Category Archives: Finance

The Politics of Economic Stupidity by Joseph E. Stiglitz – Project Syndicate

In 2014, the world economy remained stuck in the same rut that it has been in since emerging from the 2008 global financial crisis. Despite seemingly strong government action in Europe and the United States, both economies suffered deep and prolonged downturns. The gap between where they are and where they most likely would have been had the crisis not erupted is huge. In Europe, it increased over the course of the year.

Developing countries fared better, but even there the news was grim. The most successful of these economies, having based their growth on exports, continued to expand in the wake of the financial crisis, even as their export markets struggled. But their performance, too, began to diminish significantly in 2014.

In 1992, Bill Clinton based his successful campaign for the US presidency on a simple slogan: “It’s the economy, stupid.” From today’s perspective, things then do not seem so bad; the typical American household’s income is now lower. But we can take inspiration from Clinton’s effort. The malaise afflicting today’s global economy might be best reflected in two simple slogans: “It’s the politics, stupid” and “Demand, demand, demand.”

via The Politics of Economic Stupidity by Joseph E. Stiglitz – Project Syndicate.

via The Politics of Economic Stupidity by Joseph E. Stiglitz – Project Syndicate.


This is mind-blowing: You have to pay Switzerland to lend it money – The Washington Post

Swiss bonds are the new Swiss banks.

Both, you see, are super-safe places to park your money, so much so that people are willing to pay to keep it there. Now think about this for a minute. It shouldn’t be true. Borrowers usually have to pay lenders, not the other way around, to borrow money. That’s something we like to call “interest.” But it’s not true in the topsy-turvy world we live in today, where investors are lining up to pay the Swiss government for the privilege of lending it money for ten years. Or, in finance-speak, bond yields are negative.

This isn’t really new, though, so much as Europe’s new normal. As the Financial Times points out, €1.2 trillion, or $1.4 trillion, of eurozone debt has negative yields that mean lenders are paying borrowers. But what it is new is just how long people are willing to pay governments to borrow. At first, they only did so for 1-or-2-year bonds. Then, in a sign of how dysfunctional Europe’s economy still is, investors started paying Germany to borrow for five or six years. But now, as you can see above, Switzerland has beaten everyone else to be the first to have negative ten year borrowing costs, at -0.2 percent. And by “first,” I mean in history. This has never happened before.

via This is mind-blowing: You have to pay Switzerland to lend it money – The Washington Post.

via This is mind-blowing: You have to pay Switzerland to lend it money – The Washington Post.


Sodexo Coupons – Invalid. A Business Model explained | Kiran Dhanwada

As of January 1st, 2012, all retail store chains in Bangalore (and across India) have stopped accepting Sodexo coupons in lieu of items purchased. Every firm hands out these Sodexo vouchers to its Employees (included in compensation package). Employees are now worried that these Sodexo coupons would be useless as they are not being accepted. My view is that this might just be a temporary phenomenon since there are a lot of stakeholders who will lose out if these vouchers prove invalid. The post explains the how and why of it.

If it were a school debate, the subject of the topic would be ‘Sodexo coupons – A boon or a curse. Discuss’.

via Sodexo Coupons – Invalid. A Business Model explained | Kiran Dhanwada.


Some nice finance papers to look at

• Can rising confidence in low macro-risk explain the boom in asset prices? (Tobias Broer and Afroditi Kero)

Look at the analysis this paper does on recessions in different economies. Analysis and comparisons based on different parameters of current recession and earlier recessions is also very interesting. Also see Appendix A for data by episode.

• On international risk sharing and financial globalization (Eleonora Pierucci and Luigi Ventura)

Look at financial account components to GDP ratio for different countries. Some useful analysis on savings and factor income.