy which runs counter to public opinion.

On this topic, Otmar Issing once said that each country gets the inflation it deserves.

This is mainly due to German hyperinflation of 1920s continue to remain etched in people’s memories…

He then goes on to discuss current crisis and ECB’s role so far…

Superb throughout.

 

Primer on Islamic Banking

September 19, 2017

Superb primer by Arshadur Rahman of Bank of England. It explains the basics of Islamic Banking and does a great job.

Also interesting to know BoE planning to introduce a Shari’ah compliant facility. This will faciliate UK Islamic banks hold central bank assets:

  • ​Islamic banking is a relatively young but growing sector of the broader financial services industry. Numerous banks around the world offer Islamic, or Shari’ah compliant, financial products.
  • Some central banks offer Shari’ah compliant liquidity facilities to Islamic banks, affording them similar flexibility to other firms in managing their liquidity. Such facilities avoid the payment or receipt of interest, which is otherwise the most common basis for operating a liquidity facility.
  • The Bank is establishing a Shari’ah compliant facility, specifically a deposit facility to allow UK Islamic banks to hold central bank assets as part of their liquid assets buffer. This article explores the various ways in which this can be done, along with the model the Bank has chosen to adopt.

How religions have shaped all these banking and financing cultures and institutions..

Did Free Banking Stabilize Canadian NGDP?

September 15, 2017

Interesting post by Prof George Selgin. Selgin counters view of a blogger who says that Free banking between 1867-1935 in Canada did not stabilize its GDP.

About a month ago, a Facebook post drew my attention to an attempt, by Casey Pender of Prague’s CEVRO Institute, to test my thesis that free banking contributes to NGDP stability using statistical evidence from Canada, which had a relatively free banking system between 1867, the year of Canada’s confederation, and 1935, when the Bank of Canada was established.

In “Some Odd Data on Free Banking in Canada,” a blog post discussing his preliminary findings, Pender reports that he had hoped to

be able to show that Canada, from 1867-1935, had a more stable NGDP percent change from year to year than the U.S. And I thought this would be an easy and quick historical example that I could use to bolster my underlying theory. But things seem like they just ain’t so.

Instead, in comparing the fluctuations of Canadian and U.S. NGDP using data from the Macrohistory database, Pender found that Canadian NGDP was not less but more volatile. Moreover that conclusion held not just for the full 1870-1935 sample period, but also for the sub-period 1870-1914, which omits various extraordinary Canadian government interventions during WWI and the Great Depression.

Here is Pender’s chart showing his results from the full sample period:

 

 

 

 

 

 

 

 

Having now been made privy to these findings, I suppose that you are looking forward to seeing ol’ Doc Selgin eat humble pie. Well, you can quit holding your breath ’cause that won’t be happening anytime soon. In fact, for the moment at least, I remain thoroughly impenitent.

He says one must not just look at changes in NGDP but look at the relationship between those fluctuations and underlying changes in Canada’s monetary base. He shows that this relationship is much stronger in Canada than US…

In the end:

In brief, both our Canadian regression results themselves, and a comparison of those results with results using U.S. data, seem fully consistent with the theory that free banking helps to stabilize the relationship between NGDP and the monetary base.

Does that mean they confirm the theory? Alas, it doesn’t. Freedom in banking is but one of many differences between the pre-WWI Canadian system and its U.S. counterpart. Furthermore, even if Canada’s more stable NGDP-M0 relationship were in fact due to its having had a relatively free banking system, it wouldn’t follow that my theory is correct. Free banking could well have contributed to the stable relationship in question for reasons apart from the one my theory points to. We know, for example, that branch banking — itself an element of free banking — made Canada’s system less fragile, and therefore less vulnerable to financial crises, than the U.S. system. We also know that financial crises tend to involve a collapse in bank credit and spending. So the relative stability of the Canadian NGDP-M0 relationship, instead of reflecting a tendency for changes in M to offset opposite changes in V, may instead simply have reflected a relative lack of banking crises and associated increases in the ratio of bank reserves to bank credit.  Although all this is still good news for fans of free banking, it leaves my particular hypothesis unproven.

