Simple Money

By |2018-09-19T05:31:54-05:00September 19th, 2018|Global Market Update|

Is our financial system too complex? Photo: Ben Thai. Source: Pixabay In banking, there are four or five ways to measure capital and over a dozen ways to classify assets. In insurance there’s a complex web of reserve calculations and investment silos. And everyone in finance is subject to an alphabet soup of regulators: the SEC, FDIC, OCC, FINRA, FinCen, CFPB, NAIC, NFA, CFTC, and the list goes on. Will we improve our financial system by adding another layer of calculation and regulation? Having [...]

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The Only Game in Town?

By |2018-05-23T06:28:00-05:00May 23rd, 2018|Global Market Update|

Should we invest in monopolies? Photo: Matthew Hull. Source: Morguefile A monopoly exists when a company is the only provider of what we need. The electric company in your area is the only way to get electricity for your home. The cable or phone company is the only way to get high-speed internet service. Companies that enjoy a huge market share have one less thing – one big thing – to worry about. They don’t have to worry about what the competition will do [...]

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Facebook – Naughty or Nice?

By |2018-04-16T07:36:19-05:00April 16th, 2018|Global Market Update|

What does Mark Zuckerberg know about us? Photo: President of Mexico. Source: Wikipedia During the financial crisis we learned that some banks are TBTF, Too Big To Fail. They’re so critical to the global economy, with assets and liabilities in so many places that they’re essential to our financial plumbing. Lehman’s bankruptcy proved this, rippling through the system and leading to millions of layoffs. Then, when officials failed to indict HSBC and other global banks for money-laundering violations, they were called TBTP – Too [...]

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Regular Regulation

By |2018-02-02T05:32:17-05:00February 2nd, 2018|Global Market Update|

Why do we need regulators? Source: Government Accountability Office Regulation is inefficient. No one ever hired a compliance officer to increase productivity. And regulation creates moral hazard. During the “blue law” era, the most energetic advocates for restricting alcohol sales on Sundays were both Christian ministers and bootleggers. The bootleggers got more sales if legal sales were restricted. This is called the “Bootlegger and Baptist” phenomenon. This creates opportunities for disruptive, entrepreneurial enterprises. Uber or AirBNB are taking advantage of the highly regulated taxi [...]

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Into the Light

By |2018-01-24T05:40:06-05:00January 24th, 2018|Global Market Update|

What’s the underground economy? Photo: Melony Candia. Source: Morguefile The informal economy is the cash economy. It’s the economy of under-the-table transactions, of digital currencies and returning favors. Sometimes it’s unsavory, sometimes not. If you read a new book that you like and loan it to a friend, that’s informal activity. No money changes hands. This is perfectly legitimate. But sometimes informal activity is sleazy: cash payments for goods or services so sellers can avoid reporting what they do – to avoid paying taxes, [...]

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Looking for Risk in All the Wrong Places

By |2017-11-15T07:11:22-05:00November 15th, 2017|Global Market Update|

Can Artificial Intelligence really manage risk? Source: Wikipedia There’s a new application for Artificial Intelligence. It’s called regulatory technology, or “regtech.” It takes the rulebook of a supervisory agency, like the FDIC, and translates it into a computerized logic engine. The regulators evaluate the logical consistency of their rules, and the banks structure and label their data to be queried. This allows the regulator to look for broad patterns in the data that might not be immediately apparent. AI can identify deep, dynamic structures [...]

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Apocalypse Now

By |2017-11-14T06:52:40-05:00November 14th, 2017|Global Market Update|

Are we regulating local retailers out of existence? Photo: Jonny. Source: Granola Shotgun There’s a recent story about a family in California that bought an old fire station for $250,000 with a view toward converting it into a bakery and micro-brew pub. This could be a very attractive retail business that would help revitalize a blighted part of their town. They were surprised to learn that they would have to spend almost $350,000 on sidewalks, curb-cuts, parking, storm drains, handicapped access, landscaping – and [...]

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A Regulatory Pendulum

By |2017-07-17T12:21:28-05:00February 21st, 2017|Global Market Update|

How much regulation do we need? Photo: Arnaud Clerget. Source: Wikipedia After the financial crisis, Congress enacted new regulations on the financial system. The concern was that big banks had gotten us into an awful mess through their reckless lending, so we needed to put new rules in place to make sure they never did that again. Dodd-Frank has been in effect for over six years now, and it’s reasonable to ask if anything has changed. The logic behind most regulation is simple: our [...]

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Puzzling Out Productivity

By |2017-07-17T12:21:44-05:00September 7th, 2016|Global Market Update|

How can we get the economy moving? Photo: Doug Tengdin When people think of productivity they usually think about getting more done during their work-time, about working harder or smarter or more focused. But when we talk about productivity in the economy, we think about how much workers can get done within the structure of their jobs. Productivity is important. Economic growth is determined by labor growth times productivity growth. That’s all there is to it. So long-term trends in productivity are critical. They [...]

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Bootleggers and Bankers

By |2017-07-17T12:22:04-05:00April 25th, 2016|Global Market Update|

Are banks out of control? Photo: Nightscream. Source: Wikimedia Many people are still hurting as a result the Financial Crisis. And there’s a lot to be upset about. By some measures upwards of $5 trillion in wealth was destroyed. The crisis triggered the Great Recession of 2008-9, and led to government bailouts and fiscal stimulus packages around the world. At the heart of the crisis was our overly complex banking system. Fundamentally, banking is pretty simple: move money from people who have it to [...]

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