Sovereign reserves and the USD

Many market observers have noted that holdings of US Government bonds by Sovereign Reserves Managers (Central Banks and Sovereign Wealth Funds) has declined in recent years whereas the USD remains well bid.  These commentators view this as contradictory and that the long term implication of lower Treasury bond holdings should be a weaker dollar. This […]

Half-time for ChatGPT’s 15 minutes of fame

I was drinking with an academic friend last week and the discussion topic moved to ChatGPT.  Like many of us who have played with the software, we both marvelled at the rate with which the application can spew out coherent prose.  The main problem is that much of it is bullshit. Fabrication and embellishment is […]

Credit Suisse was no big threat

Why is everyone else nodding and I am shaking my head at the forced Credit Suisse rescue/bankruptcy/insolvency/systemic-threat/crisis?  Those nodding agree that it was a prudent action by the Swiss regulator.  My view is that there is nothing systemic that the market hasn’t already dealt with. Walk down the street and ask people, in every city […]

Silicon Voodoo Bank and the managed funds industry

So what is the big deal with the failure of SVB?  The story goes that SVB’s depositor base was a bunch of tech startups.  The asset’s went down in price, chewing up the Bank’s capital and then some.  This triggered a classic ‘bank run’ where depositors tried to withdraw their deposits at a price that […]

Respect age (of the system)

When the missionaries arrived at Aitape in Papua at the turn of the century they were appalled to see the villagers carry there boats from the mountain settlement to the beach each day, fish and return to the hills each evening boat in tow.  No-one knew quite why so the missionaries decided to resettle the […]

What happened to the cow?

In the classic fairytale Jack and the Beanstalk, Jack is charged with the important job of taking the family’s cow to market to sell for some much needed money to put food on the table.  Jack, however, gets stopped by some scammers and is convinced to sell the cow for a handful of ‘magic beans’.  […]

Spurious Fed policy

A lower than expected CPI result of +0.4% for October in the US sparked an explosive rally across risk assets last night.  If this number propogates for the next year then the Fed is finished tightening.  If the number continues to fall then the Fed will be led to reverse course.  Interest rate dependent securities […]

ALM, LDI and CSA spells trouble for the BOE

I cannot remember the number of times I walked into meetings to discuss Asset – Liability Matching (ALM) with pension funds and insurance companies.  Insurers fell into two buckets – the savvy ones running sophisticated matched portfolios and the others with serious mismatches.  Pension funds, alternatively, either lacked instruments to reduce the mismatch or fell […]

The virus wins, humanity survives, so what is the policy lesson?…plus the Queen and ‘The Dismissal’

The virus, humanity and policy… I remember in February 2019 visiting my daughter in hospital where she had been rushed with suspected apendicitis.  The hospital was eery with ward upon ward darkened and empty.  The reason being the pandemic was just starting and there was a fear that the hospital system would become over-stretched.  The […]

Inflation IDK – better raise rates!

I have argued repeatedly in this blog that one of the great economic unknowns is what causes inflation and why.  The classical argument is money supply expansion, which seems to work empirically for hyperinflations, but not for moderate or galloping inflation rates.  Indeed, the best general equilibrium economic models we have are completely devoid of […]