Meet the NEW real interest rate

In Japan, short term Tbills have a negative yield of -0.25% while inflation is negative -0.4%.   The real interest rate is positve, roughly +0.15%. In the US, short term Tbills have a positive yield of 0.25% while inflation is positive 1.0%.   The real interest rate is negative, roughly -0.75%. It may come as a surprise […]

The ‘Brand EU’ Dilemma

The ‘prisoner’s dilemma’ is the classic sub-optimal equilibrium example in Game Theory. 2 prisoners are being interrogated separately. Each faces the same decision – if they remain silent they each get 3 months jail. But if one blames the other, and the other remains silent, the whistleblower walks free while the other gets life imprisonment. […]

Brexit just broke the cartel

“The world of hope, the world of ever-closer union among countries which for centuries would kill each other by the million—came to a shattering end on Thursday,” – Felix Salmon Felix, what a lot of rubbish.The UK’s vote to leave the EU just struck a blow for competition and free trade for all the World. […]

The Brexit Issue: “our cost-benefit analysis supports this” (gesticulating)

Opinion polls in advance of a plebiscite are highly scientific yet have proven themselves to be way off the mark compared to the actual result. Despite the advances in sampling procedures avoiding bias, opinion polls seem to be getting worse, rather than better, at predicting outcomes. Some analysts think that the divergence between pre-poll opinion […]

Less turnover means more liquidity in the new finance world…PLUS a bonus Fed bloglet!

Michael Lewis famously lambasted Salomon Brothers clients in Liars Poker thirty years ago as being intellectually inferior and ignorant to the risks they purchased from the savvy Wall St bankers. The 3-6-3 club (borrow at 3%, lend at 6% and be on the golf course at 3pm) is a story Lewis relates about his sucker […]

Blockchain beware: Old Systems Title and non-Markov processes

“Possession is 90% of the Law” is the famous, unattributed saying in English Common law. In the context of proving ownership of an asset, being in possession of that asset makes a pretty strong presumption that you own it. The problem with assets that are electronically generated, registered and traded is that they do not […]

How should I know what to do, I’m just your fiduciary?

“It’s a very simple principle: You want to give financial advice, you’ve got to put your client’s interests first.” – President Barack Obama, February 23, 2015 From time to time my avid reader base suggests the topic for one of my blog posts. My good friend Ted, drew my attention last week to the new […]

The resurrection of Friedman’s money laden helicopter

At the height of its influence in the late 60’s and early 70’s, Monetarism held that money expansion could have powerful short term effects on GDP and Employment. This appealed to policy makers since it offered a cheap way to manage the macro-economy and elevated Milton Friedman to rockstar status. Quite honestly, Friedman would have […]

ECO 401: Studies in Monetary Stupidity

Way back in my first year of Grad School, I enrolled in ECO 401: Studies in Monetary Theory. To my amusement and surprise, the entire semester was spent deriving the Basic Neo-Classical Model and its extensions within the ‘Real Business Cycle Theory’ framework. RBC was the most promising development in macroeconomics for decades. The amusing […]

Negative interest rates: The cost of monetary saturation?

I have banged on many times about the drastic collapse in the velocity of circulation of money. This is a fancy way of saying that banks and individuals don’t want to hold the money that the Central Banks have been throwing at them for a decade. Despite the attempts of the Central Banks to ‘reignite […]