Category Finance
Don’t eat the marshmallow
"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery" – Mr. Micawber in Charles Dickens' "David Copperfield" Canadians are increasingly indebted. 31% of us struggle to make our bills and payments. We're pretty clueless when it comes to retirement – just 40% […]
Ontario’s Public Finances: A Fiscal Primer
With Ontario set to deliver its own budget on Tuesday March 29th, it is useful to provide a perspective on the province's finances given that it is Canada’s most populous province and largest provincial economy. Ontario faces some tough fiscal decision making over the next few years given a set of deteriorating public finances and […]
Inequality and debt: the soft bigotry of low expectations
"The poor don't have enough income to save, and can't help going into debt to the rich. Debt is caused by inequality". That statement is wrong on many levels. It's wrong theoretically. It's wrong empirically. But most of all, it's wrong because it might make inequality worse. It's the soft bigotry of low expectations. Providence […]
Random Sales, and the elasticity of supply for the option of doing nothing
This post is not about Boxing Day sales. It's about those seemingly random sales, where a good is heavily discounted for no obvious reason. A couple of years ago I went to Canadian Tire planning to buy a $200 socket set. And was surprised to find the one I wanted on special that day at […]
Pictures of Ireland?
In countries like Ireland, there is currently an abnormally large Gap between nominal interest rates and the expected growth rate of nominal GDP. That Gap creates a nasty positive feedback loop, through two channels: The Risk Channel. It's hard to pay down debt when the debt is compounding a lot faster than the growth in […]
Can the EU survive?
Just for once, this is not a question best left to the Poli Sci. Because the main forces will be money/macro. For nearly two years now, I've been worried that one or more of the Eurozone countries might do an Argentina. I've been asking whether the Eurozone could survive. I think it's time to change […]
Plastic and glass
It seems the Eurozone troubles are heating up again. Debt is like glass. If you hit it with a small shock it stays rigid. But if you hit it with a big shock it breaks. Equity is like plastic. If you hit it with a shock it bends. The bigger the shock the more it […]
Some thoughts on the Gauti Eggertsson & Paul Krugman paper
It's an interesting paper (pdf). It's a very standard New Keynesian macro model with one twist. It's a twist worth doing. There are two types of people: the impatient, who borrow from; the patient. And there's an exogenous limit to the debt the impatient are allowed to accumulate. It's a math model, of course. I'm […]
Bad Irish banks and the Tragedy of the Commons
This analogy can't be original. But I don't remember hearing it before (though that doesn't mean much). I was reading Morgan Kelly (H/T Tyler Cowen) on Irish banks. And I was also thinking about my next lecture in ECON1000, on common resources. Then it struck me. They are the same. Banks are a common pool […]
Worthwhile Canadian Initiative 
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