In short, while my theory has yet to be discredited, it also has yet to be confirmed. I hope that either Mr. Pender or some other enterprising econometrician will eventually settle the matter, one way or the other.

Hmm..

75th anniversary of Bank of China branch in Sydney and some interesting history…

September 15, 2017

Philip Lowe, chief of Reserve Bank of Australia shares some history from the Archives at the 75th anniversary.

Back in 1940s it was much easier to open a bank branch in Australia and tougher for people to travel to the country. How global banks and finance is built over the years is a tale of many a struggle:

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Methods for pricing options in the 19th century..

September 14, 2017

Prof George Dotsis of University of Athens has a piece on how options were priced in 19th century.He builds his research from a book by an option trader: Higgins, L (1906), The put-and-call, Aberdeen: Aberdeen University Press.

As expected, traders back then had figured a way to price options without much jazz as today:

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The origins of financial development: How the African slave trade continues to influence modern finance..

September 12, 2017

Interesting paper by  Ross Levine (who else), Chen Lin and Wensi Xie”

In this paper, we contribute to research on two interrelated questions: What are the historical determinants of national differences in financial development and through which mechanisms do these historical factors influence the operation of modern financial systems?

We focus on the historical African slave trade during the period from 1400 – 1900, which Nunn and Wantchekon (2011) show has had an enduring effect on social cohesion and culture across Africa. More specifically, we examine the impact of the intensity with which people were captured, enslaved, and exported from Africa on financial development today and key institutions that shape modern financial systems. With respect to the first question, Pierce and Snyder (2017a) show that the slave trade is negatively associated with firm access to credit. We contribute by showing the intensity of the slave trade across African countries is also negatively associated with household access to credit and overall financial development. We further show that the negative association between slave exports and firm access to credit varies in a theoretically predictable manner, as the association is especially pronounced among firms that depend heavily on external finance for technological reasons.

With respect to the second question, we evaluate three potential mechanisms linking the historical slave trade to modern finance. A large body of evidence indicates that information sharing institutions that reduce information asymmetries about potential borrowers, the degree of trust that individuals have in financial institutions, and the quality of legal institutions influence the operation of modern financial systems. We discover that the intensity of the African slave trade in the 1400 – 1900 period is strongly, negatively related to the quality of information sharing institutions and trust in financial institutions but is not strongly related to legal institutions. These findings are consistent with the view that two mechanisms through which the historical slave trade continues to influence modern financial systems across Africa are information sharing institutions and trust.

Need to read it carefully..

Women leading banks: A case for more or less stability?

September 8, 2017

They say if Lehman Brothers was Lehman Sisters, things would have been more stable not just at the firm but even for markets.

However, economists will always say but where is the evidence?

A group of IMF economists look at data and show that banks led by women are more stable:

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The interdependence of research and (monetary) policymaking

August 29, 2017

ECB chief Mario Draghi gives a nice speech on the topic. It is at Lindau Nobel Laureate Meeting.

He looks at how research has impacted policies over the years summarising many years of research and policy. In the end points t0 5 lessons:

This account of how policymakers and researchers have interacted in the past ten years shows how indebted the former are to the latter. From my point of view, one can draw five lessons for policymakers.

First, sudden shocks often make visible the flaws in our policy frameworks and challenge the explanatory power of existing theories in ways that have been previously overlooked. But analysis conducted by researchers and embraced by policymakers remains essential in designing the policy response.

Second, a policy response that has its foundation in rigorous research is less prone to being impaired by political compromise and easier to explain to the general public.

Third, Keynes is often quoted as saying, “When the facts change, I change my mind. What do you do, sir?” Well, for policymakers, it is not that simple, and research helps us to decide whether a change in the facts deserves a policy response or, as we say, we should look through it.

Fourth, when the world changes as it did ten years ago, policies, especially monetary policy, need to be adjusted. Such an adjustment, never easy, requires unprejudiced, honest assessment of the new realities with clear eyes, unencumbered by the defence of previously held paradigms that have lost any explanatory power.

