The New Gold

The recent rise of Bitcoin (BTC) has brought a new wave of triumphalist propaganda across the internet, along with annoyed responses by critics. My view is that BTC is a speculative trading vehicle without any economic significance, and I prefer to look at markets from a value perspective. As such, I see little value in discussing it. However, in addition to wishful thinking from BTC backers, critics of BTC are also falling prey to the assuming that what ought to happen will happen. Although things could go south for the crypto-currency, it is not that deep an insight to argue that BTC has carved out a niche as the new gold -- with certain advantages for speculators.

Is The Price Of Gold Telling Us Something?

Gold prices have been rising in a parabolic fashion again, and catching some interest. If one owns gold, congratulations. One of the usual ways to fill up column inches in commentary is to discuss what information about the economy and/or financial markets gold is providing. The most likely answer is that portfolio managers feel that other portfolio managers want to buy gold, so they hopped on the bandwagon. This offers us zero useful information for the macroeconomic outlook.

Book Review: The Road To Ruin

James Rickards recently published The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis. His argument is that the risks of a financial crisis is building (possibly hitting in 2018), and that the financial system will be locked down as a result. (He argues that you need to buy gold to hedge against this.) The book is awkward, but has some interesting features. He describes various pop mathematics techniques for economic and financial analysis, although the book does not provide enough details to be able to evaluate them. James Rickards joined the LTCM hedge fund in 1994, and provides an insider's take on its collapse. He is also nostalgic for the economic framework of the 1950s, which parallels the views of a lot of post-Keynesians; the issue is that he is fixated on the gold peg, which was arguably an incidental feature of the 1950s economic institutions.

A SFC Model Of Gold Standard Austerity Policies

This article describes the model that I discussed in an earlier video (video link: https://youtu.be/Sx6YkT75ehg). Although a Gold Standard is not exactly a pressing topic for most of us, the simplicity of the system makes it easy to demonstrate ways in which we can use stock-flow consistent (SFC) models. In this case, I can explain why austerity was a core component of gold standard thinking.

Modelling A Gold Standard

Although the topic of the Gold Standard often comes up in economic discussions, their actual operation is less well understood. This article explains how a theoretical model of a Gold Standard works, as implemented by stock-flow consistent (SFC) models. This is a unedited draft of a section of an upcoming book that describes how to use the Python sfc_models framework.

What Are Government Promises Worth - Gold, The SNB, And Sovereign Debt (Part 1)

The shock decision by the Swiss National Bank (SNB) to drop its policy of capping the strength of the Swiss franc came as a shock to most, and proved to be financially painful for some. Certain policies, such as gold or currency pegs, are inherently unsustainable, and the only question is the timing of the end of the policy. But in the case of the SNB's policy, it appeared financially sustainable, as they have unlimited capacity to create francs. This creates an uncomfortable parallel with government bonds - they are typically viewed as default risk-free since the government can create money at no cost.