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macro and politics

Argentina saw a huge rebound in growth when it abandoned its dollar peg

Greece is not Argentina: don’t expect exports to drive growth if Greece leaves the euro

I have heard it said, semi-seriously, that the biggest risk for the Eurozone isn’t that Greece leaves the single currency and its economy collapses, but that it leaves and thrives.  In this scenario Greece starts again, debt free, able to adapt fiscal easing rather than austerity, and with a devalued “new drachma” encouraging an influx of tourists and a manufacturing and agricultural export boo…

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15.04.16 blog RW

Greece, the currency vigilantes and the Expulso solution

It has been a while since we have discussed the economics of the single currency, but once again the issue of its suitability for all its members is at the forefront of economic concerns, as Greece faces some difficult decisions.

The financial crisis has taught us a number of lessons: fiscal policy works, monetary policy works, better regulation is beneficial for the financial sector, confidenc…

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The greater the income share of the rich, the lower the savings rate

If you want to generate economic growth then encourage the rich to spend

In 1714, an Englishman called Bernard Mandeville published his poem entitled “The Fable of the Bees: or Private Vices, Public Benefits”. The satire was about a hive of prosperous bees that were living a life of luxury. One day, some of the bees began to grumble that their lifestyle lacked virtue and the bees subsequently turn away from greed and extravagance. This leads to a rapid loss of prosp…

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The Signal and the Noise – why local weather forecasters get it wrong, and what it means for those big market calls

I’ve finally got round to reading Nate Silver’s The Signal and the Noise. It’s a brilliant analysis of why forecasts are often so poor, from the man who called every state correctly in the 2012 US presidential election. In short, predictions are often poor because they are too precise (asserting an absolute outcome rather than assigning probabilities to outcomes); there’s often a bias to overwe…

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The Great Compression of peripheral to core European risk premiums

Are investors still compensated adequately for investing in peripheral rather than core European debt, or has the on-going convergence eroded debt valuation differentials altogether? In his latest blog entry, James highlighted five signs indicating that the bond markets consider the Eurozone crisis resolved. Inter alia, James pointed out that risk premiums for peripheral vs. core European high …

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Jim Leaviss’ outlook for 2014. The taper debate (watch the data), inflation (where is it?), and it’s a knockout. Merry Christmas!

With many expecting a ‘great rotation’ out of fixed interest assets in 2013, bond investors will, in the main, have experienced a better year than some had predicted 12 months ago. It might not always have felt like it at the time – indeed, over the summer when markets were sent into a spin by the prospect of the US Federal Reserve (the Fed) cutting its supply of liquidity earlier than expected…

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Italy: the good, the bad and the…politicians

Italian politics has been in the international news, again. Markets tend to fear instability and Italy is always a creative and boundless source of uncertainty. We Italians have a wonderful ability to put ourselves into trouble. The good news is that markets in recent weeks have held up more than in the past.

1 – Political life in the peninsula

In the last few weeks, research from many well-kn…

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Asian currency wars; is China really the ‘currency manipulator’?

Ever since the Asian financial crisis in 1997, Asian economies have generally engaged in a policy of maintaining artificially cheap currencies in order to generate export-led growth. This led to substantial political pressure being placed on Asian countries, primarily from the US, to allow their currencies to appreciate.

The problem facing export dependent Asia is that this growth model has now…

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Should the people of Middle Earth have done Quantitative Easing to mitigate against Smaug’s tight monetary policy?

Any blog that begins with the words “Smaug the dragon is typically viewed as a fiscal phenomenon…” has immediately got my attention. Please read The Macroeconomics of Middle Earth by Frances Woolley. Woolley compares the size of the dragon’s hoard with a picture of the gold reserves at the Bank of England – although it is likely that Smaug is the beneficial owner of his gold, rather than a cust…

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