Central
bank mandates still debated – growing understanding that asset prices are a big
contributor to the economic cycles, and the real solution is lessening asset
price volatility. As this volatility arises from credit booms and busts, the
key is monitoring asset prices and applying countercyclical banking and market
regulation. That has many implications
and will be hotly debated – and probably forgotten soon. Last week’s Economics
& Markets here.
Previously on MoreLiver’s:
An
attractive way to give a broad sweep over the history of macroeconomic ideas is
to talk about a series of reactions to crises… However it is too simple, and
misleads as a result.
Inflation Targeting
and Country Risk: an Empirical Investigation – IMF
NGDP level targeting:
Yellen it from the rooftops, but nobody heard – alphaville
/ FT
Given the boost that Goldman’s economists gave to the
nominal GDP level targeting
movement when they endorsed the idea near the end of 2011, it’s probably a good
idea to listen to them when they write about the subject (whether you agree
with them or not).
Stubborn national politics drag down the global
economy – Reuters
The
imbalance is such that while the emerging markets produce the majority of goods
and services, they depend upon selling to Western consumers. Until that
changes, no continent can succeed without the other. Indeed, in the absence of
global coordination the world is stuck in a rut of its own making, acting out
our own global version of the “Prisoners’ Dilemma.” It is a world where no
major economy can succeed on its own and yet none trusts any other enough to
try a cooperative effort through coordination.
Low money multiplier does not justify ultra
easy monetary policy
– Sober
Look
Writing the Future – Project
Syndicate
Jeffrey D.
Sachs: More than we know (or perhaps care to admit), the future is a matter of
human choice. So, will living standards rise worldwide, as today’s poor
countries leapfrog technologies to catch up with richer countries, or will
greed and corruption lead us to degrade the natural environment on which human
well-being depends?
Why financial markets are inefficient – voxeu.org
Roger E. A.
Farmer: The efficient market hypothesis – in various forms – is at the heart of
modern finance and macroeconomics. This column argues that market efficiency is
extremely unlikely even without frictions or irrationality. Why? Because there
are multiple equilibria, only one of which is Pareto efficient. For all other
equilibria, the whims of market participants cause the welfare of the young to
vary substantially in a way they would prefer to avoid, if given the choice.
This invalidates the first welfare theorem and the idea of financial market
efficiency. Central banks should thus dampen excessive market fluctuations.
How we got here – Free
exchange / The Economist
Mainstream macroeconomics
has a pretty poor reputation these days, both among the public at large and
among economists in other fields. This is hardly surprising. There is little
consensus on even the most basic questions in macro.
'Wealth Effects Revisited: 1975-2012' – Economist’s
View
Housing
cycles matter.
World Economic Outlook October 2012: Coping
with High Debt and Sluggish Growth – The
Big Picture
Terrifying Tim from Tullett – Buttonwood
/ The Economist
Tim Morgan
of the brokers Tullett Prebon has just produced an 82-page note (complete with
lots of pictures of ancient ruins) called "Perfect storm; energy, finance
and the end of growth."
BANKS & REGULATION
Just who should we be blaming anyway? – Free
exchange / The Economist
Why have so
few gone to jail for the financial crisis? The boom and bust in S&L lending
in the 1980s ended with nearly one thousand people sent to jail for financial
fraud—and that experience was quite mild compared to the recent cycle.
How much value does the finance industry
create? – Noahpinion
Making Sense of Wall Street’s Trading Revenue – DealBook
/ NYT
Trading
results are good place to start when assessing whether banks release sufficient
information about their financial results.
Reforming risk-weights, quotes du jour – alphaville
/ FT
This handbook gives an overview of the market for
Finnish government debt. We offer details on the structure of the market
including instruments, marketplace, auctions, issuance, outstanding volume and
ownership.
Q4 Earnings Season: Far Worse Than Most Suspect – ZH
Financials vs Technology Sector Earnings – ETF
Replay
In the last
blog post, we showed how S&P 500 earnings were tracking vs past years. This blog looks at 2 of the major sectors
that generate those earnings.
Weekend Reading for Equity Investors
– CFA
Institute
Dying markets,
illustrated – alphaville
/ FT
World Federation of Exchanges pushed out “highlights”
from 2012. The trading rut extends to… everywhere. Every region. Every market.
Globally equity transactions were down 22.5 per cent last year, derivatives
trading fell 20 per cent, while ETF business fell by 31.6 per cent. What’s to
blame?
Carry Trade and Systemic Risk: Why are FX
Options so Cheap? –
SSRN
Ray Dalio: Cash Will
Move Into 'Stuff' in 2013 – Marketfolly
How To Manage Risk – Ivanhoff