Fifth, we must be aware of the gaps that still remain in our knowledge. Our mainstream macroeconomic models still have little to say, for instance, about the non-linear propagation of shocks, the distributional impacts of policies, or how endogenous firm entry and exit can affect economic performance.[15] Policy actions undertaken in the last ten years in monetary policy and in regulation and supervision have made the world more resilient. But we should continue preparing for new challenges.

The changes that we have discussed, profound as they are, often hinge on one fundamental idea. A natural question to ask is whether such an idea sprang out as a response to a specific policy problem or was rather conceived previously in an entirely different, unrelated intellectual environment, perhaps addressing a different set of problems. It is a question that is especially relevant in economics, when previously held consensus views change. But it is a question that is unlikely to have a precise answer.

Let me rather use the 1939 words of Abraham Flexner, the first director of the Princeton Institute for Advanced Study: “Almost every discovery has a long precarious history. Someone finds a bit here, another a bit there. A third step succeeds later, and thus onward till a genius pieces the bits together and makes the decisive contribution.”[16]

Today, I have had the privilege of addressing such people – geniuses who have pieced the bits together and made decisive contributions.

He misses the 6th and most important lesson: avoiding hubris and need for humility in both research and policymaking. We often see a lot of problems when both research and policymaking think they have solved all economic problems  and nothing can go wrong, is when all wrongs happen…

If Trump is so bad, how come equity markets are so stable?

August 28, 2017

The superb Gulzar blog has a mid-week linkfest (previous week) in which he points to this starting thing.

The Trump administration has been mostly condoned by one and all. However, one barometer proves all this wrong. This is is the equity markets which ahs emerged as one of the key benchmarks for comparing everything. Any policy or action is usually judged in terms of stock markets. If markets are fine so is the action is the general call of things.

However, this blog does not really buy this recent stock market fascination for everything as it is quite biased and could go terribly wrong as well. Markets correct and move on but leads to all kinds of problems for people who built certain expectations based on equity market reactions earlier.

But nevertheless, it is amazing to note that despite all kinds of admonitions, the volatility in equity markets is lowest in Trump’s first 6 months compared to any other President:

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What is its working at a sprawling bitcoin mine in Inner Mongolia (China)..

August 28, 2017

Superb piece about a firm behind bitcoin mining.

The article is quite in the Coasean spirit. People often talked about markets but Coase saw that most exchanges are actually governed by firms. Which led to one of the most amazing insights of economics that it is firms which via lower transaction costs enable exchanges.

Likewise, we talk about how cryptocurrencies shall usher in a new world of decentralised digital currency and lead to better monetary markets. But we really do not look at the back-office of these cryptocurrencies and ask who is doing all this stuff?

This interesting article speaks about this Chinese firm Bitmain which provides 4% of the processing power in the global bitcoin network. It was fascinating to connection between old industry and new one. The region was first a coal bed and thus was a natural home to electricity which is needed immensely in these operations:

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How women started but got crowded out of the computing revolution…

August 21, 2017

One just blogged about women stockbrokers in NYSE.

Then was reading this article by Tamal Bandypadhyaya on how with each subsequent data, men are being seperated from boys in Indian banking. To this Bindu Ananth  of IFMR Trust tweeted and rightly so : “Given that a majority of banking assets are managed by women CEOs, the title needs editing”. Indeed!

As one finished Tamal’s piece, popped another piece from Stephen Mihm in Bloomberg View.

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Why have a Museum of Finance? (Lessons for Museums of Finance in India..)

August 18, 2017

A nice piece (old piece in 2012) by Prof Richard Sylla of NYU in the Financial History publication released by Museum of American Finance.

He narrates several examples from financial history to show why a Museum of Finance is really important. These several examples show the importance and power of finance. Apart from this, these museums also shows importance of financial education which is poor amidst most people. A museum with right kind of communication technologies helps in many ways where dozens of government programs just fail.

In India, have seen three Finance Museums. The RBI Museum in Mumbai, the RBI Archives Museum in Pune and Corporation Bank Museum in Udupi. With RBI it is expected but to see Corporation bank having such a useful museum is quite surprising. It has amazing anecdotes which even likes RBI does not have in its resources. The unseen ones there is SBI Museum in Calcutta and former State Bank of Travancore which opened one just before it got merged with SBI.

