Featured
- 3 days
Trending
1 IMF Chief Urges Caution: Central Banks Should Resist Early Rate Cuts Amid Inflation Concerns
Anas Bouargane2 Millions to Benefit From UK's New Flexible Working Bill
Daniel Hall3 UK House Prices Experience First Monthly Decline in Six Months
Anas Bouargane4 UK Wage Growth Expectations Hit 2 Year Low
Daniel Hall5 Gross Domestic Income Shows America Is In Stagnation
Daniel Lacalle
Search
Most Read
- 3 years
Climate Summit 2021: President Joe Biden Announces the United States Will Aim to Cut Carbon Emissions by as Much as 52% by 2030
- 6 years
Economics of World War I
- 5 years
"You Cannot Convict Your Opponent of Error; You Can Only Convince Him Of It"
- 4 months
“Academic” Freedom Has an Adjective in Front of the Noun
- 2 years
“Economics is the Social Science of Love”
- 5 months
“Spend Now, Deal with The Consequences Later” Is the Worst Policy
- 4 years
100 Million Traffic Stops: Evidence on Racial Discrimination
- 4 years
1957: When Machines that Think, Learn, and Create Arrived
- 6 months
2023’s Most Popular Bitcoin Alternatives
- 1 year
4 Ways to Keep Food Prices Low Amid Inflation & Cost of Living Crisis
- 10 months
5 Things The Government Can Do To Boost Innovation
- 6 years
8 Downside Risks to Indian Economy in 2018
- 3 years
A “Medicare Funding Warning” from the Trustees
- 6 years
A Bee Industry Update: Colony Collapse Disorder and Almond Pollination
- 4 years
A Bounce Is Not A Recovery
More in Global Economy
Interview with Hal Varian: An Academic Goes to Google
Tyler Cowan conducts one of his rapid-fire, many-different-topics "Conversations with Tyler" with Hal Varian ("Hal Varian on Taking the Academic Approach to Business," June 19, 2019). Of course, Varian was a very prominent academic economist (and textbook author) for decades, but then 20 years ago became one of the first prominent economists to move over to the tech industry. He has now spent the last 20 years at Google. The conversation is full of highlights, but here are some snippets.
- 2
Video Clips are Revolutionising Economics Classes
I know a number of economics faculty who have been incorporating video clips into their classes. Sometimes it's part of a lecture presentation. Sometimes it's for students to watch before class. For intro students in particular, it can be a useful practice because it gives them a sense that they are being introduced to a universe of economists, not just to one professor and a textbook. The faculty member can also react to the video clip, and in this way offer students some encouragement to react and to comment as well--in a way that students might not feel comfortable reacting if they need to confront their own professor.
- 5
High Government Spending Leads To Stagnation
The idea that governments can’t lower taxes because there is a deficit, but are free to raise all expenses even if there is a deficit can be found in many political manifestos these days. Central planners always see the economic challenges as a problem of demand, and as such cringe at the idea of prudent investment and saving. When GDP growth, gross capital formation, and consumption are lower than what Keynesians would want, they always blame the alleged problem on “too much saving”, a ridiculous premise based on the perception that economic cycles and excess capacity do not matter and if companies and citizens don’t spend as much as the government wants, then the public sector should spend a lot more.
- 3
When Friedrich Hayek Opposed the Nobel Prize in Economics
As the pedants among us never tire of pointing out, the so-called "Nobel Prize in economics" is not literally a "Nobel prize." It was not established by the original bequest from Alfred Nobel, but instead was first given in 1969, with the prize money provided by a grant from Sweden's central bank as part of the 300th anniversary of the founding of the bank. Thus, the award is officially "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel." (Justin Fox gives a nice brief overview of the history here.) Although I am pedantic in many matters, this doesn't happen to be one of them, so I will continue following the conventional usage in calling it the "Nobel prize in economics."
- 4
The Economics Nobel: Who Might Have Won?
Next Monday the 51th Nobel prize in Economics will be awarded. Allen R. Sanderson and John J. Siegfried offer some perspective on the first 50 years of the economics award by providing some context with the other Nobel prizes in "The Nobel Prize in Economics Turns 50" (American Economist, 2019, 64:2, pp. 167–182). They offer background on the genesis of the prize, how its official name has evolved, academic backgrounds, and big ideas that spanned several awards.
