The current retracement in bond markets, a.k.a. “the global bond rout”, has awoken the Bond Bears from their embarrassed slumber. Embarrassed, because for years they have been incorrectly calling for lower bond prices, particularly in the US, without much success. The Bears are beginning to chant “we told you so”, but it is far too […]
I did not attend the European Finance Ministers summit in Riga last Friday. Reports, however, chronicle how the Greek finance minister, Yanis Varoufakis, gave his European counterparts a lecture in macro-economics. Specifically, Varoufakis extolled the fantastic way that government spending ‘stimulates’ the economy, and how his government should be unshackled from debt to spend its […]
One of the fundamentals of finance is that investment markets tend to go up. This is perfectly rational, and indeed necessary to induce capital formation, but conflicts with the fashionable view amongst policymakers that higher asset prices are the product of speculative bubbles. Singapore’s government introduced a combination of credit rationing and transaction taxes over […]
“If financial-market conditions do not tighten much in response to higher short-term interest rates, we might have to move more quickly. In contrast, if financial conditions tighten unduly, then this will likely cause us to go much more slowly or even to pause for a while.” NY Federal Reserve President Dudley, April 6 2015. At […]
Monetary authorities can control the interest rate or the exchange rate, but not both. 2015 has witnessed a startling array of ‘monetary stimulus’ measures around the world, with varying degrees of success. The ECB has acted to aggressively lower interest rates in Europe by buying bonds across the curve. Lower interest rates arguably lead to […]
In theory, nominal interest rates are not suppose to be negative. This is because simply stashing cash in the mattress earning nothing dominates the negative rate of return associated with a bank deposit carrying a negative interest rate. Arbitrage, the second strongest force known to man next to gravity, should operate to keep nominal interest […]
http://www.firstdegree.asia/wp-content/uploads/2018/04/logo.png00Timhttp://www.firstdegree.asia/wp-content/uploads/2018/04/logo.pngTim2015-03-30 03:23:422018-05-21 03:24:17Sorry Mario, Negative Interest Rates Favour Stashing Cash in the Mattress Rather than Spending!
What are the Critical Success Factors (CSF) for a Quantitative Easing (QE) program? This sounds like an easy question, but there are so many layers of actions involved that there are just as many CSFs to achieve. Take Draghi’s European QE program, for instance. What are the CSF’s? Here is the list in order of […]
To any student of economics, Singapore is a refreshing example of good policy triumphing over political opportunism. Mr Lee Kuan Yew, Singapore’s founding father, passed away today and this is his legacy. The economic train wrecks that have become a hallmark of “modern democracy” is what he managed to avoid. Implementation is always more difficult […]
http://www.firstdegree.asia/wp-content/uploads/2018/04/logo.png00Timhttp://www.firstdegree.asia/wp-content/uploads/2018/04/logo.pngTim2015-03-23 03:24:572018-05-21 03:25:16What was Lee Kuan Yew’s Contribution?
I have been fascinated by the deluge of commentary linking Quantitative Easing in Europe with declining interest rates in other parts of the world, particularly the United States. The basic argument is that investors are buying US Treasuries to replace European bonds because they have a higher yield. This argument is obviously flawed: the higher […]
http://www.firstdegree.asia/wp-content/uploads/2018/04/logo.png00Timhttp://www.firstdegree.asia/wp-content/uploads/2018/04/logo.pngTim2015-03-11 03:36:362018-05-21 03:37:36A Rational Explanation for a ‘QE Spillover Effect’?
In 2010, when the Greek debt crisis first came to a head, the politicians searched frantically for a scapegoat. “Private sector involvement”, or PSI as it became known, was the eventual means by which Greek debt was reduced by restructuring bonds in the hands of the private sector. Publicly held debt in the hands of […]
http://www.firstdegree.asia/wp-content/uploads/2018/04/logo.png00Timhttp://www.firstdegree.asia/wp-content/uploads/2018/04/logo.pngTim2015-02-25 03:38:252018-05-21 03:38:56Why This Greek Crisis is Different From the Last Greek Crisis
Bond Bears Cannot Claim “We Told You So” Just Yet!
The current retracement in bond markets, a.k.a. “the global bond rout”, has awoken the Bond Bears from their embarrassed slumber. Embarrassed, because for years they have been incorrectly calling for lower bond prices, particularly in the US, without much success. The Bears are beginning to chant “we told you so”, but it is far too […]
Greece: Micro-Reality Trumps Macro-Fantasy in Riga
I did not attend the European Finance Ministers summit in Riga last Friday. Reports, however, chronicle how the Greek finance minister, Yanis Varoufakis, gave his European counterparts a lecture in macro-economics. Specifically, Varoufakis extolled the fantastic way that government spending ‘stimulates’ the economy, and how his government should be unshackled from debt to spend its […]
Singapore’s Property Ration Pack
One of the fundamentals of finance is that investment markets tend to go up. This is perfectly rational, and indeed necessary to induce capital formation, but conflicts with the fashionable view amongst policymakers that higher asset prices are the product of speculative bubbles. Singapore’s government introduced a combination of credit rationing and transaction taxes over […]
Fed to Markets: “Read our Minds, Read our Minds”
“If financial-market conditions do not tighten much in response to higher short-term interest rates, we might have to move more quickly. In contrast, if financial conditions tighten unduly, then this will likely cause us to go much more slowly or even to pause for a while.” NY Federal Reserve President Dudley, April 6 2015. At […]
A Hippocratic Oath for Monetary Policymakers?
Monetary authorities can control the interest rate or the exchange rate, but not both. 2015 has witnessed a startling array of ‘monetary stimulus’ measures around the world, with varying degrees of success. The ECB has acted to aggressively lower interest rates in Europe by buying bonds across the curve. Lower interest rates arguably lead to […]
Sorry Mario, Negative Interest Rates Favour Stashing Cash in the Mattress Rather than Spending!
In theory, nominal interest rates are not suppose to be negative. This is because simply stashing cash in the mattress earning nothing dominates the negative rate of return associated with a bank deposit carrying a negative interest rate. Arbitrage, the second strongest force known to man next to gravity, should operate to keep nominal interest […]
QE CSFs?
What are the Critical Success Factors (CSF) for a Quantitative Easing (QE) program? This sounds like an easy question, but there are so many layers of actions involved that there are just as many CSFs to achieve. Take Draghi’s European QE program, for instance. What are the CSF’s? Here is the list in order of […]
What was Lee Kuan Yew’s Contribution?
To any student of economics, Singapore is a refreshing example of good policy triumphing over political opportunism. Mr Lee Kuan Yew, Singapore’s founding father, passed away today and this is his legacy. The economic train wrecks that have become a hallmark of “modern democracy” is what he managed to avoid. Implementation is always more difficult […]
A Rational Explanation for a ‘QE Spillover Effect’?
I have been fascinated by the deluge of commentary linking Quantitative Easing in Europe with declining interest rates in other parts of the world, particularly the United States. The basic argument is that investors are buying US Treasuries to replace European bonds because they have a higher yield. This argument is obviously flawed: the higher […]
Why This Greek Crisis is Different From the Last Greek Crisis
In 2010, when the Greek debt crisis first came to a head, the politicians searched frantically for a scapegoat. “Private sector involvement”, or PSI as it became known, was the eventual means by which Greek debt was reduced by restructuring bonds in the hands of the private sector. Publicly held debt in the hands of […]