Understanding Financial Crises: Lessons from the Past and Present
Are you familiar with the financial crises that hit the world over centuries? Have you ever wondered what causes changes and shifts in the financial industry, which sometimes causes sudden and unexpected downfalls and losses? The financial industry has faced numerous setbacks over the years. The financial markets have faced numerous challenges and crises worldwide, from ... Read more
How Macroeconomic Indicators Shape Global Trade Trends
Macroeconomic indicators refer to economic data points that help assess the economy’s health and future prospects. They are used by investors and policymakers to comprehend the economy’s growth and performance. Some of the macroeconomic indicators include Gross Domestic Product (GDP), coincident indicators, and inflammation. Other indicators include National Income, Consumer Price Index, and Producer Price ... Read more
The Geithner-Summers Plan Is Worse Than You Think
The Geithner-And-Summers Plan (GASP) to buy toxic assets from the banks is rightly scorned as an unnecessary give-away by virtually every independent economist who has looked at it. Its only friends are the Wall Street firms it is designed to bail out. In an earlier article, one of us (Sachs, FT, March 23) described the ... Read more
Bitcoin Bubble or New Virtual Currency?
Yves here. I’ve heretofore avoided the topic of Bitcoin, since I recall the brief fad of the Second Life currency, which then flamed out impressively. And Bitcoin already has had the US Treasury clear its throat and say if market participants try exchanging Bitcoin for dollars, it takes a dim view of that. Recall that ... Read more
Understanding Bitcoins
What is a Bitcoin? Introduced in 2009 as a peer-to-peer payment system, the bitcoin developed into a digital currency (BTCs). Today, the BTC is a financial network able to both transfer and create money. BTCs issuance and use is decentralized (see below), and loosely regulated by the Bitcoin Foundation, a non-profit organization. As BTCs are ... Read more
iPad Mini Index: RMB Fairly Valued, Euro Overvalued
View a larger version of this Geo-Graphic here. The “law of one price” holds that identical goods should trade for the same price in an efficient market. To what extent does it hold internationally? The Economist magazine’s famous Big Mac Index uses the price of McDonald’s burgers around the world, expressed in a common currency (U.S. ... Read more
Fed Watch: Dudley Revisits Exit Strategy
Today New York Federal Reserve President William Dudley gave what was both an interesting and depressing speech. Interesting in that he provides some new thoughts on the exit strategy. Depressing in that he outlines a case for persistently low interest rates. One wonders why, given such an outlook, the Fed is so firmly focused on the ... Read more
France Has Hissy Fit Over BNP Paribas Fine and Dollar Dominance
France appears to have taken its public relations strategy for dealing with $8.9 billion fine against BNP Paribas from an old saying among lawyers: “If you have the facts on your side, pound the facts. If you have the law on your side, pound the law. If you have neither on your side, pound the ... Read more
Potential unintended consequences of the LCR
Summary: Drawing mainly on the recent EBA impact assessment, this VOX piece examines the implementation of the Liquidity Coverage Ratio (LCR) in the EU, which is due by December 31st, 2014. The recalibration of the LCR in January 2013 watered down the standard significantly. Nevertheless, banks in the EU still feature substantial liquidity risk exposure. To ... Read more
Monitoring Risk in the Housing Market
Housing is the weak link in an otherwise upbeat trend for the US economy. Deciding if this is a temporary soft patch for real estate or the start of something darker is still a work in progress. The potential for trouble is certainly lurking, as the recent run of weak data in residential sales and construction ... Read more