A Flash of Insight (Part 3)

By |2016-11-17T16:35:21-04:00October 29th, 2014|Categories: Global Market Update|Tags: , , , |

Why do people develop new ideas? It’s not enough to have folks who are able to innovate and who are encouraged to innovate. They have to want to innovate. When we look at the geography of innovation, we see dramatic disparities: Source: Cityam.com Last year over 15,000 new companies were started. The vast majority were founded in the US; a good number were sited in Europe and Britain; and then various cities around the world like Tel Aviv, [...]

Banking on Change (Part 2)

By |2016-11-17T16:38:45-04:00September 9th, 2014|Categories: Global Market Update|Tags: , , |

What’s changing for banks? The easiest changes to see are regulatory. Regulators have massive influence on how banks do business. From standards on loans to borrowing to capital, the overseers have been raising the bar. And it needed to be raised. One of the causes of the Financial Crisis was lenient regulation. Regulators assumed that market discipline would keep the biggest institutions in line—that firms that mark-to-market every day didn’t need as much of a safety net. [...]

No Place to Run

By |2014-09-18T11:10:01-04:00August 15th, 2014|Categories: Global Market Update|Tags: , , , |

Finally, an official gets it. Six years, 848 pages, and 280 Dodd-Frank rules later, a Fed official is getting to the heart of the Financial Crisis. Eric Rosengren, President of the Boston Fed, gave a substantive speech about the repo market three days ago. Repos—or repurchase agreements—are a critical part of our financial infrastructure. They’re how major broker-dealers fund themselves. And Dodd-Frank barely mentions them. In a repo, a firm sells a security and agrees to buy [...]

On Dasher, On Dancer …

By |2013-12-24T10:13:08-04:00December 24th, 2013|Categories: Global Market Update|Tags: , , |

Is the EPA going to play Scrooge?A team of researchers at the Oregon State University has noted that with all the concern about the effect of carbon emissions on the global climate, a major greenhouse gas is being overlooked: methane. And methane is over 20-times more powerful than carbon dioxide in trapping heat.Cows, sheep, goats, and other ruminants produce tons of methane in their digestive systems. Over the past 50 years the population of these animals has [...]

The Complexity of Simplicity

By |2013-08-05T09:12:07-04:00August 5th, 2013|Categories: Global Market Update|Tags: , , , |

It wasn’t supposed to be this way.In 2008 Lehman failed, in part because the company was massively leveraged. They had borrowed over 30 times their net equity. When the real estate market tanked, investors were worried that Lehman would owe more than their assets were worth, and rushed to get their cash out. This “run-on-the-bank” led to Lehman’s failure—a major link in the Financial Crisis which caused our Great Recession. […]

The Law of the Jungle

By |2016-11-17T17:21:11-04:00March 20th, 2012|Categories: Global Market Update|Tags: , , |

Is economics a game with no rules?In college I was introduced to a game called “Jungleball.” The first rule of Jungleball is that there are no rules. The second rule is to disregard the first rule. Sometimes it would take the form of a volleyball game, where some players got onto their teammates’ shoulders to spike the ball, or where the server’s team would try to tackle their opponents from below the net. Other times it would [...]

Regulating Pendulums

By |2011-12-21T22:32:08-04:00July 20th, 2011|Categories: Global Market Update|Tags: , , |

How much regulation do the banks need? The Dodd-Frank bill has been around for a year now, and it’s reasonable to ask if anything has changed. The logic behind Dodd-Frank is simple: our capitalist system runs on self-interest and profits. Regulation is necessary to make sure things stay within reasonable limits—things like systemic risk, […]