- 5
Quantitative Easing Is Back
The Federal Reserve, through its president Jerome Powell, has indicated that it is preparing to increase its balance “organically”. The effort to separate this latest monetary policy change of course from a full-blown new QE (quantitative easing) is, at the very least, amusing. If we look at what is being discussed, it has nothing to do with organic expansion and looks a lot like a new repurchase program.
- 4
Foreign Exchange Markets: $6.6 Trillion Per Day
Kenneth Kasa back in 1995. It's hard to understand at an intuitive level the difference between millions, billions, and trillions. I sometimes try to describe it this way. One million seconds in the past is about 11 days ago. One billion seconds is 11,000 days, which about 30 years ago. One trillion second is about 30,000 years ago, which would be the time period when early rock-paintings were done, when the main human inventions of the time were the oven, pottery, and twisting fibres to make rope. So the difference between a million and a billion is the difference between what happened the weekend before last, and what happened in 1989. The difference between a billion and a trillion is the difference between how long ago it was that world headlines were about Tiananmen Square demonstrations and the Berlin Wall coming down, compared with how long ago human culture was in its hunter-gatherer cave-dwelling stage . Mull over that comparison with this fact: foreign exchange markets trade $6.6 trillion per day, up from $5.1 trillion per day in the previous survey. The authoritative statistics on foreign exchange markets come from the Triennial Central Bank Survey conducted by the Bank of International Settlements. The data for the latest round of the survey, completed in April 2019, is now available (September 16, 2019). At first glance, this volume of trading seems like it must be a mistake. Total world exports of goods and services are about $25 trillion per year. Add in the investment flows across borders for 2018, which were $2 trillion in foreign direct investment, $1.9 trillion in portfolio investment, and $2 trillion in other financial transactions, mainly bank loans (according to UNCTAD). But these annual totals don't get anywhere close to the volume of for $6.6 trillion per day in foreign exchange markets. The obvious conclusion is that most foreign exchange trading isn't about facilitating exports and imports, nor about facilitating flows of international investment. Instead, it's about financial transactions that seek to address the risks of shifts in foreign exchange rates, or to profit directly from those shifts. For example, about half the foreign exchange market is swaps contracts (that is a contract where one party is owed a certain amount in one currency, over some period of time, and another party is owed an amount in a different currency, over some different period of time, and they agree to swap these payments). There's also an interesting insight into how foreign exchange markets work from looking at what currencies are used the most. It turns out that the US dollar is involved in 88% of all foreign exchange deals, either as the currency being sold or being bought. Again, this isn't about facilitating trade or investment related to the US economy. Instead, it's because if there is a deal happening between, say, the Brazilian real and the South African rand, the usual pattern of foreign exchange markets behind the scenes would be to convert both currencies into US dollars, and then to convert out to the desired currency. This pattern is one dimension of what is meant when people say that the US is the global "reserve currency." With regard to other currencies, the BIS report notes: The US dollar retained its dominant currency status, being on one side of 88% of all trades. The share of trades with the euro on one side expanded somewhat, to 32%. By contrast, the share of trades involving the Japanese yen fell some 5 percentage points, although the yen remained the third most actively traded currency (on one side of 17% of all trades). ... As in previous surveys, currencies of emerging market economies (EMEs) again gained market share, reaching 25% of overall global turnover. Turnover in the renminbi, however, grew only slightly faster than the aggregate market, and the renminbi did not climb further in the global rankings. It remained the eighth most traded currency, with a share of 4.3%, ranking just after the Swiss franc. Given the size and complexity of foreign exchange markets, and their potentially very rapid reaction times, it's little wonder that they often move in ways which have long been hard for economists to explain. Every now and then, I post on the bulletin board beside my office a quotation from Kenneth Kasa back in 1995: "If you asked a random sample of economists to name the three most difficult questions confronting mankind, the answers would probably be: (1) What is the meaning of life? (2) What is the relationship between quantum mechanics and general relativity? and (3) What's going on in the foreign exchange market. (Not necessarily in that order)."
Follow us
On social Media
Download our app
Download our app for iPhone and Android
BBN Times connects decision makers to you. Experts in their fields, worth listening to, are the ones who write our articles. We believe these are the real commentators of the future. We quickly and accurately deliver serious information around the world. BBN Times provides its readers human expertise to find trusted answers by providing a platform and a voice to anyone willing to know more about the latest trends. Stay tuned, the revolution has begun.