Making sense of the distribution and lag effects Let us explain the problem or rather challenge of choosing between Quantitative Easing (QE) and an Interest Rate reduction to stimulate economic activity, with reference to the Bell Curve diagramme above: There are two major factors at play here: Distribution Time With a bout of QE, the effect … Continue reading QE – Our take on the Bell Curve effect
Originally published 4 October 2009: Information Asymmetry is what drives the market. We alluded to this in an earlier blog posting (see Market Responsibility, Saturday, 18 October 2008). Yet we still hear the socialist agenda mention regularly that if it wasn’t for the recent government interventions to ‘save the market’, the market would have collapsed. … Continue reading The Ice Age is Cometh
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Forget about recapitalising the French Banks, saving Greece, (or the Euro)…. Continuing our conversation on Innovation Yes, we admit it! The headline statement above is all about grabbing your attention. We are not advocating any disorderly default crises. What we believe is that the ‘agricultural’ economic base and the semi-integration of Europe, via market and monetary … Continue reading Recapitalising Europe
Yesterday the Independent Commission on Banking (Vickers Commission) published its long anticipated, yet low in surprises report on Banking Reform in the UK. See: Rather than rehash the analysis already performed, we only have two items to add at this stage: Get your calculators out, or at least keep the Quants busy, because unravelling and … Continue reading Get your calculators out
Ever since the Great Depression and JMK’s ‘The General Theory of Employment, Interest and Money (1936)', have we had more intense government interference and hence taxation in most advanced economies. Thank you JMK. But seriously, how much is too much? There must be value in controlling fiscal policy, monetary policy and (social) employment policy, but is … Continue reading I blame John Maynard Keynes (JMK)
The real (inflation adjusted) 30 Year T-Bill rates have since the beginning of the year averaged 1.72% (simple averaging). Since the beginning of September 2011 the average real rate has dipped to below 1.00% to 0.99%. (Our measurement). Does this mean that the flight to other asset classes is now in full-swing … Continue reading The Flight – Keeping an eye on the real 30 Year Treasury Yield Rates
We were reminded today of a blog post we made on 21 October 2009 we made regarding the Credit Crisis of 2008 - 2009, at the time. Some of the lessons learnt and discussed there are still relevant today, especially our comment regarding the fact that the Credit Quake would have 'after shocks' for a … Continue reading The Credit Quake of 2008 – 2009 (Revisited)
...continuing our conversation in the Economics of Taxation series (part 2) A European Generation ‘E’ enquiry – (‘E’ for employment) Referring to our previous article entitled ‘The Economics of Taxation’, today we elaborate and flesh out the basic ideas around taxation. The basic idea is that any form of taxation becomes a drain on … Continue reading Crafting the Cynical Generation?
Today’s short opinion piece revolves around the recent rail fare increases announced in the UK. It strikes us as a very cynical way of rewarding behaviour and policies implemented by previous governments and parliaments to now go and increase the ‘tax’ on rail commuters when the switching policy from road to rail has meant that … Continue reading A cynical swipe at the ‘Consumer end’ of the money (value) chain
For today's brief analysis of the US Treasuries (T-Bill) Yield rates, we constructed the chart and table below utilising data from the US Treasury official site. We took a point in time being mid August for 5 consecutive years from 2006 through to 2011 and compared the 1-month through to 30 Year T-Bill Yield Curves. As can … Continue reading US Treasuries – A steady erosion in confidence?
How do we define the state of our nation at the moment? For a little while now we have been experiencing an 'unease' with the communication revolution and the disparate nature of communication tools at our disposal. On the surface it would appear that what is happening is that rather than bind together a society … Continue reading The Economics of Social breakdown
Today’s brief commentary piece tracks the US Treasury Yield curve of 5 August 2011 (before the Standard & Poor’s downgrade announcement) and the closing rate on 10 August 2011. As can be observed, across the board, the T-Bill yields of 10 August are lower than on 5 August 2011. It begs the question: Is a ratings … Continue reading US Treasuries – 4 trading days on and rates look rosy?
So it has finally happened. After threatening for months that a credit rating down grade was probable for the USA, Standard & Poor's finally took the 'big step' on Friday 5 August, after the major markets closed. So what next? In our article 'US Treasuries - Are the markets really that bothered?' published on 30 July 2011, … Continue reading US Treasuries – An FX or a market call?
There are in essence only two ways of taxing citizens: A Tax on Stock (Wealth) A Tax on Flows (Income or consumption) Within these two tax methodologies are hidden the minutiae of the tax regime system, but at a fundamental level, any tax raising authority has to look at these two options / methodologies available to … Continue reading Economics of Taxation
Some say that in life timing is everything... And so too it is with economics. We don’t yet have a fully developed and ‘mature’ [in terms of life-cycle] grasp of the impact of timing with leads and lags in the economy in general. Yes, we have very sophisticated and advance models, analytics, knowledge management, quantitative … Continue reading A sigh of relief?
In the previous article we posted, mention was made of the (0.72)% [negative 0.72%] real return US Treasury investors can currently expect on 5 Year Treasury Bills. The Nominal (quoted) Yield Curves and Real (Inflation adjusted) Yield Curves for two specific points in time, namely Friday 29 July 2011 and 30 July 2006 are listed below. Yield … Continue reading The US Treasury Yield Curves #2 – Do you factor inflation into the deal?
As a general introduction today we will look at two US Treasury Yield curves. The first Yield curve in the Curve graphic 1 below is the 3 Month bills compared to the 10 Year bills over the last 5 years. Yield Curve 1 In this table it is clear that the current 10 Year … Continue reading The US Treasury Yield Curves – Are the markets really that bothered?
Never resist the temptation to start a discussion with a pun. In our previous article we highlighted the ‘battle royal’ on Capitol Hill to get a proposal agreed to address the possibility of a US Treasury default, whether actual or technical on or after 2 August 2011. So the Republicans could not muster together enough … Continue reading A Storm in a ‘Tea’ cup
It is a confidence thing. We are so very, very close to seeing and experiencing another colossal collapse in confidence in the world’s financial system. This time it is driven by the ‘US Debt Ceiling impasse’. A steady flight to gold has been taking place over the past few months and even though most informed … Continue reading Hold your nerve!