Despite its apparent success so far, the Brazilian Central Bank’s strategy is very risky. The Brazilian Central Bank (BCB), in a movement that was unanimously forecasted by the market, has reduced interest rates once again to 10.5%. In the minutes of the meeting published last week the BCB, as well as justifying the cut, also … Read more
I still don’t get why the ECB hiked rates in April and July of 2011. I questioned this using bond market pricing back in August 2011. Now I question it once more using the ex post trajectory of mortgage rates. Across the Euro area, 43% of total home loans are made on a variable rate … Read more
President Obama’s 2011 State of the Union Address contained ringing language on corporate tax reform: Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are … Read more
Recently, a lot of the political debate has been about whether private equity—and by extension Mitt Romney—is good or bad. The argument on one side is that private equity firms are vultures who destroy firms to make money; on the other, that private equity is just capitalism at work, creates value, and creates jobs. A … Read more
Here is Part I. A Fork in the Economic Road … The commodity boom has created a “two track” economy. The mining and commodity boom benefits a small part of the economy whilst simultaneously creating problems for other parts. The mining and energy sector account for less than 10% of the Australian economy. This is … Read more
Andrew Lo’s review of twenty-one financial crisis books has been getting a fair amount of attention, including a recent mention in The Economist. Simply reading twenty-one books about the financial crisis is a demonstration of stamina that exceeds mine. I should also say at this point that I have no arguments with Lo’s description of … Read more
The primary objective of the European Central Bank is to maintain price stability; however, as a compliment to its primary objective, the Eurosystem “shall also ‘support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union’. These include inter alia ‘full employment’ and ‘balanced economic … Read more
Since September of last year, risks to global financial stability have deepened, notably in the euro area. However, over the past few weeks, markets have been encouraged by measures to provide liquidity to banks and sovereigns in the euro area. This recent improvement should not be taken for granted, as some sovereign debt markets remain … Read more
Australia has been one of the world’s best-performing economies. However, its success in avoiding the worst of the global economic problems may not continue. Australia’s future is inextricably linked to China and the commodity “super boom”. Australia’s economic prospects remain vulnerable to international developments outside its control. The popular narrative is that Australia escaped the GFC … Read more
Summary: Germany used it power over the European Monetary Union to institute a monetary policy that disproportionately benefited itself, to the disadvantage of the periphery nations. Germany prospered, they lost competitiveness. Now Germany acts to continue the game, attempting to force the losers to stay in the game. Now it’s Greece’s turn to go under the hammer. Will … Read more