Recent Posts

Sunday, February 14, 2016

Monetary Disorder: Some Views From France

One of the entertaining part of economics is the divergence of views on a national basis. Within a country, partisan political views create a spectrum of opinion, but we can usually identify an "establishment view." But those establishment views can be quite distinct across countries. As an example, the French establishment has a fixation upon exchange rate regimes, and an interpretation of the current monetary system which bears little resemblance with mainstream American views on the topic. This was apparent from reading Désordre dans les monnaies [Monetary Disorder]: L'impossible stabilité du système monétaire international?

Wednesday, February 10, 2016

Pick Your Financial System Dysfunction

Chart: U.S. Bank Treasury Holdings

Trade-offs are an important part of decision making. If make a change to improve some metric, it is usually at the cost of something else. We have enthroned mark-to-market as a core principle of finance, and we are now seeing what the costs are. If those market prices do not turn around, the only way out is "qualitative easing."

Sunday, February 7, 2016

"Groundhog Day!" For The Treasury Market

Chart: 10-Year Treasury Yield (

Treasury market participants might be forgiven if they feel that they are trapped in a "Groundhog Day" style time loop; the 10-year Treasury is back at levels seen in 2011. This is despite the widespread  belief that a Fed rate hike would cause a bloodbath reminiscent of 1994. Although I have a dour outlook about economic trends, it is still unclear that it is weak enough to trigger a further plunge in yields.

Wednesday, February 3, 2016

Money Hoarding Versus Saving, And Economic Growth

One of the ongoing arguments in political economy that has followed on from Keynes is the debate over the "Paradox of Thrift." This paradox could be loosely summarised as: an attempt to increasing savings by households will lower incomes, and will actually reduce their financial resources. Free market supporters tend to reject this logic, instead arguing that increased savings increases investment, boosting growth (as discussed here). Professor Nick Rowe argues in a recent paper (paper link; comments link) that the problem is not "thrift," rather the desire to "hoard" monetary assets. This debate is not just of theoretical interest; we need to understand the effects of increasing savings in order to gauge what the effect of increasing pension contributions would have on the economy (for example).

Sunday, January 31, 2016

Rise Of Robot Lettuce

A story about a robot-run lettuce farm that can produce 10 million heads a year has been making the rounds (h/t Mike Norman Economics). Although interesting, you cannot extrapolate this to imply that all farming jobs are at risk. The article is interesting in how the techno-enthusiasm covers up the interesting economics. (This article could be viewed as a post-script for my review of the book Rise of the Robots.)

Friday, January 29, 2016

BoJ NIRP Makes Fed Rate Hike Look Even More Foolish

Chart: 10-Year JGB Yield

The JGB collapse has been delayed yet again. The Bank of Japan (BoJ) has introduced a Negative Interest Rate Policy (NIRP), via a complicated 3-tier policy rate, with one of those rates at -0.10%. Once again, year-end forecasts of higher bond yields have been met with an early bond bull market.

Wednesday, January 27, 2016

The Difficulty Of Extending Universal State Pensions (Part 1)

I have previously discussed the framework of private sector pension provision, I will now turn to universal public pensions. These universal pensions offer a safety net with benefits that are comparable to low income deciles; that is, they give seniors an income that is in line with the working poor. Such an arrangement has been highly robust politically, and there is little sign of that changing (in the absence of major realignment of societies). However, this views the benefits in relative terms; we have little way of knowing what future benefits will correspond to in absolute terms. I discuss this using Canadian data to provide context. Follow up article(s) will cover the difficulties of expanding these schemes in order to make up for the gaps in private sector pension provision.