Recent Posts

Sunday, July 24, 2016

Seriously, Money Is Not A Zero Coupon Perpetual

Money needs to be abolished -- from economic theory. Too much importance is attached to it, and it skews people's abilities to analyse it properly. For example, people make fundamental errors, such as thinking of it as a "zero coupon perpetual bond." (UPDATE: I respond to Nick Rowe's response...)

Friday, July 22, 2016

NGDP Futures Convertibility -- Unworkable?

Scott Sumner has been championing "nominal GDP futures" ("NGDP futures") as a means of creating "market-based monetary policy." This has provoked all kinds of debate, such as whether the Efficient Markets Hypothesis holds. In my view, this is a distraction from the main point -- the market would not function. Sumner has proposed a few models; this article discusses what he said is his current preference -- futures convertibility.

Wednesday, July 20, 2016

Bond Active Management -- Makes As Much Sense As It Ever Did

Cullen Roche (Pragmatic Capitalism; Orcam Asset Management) wrote an interesting article on the secular bond bull market, and the somewhat dismal forward-looking nature of bond returns. I find it hard to disagree with the bulk of the article, but I disagree with his sentiment about bond fund active management. In my view, the case for active bond fund management has not really been changed by the drop in yields. (Note that this assessment is deliberately ambiguous; I am not saying that the case for active management was good when yields were higher; I leave that assessment to the reader.)

Tuesday, July 19, 2016

Inflation Forecasting Humour

Gerard MacDonell has an amusing yet disturbing article at Beinn Bhiorach -- "Yeah, but if you control for the Jupiter effect." (Disclaimer: Gerard hired me in my first job in finance.) He discusses which prices indices economists should use to make the inflation rate higher than it is, in order to meet the bias that inflation is high, and going higher.

Monday, July 18, 2016

Interview at RateSpy

I was interviewed for an article at "The Market’s Message: Go Short, or Variable." The interview questions were about everyone's favourite fixed income subject -- rate expectations and the term premium. (Luckily, there were no questions about affine term structure models...) For those of you interested in Canadian interest rates, in addition to collecting Canadian mortgage rates, the site has news about mortgages and interest rates. (I have not been in the market for a mortgage for a long time, so I am not too familiar with the web site.)

Sunday, July 17, 2016

The Yield Curve And The Cycle

The slope of the yield curve is a topic of wide interest in bond market economics. It can be viewed as an economic indicator, or an instrument to be traded. Within this report, the focus is on how and why yield curve slopes act as economic indicators. The advent of ultra-low interest rates has made some interpretations of the yield curve untenable, but the yield curve is still useful as an indicator. (This article is an excerpt from Interest Rate Cycles: An Introduction.)

Thursday, July 14, 2016

UMKC Post-Keynesian Conference

For those of you with an interest in post-Keynesian economics, just a reminder that the 13th annual Post-Keynesian Conference at UMKC is on September 15-18th. I was not sure that the schedule would work for me, but I will be heading out there. (Assuming I book a flight to Missouri, and not Kansas. American geography was never my strong point.)