Category Archives

Archive of posts published in the category: Financial

The Hypertrophy of Finance

George Gilder explains how the management of our money system has increased inequality. While the trade in goods and services has remained stagnant the volume of trade, and the ensuing profits, in currency trading and financial instruments has grown substantially,

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Capitalization vs Regulation

While the left claims the greedy 1% led us to financial ruin, years of reflection indicate that wrongheaded regulation and policy had much to do with magnifying the depth of the recession. Deregulation was not the problem, wrong regulation was

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Risk Horizons

There are a lot of ways to lose money in the stock market, but far fewer effective ways to make money. Looking at two managed accounts over the same time period, one was far more profitable than the other.  One

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Pretending to Balance the Budget

from Kevin Williamson at National Review, We’re Not That Far from a Balanced Budget One, Americans earning $100,000 or more pay basically all of the federal income taxes, about 80 percent. That is far in excess of their portion of

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Currency Manipulation

from the editors of the Wall Street Journal, Emerging Market Rip Tide: The destabilizing effect of QE threatens global growth at a moment when none of the major economies is firing on all cylinders. By encouraging overinvestment in developing countries,

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Financial Myths

from Forbes Five Years Of Dodd-Frank: ‘Too Big To Fail’ Still Unresolved by Norbert Michel excerpt: The notion that these transactions took place in some shadowy, hidden room of finance, where regulators had no clue what was going on, is

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Dumb Regulation isn’t the same as Deregulation

from Jeb Hensarling at The Wall Street Journal, After Five Years, Dodd-Frank Is a Failure: Dodd-Frank was based on the premise that the financial crisis was the result of deregulation. Yet George Mason University’s Mercatus Center reports that regulatory restrictions on financial

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Fostering a Liquidity Crisis

From The Wall Street Journal, How the Next Financial Crisis Will Happen by Stephen Schwarzman: Despite good intentions, however, politicians and regulators constructed an expansive and untested regulatory framework that will have unintended consequences for liquidity in our financial system.

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Financial Bloat

A black hole for our best and brightest by Frank Tankersley at The Washington Post Excerpts: It’s not that finance is inherently bad — on the contrary, a well-functioning financial system is critical to a market economy. The problem is,

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Why Tax Cuts are Disproportionate

Kevin Williamson writes Blue Voodoo in National Review. Excerpts:  The cartoon version of conservative economic thinking — that we should subsidize gazillionaires in order to create work opportunities for yacht painters, monocle polishers, and truffle graters — is fundamentally at

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Leveraging Ignorance

The Greatest Trade Ever by Gregory Zuckerman is the story of John Paulson and a handful of other traders who took positions against the mortgage market and made fortunes in a very short period of time.  Their primary method was

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And Now for the Rest of the Story…

The outcome of the 2008 election centered around the financial collapse that hit just months before the vote.  Even the most committed capitalists were taken by surprise at what seemed like a significant failure of capitalism.  Outrage was magnified as

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This is Rich

George Soros is closing his hedge fund to outside investors because of the new financial regulations.  He will be returning investor’s money. Excerpt from Soros to close Quantum fund to outsiders by Dan McCrum: Quantum, which will continue to manage

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Deregulating Glass-Steagall

The Glass-Steagall Act was passed in 1933 in response the Crash of 1929.  It built a wall of separation between investment banking and commercial banking. It sought to isolate the purpose of providing loans for mortgages and small businesses from

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Do Regulations Increase the Risk of Catastrophic Failure?

The implications of complexity in financial markets are more pointed than for most other industries: In the financial markets, some participants have a self- interest in gaming the system.  Traders do not act as uninvolved parties.  They are ready to

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The Regulation Trap

The natural reaction to market breakdown is to add layers of protection and regulation.  But trying to regulate a market entangled by complexity can lead to unintended consequences, compounding crisis rather than extinguishing them because the safeguards add even more

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Liquidity and Solvency

There are many small business people who contend that they cannot get a loan. The press reports that banks are sitting on their money and not loaning any. They are just making a safe spread between very low bank rates

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Replace bailouts with “bail ins”

In We’ll Always have Basel The Wall Street Journal reports on the work to raise capital standards to avert future bank meltdowns.  One of the more interesting concepts is a “bail in”: The idea is to set very high capital

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Why the drop in home sales is a good thing.

It is not Obama’s fault that home sales are dropping, though it is his fault that they did not drop sooner.  Why is it bad that the sales of home and home prices are dropping? Yes, it eats up bank

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How to Turn Crisis Into Catastrophe

“The bankers fervently believed their new structures and systems would better ensure the soundness of their loans than old- fashioned credit analysis and human judgment, fraught as ever with human error.  Having crafted a system that seemed to relieve them

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