So five museums of finance are there in India as per my limited knowledge and there could be few more. Five alone is an impressive number.

The problem with these Museums is that they do not communicate much with the outside world. They take their sole purpose as one of display and nothing else.

However, in museums like Museum of American Finance under whose publication Prof Sylla writes the idea is to reach across people:

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Ladies of the Ticker: Pioneering Women Stockbrokers from the 1880s to the 1920s in New York..

August 17, 2017

George Robb (Prof of History at William Paterson University of New Jersey) has a nice piece:

During the late 19th century, a growing number of women were finding employment in banking and insurance, but not on Wall Street. Probably no area of American finance offered fewer job opportunities to women than stock broking. In her 1863 survey, The Employments of Women, Virginia Penny, who was usually eager to promote new fields of employment for women, noted with approval that there were no women stockbrokers in the United States. Penny argued that “women could not very well conduct the business without having to mix promiscuously with men on the street, and stop and talk to them in the most public places; and the delicacy of woman would forbid that.”

The radical feminist Victoria Woodhull did not let delicacy stand in her way when she and her sister opened a brokerage house near Wall Street in 1870, but she paid a heavy price for her audacity. The scandals which eventually drove Woodhull out of business and out of the country cast a long shadow over other women’s careers as brokers.

Histories of Wall Street rarely mention women brokers at all. They might note Victoria Woodhull’s distinction as the nation’s first female stockbroker, but they don’t discuss the subject again until they reach the 1960s. This neglect is unfortunate, as it has left generations of pioneering Wall Street women hidden from history. These extraordinary women struggled to establish themselves professionally and to overcome chauvinistic prejudice that a career in finance was unfeminine.

….

The first generation of women stockbrokers faced great resistance, but they chipped away at the old boys’ network on Wall Street that sought to exclude
and marginalize them. They carved out a niche for themselves as advisers and liaisons to women investors. They helped break barriers to women’s employment in brokerage firms, and they made it possible for women today to have greater financial opportunities.

Hmm..

What about women stock brokers in India? Is there any such history?

Were Banks ‘Boring’ before the Repeal of Glass-Steagall?

August 8, 2017

The presumption is before Glass Steagall repeal banks were boring and did basic stuff. Post Glass Steagall repeal in 1995, banks became adventurous and did multiple things leading to 2007 crisis.

Right?

Not so sure as per this blogpost by  of NY Fed.

So how boring have banks been in the past few decades? Let’s look at some aggregate numbers based on a database I recently assembled on the organizational structure of BHCs. Between 1970, when the data begin, and 2016, more than 13,000 unique corporations have operated at some point with a BHC charter. Of those BHCs, more than a quarter expanded their business scope beyond traditional banking, collectively adding more than 60,000 subsidiaries. These units specialized in activities spanning the financial industry, such as specialty lending, loan brokerage, securities and commodities brokerage and dealing, wealth management, insurance, and much more. 

Was it the partial repeal of the Glass-Steagall Act in 1999 that spurred this expansion? The chart below shows the number of unique financial activities that BHCs collectively engaged in each year. The data indicate that the trend toward expanded activities in fact began in the early 1980s, and continued unmitigated throughout the 1990s. Judging from this evidence, the restrictions under Glass-Steagall did not prevent BHCs from expanding beyond traditional (“boring”) activities by BHCs, nor did its repeal accelerate that expansion. 

Were Banks ‘Boring’ before the Repeal of Glass-Steagall?

Were Financial Holding Companies Expanding? 
Perhaps instead of looking at BHCs as a whole, we should look specifically at BHCs that converted into financial holding companies (FHCs), the legal charter introduced by the Gramm-Leach-Bliley Act (GLBA) that allowed firms to expand more freely across a broader set of activities. FHCs may have be the ones that actually chose to expand, but their dynamics could be lost within those of the broader population. Out of 5,354 BHCs in existence at the end of 1999, 526 became FHCs between 2000 and 2001. The chart below shows how the scope of financial activities has fluctuated for those FHCs and for all other (non-converting) BHCs, relative to 1999. Somewhat contrary to expectations, it seems that FHCs and BHCs experienced virtually identical dynamics in the post-1999 years, with no upward trend detectable for either group. 

Were Banks ‘Boring’ before the Repeal of Glass-Steagall?

In sum, the repeal of Glass-Steagall in 1999 does not seem to have ignited a flurry of new activities. As I note in a recent New York Fed Staff Report(see page five), banking firms had already been widening their business scope for a long time, so it is not clear that that particular regulatory reform can be considered the catalyst of the Great Recession some ten years later, nor is it immediately obvious how reinstating restrictions per se would reduce the likelihood of a future crisis. But how is it that banks were already allowed to engage in less “traditional” activities, and what does that tell us about the nature of the banking business? To address those questions, we need to take a look at the history of banking regulation—something I will cover in a follow-up post. 

Hmm.. Looking forward to the post..

The oil trader known as ‘God’ is closing down his main hedge fund

August 4, 2017

How often finance industry christens someone as God only to see God being reduced to a mere human soon thereafter.

 

Story in Bloomberg. 

Andy Hall, the oil trader sometimes known in markets as “God,” is closing down his main hedge fund after big losses in the first half of the year, according to people with knowledge of the matter.

The capitulation of one of the best-known figures in the commodities industry comes after muted oil prices wrong-footed traders from Goldman Sachs Group Inc. to BP Plc’s in-house trading unit. Hall’s flagship Astenbeck Master Commodities Fund II lost almost 30 percent through June, a separate person with knowledge of the matter said, asking not to be identified because the details are private.

“I’m shocked,” said Danilo Onorino, a portfolio manager at Dogma Capital SA in Lugano, Switzerland. “This is the end of an era. He’s one of the top oil traders ever.”

Hall shot to fame during the global financial crisis when Citigroup Inc. revealed that, in a single year, he pocketed $100 million trading oil for the U.S. bank. His career stretches back to the 1970s and includes stints at BP and legendary trading house Phibro Energy Inc., where he was chief executive officer.

He bet for oil prices about to rise soon which never happened leading to decline in the fund.

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Why corrupt bankers avoid jail?

July 26, 2017

Patrick Radden Keefe has a long piece but the summary is: Prosecution of white-collar crime is at a twenty-year low.

Fascinating interplay and interdependence of politics and finance…

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Looking at the Stars while making economic policy…

July 26, 2017

John K Galbraith famously said: “The only function of economic forecasting is to make astrology look respectable.” 

Least did he know economists would take this seriously!

RBNZ Deputy Governor titles his speech: Looking at stars! Just that these stars are the unobserved variables which economists try along which economists shape the economy:

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Fintech: Is This Time Different?   A Framework for Assessing Risks  and Opportunities for Central  Banks 

July 24, 2017

Nice policy research paper by Bank of Canada economists:

Fintech is likely to increase competition and improve financial inclusiveness, which could reduce the cost of financial intermediation. If financial intermediation changes fundamentally, the traditional tool kit of central banks might be at risk. In this paper, we provide a framework to analyze the economics of various fintech solutions by focusing on the component technologies and underlying frictions that they solve. Moreover, we study the business models that some fintech firms are employing to understand which characteristics will likely lead to broad adoption of their technology. Our framework is meant to be general enough to use as fintech advances. Going forward, central banks and regulators will have to monitor whether these new technologies and business models are fundamentally changing money demand and the industrial organization of financial intermediation.

In this paper we focus mostly on banks and DLT. With respect to banks, we conclude that fintech firms will have incentives to either find new economies of scope or exploit the traditional economies of scope of banks by becoming regulated entities. Banks, on the other hand, will acquire or adopt the fintech innovations but might be hindered by their current business models. Lastly, we conclude that fintech might bring more change by creating new financial
intermediation applications than by changing the ones that exist today.

The slow rise of P2P lending: Moneylenders are back in business..

July 20, 2017

How things keep coming in circles especially in finance. The terms/names can change but in the end it is just some old wine in a new bottle.

Here is an interesting story of i2ifunding.com which is a Peer to Peer lending portal. It is not a classic moneylender which lent from its own capital but more an intermediary between lenders and borrowers:

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