Category Finance
Why is buying US Treasuries considered a ‘flight to security’?
Let's consider: The adjective that best describes the US banking system is 'insolvent'. The government balance is horrible, and is about to become unspeakably horrible. The current account deficit is not quite as horrible as it once was, but it is still outside any normal country's comfort zone. So why would anyone seeking a safe […]
The federal government and the CMHC enter the fray
From a story in today's Globe and Mail: The federal government is moving to backstop the Canadian banks' capacity to lend money in an acknowledgment that not even the country's sturdy banking system is immune to the global financial crisis. A plan originally earmarked for Friday morning would see the government assume some mortgages currently […]
Liquidity, solvency, fire-sale and fair prices, and TARP: a simple model
Nick Rowe follows up his post on the origins of the crisis with some thoughts about how to deal with it: How is the Troubled Asset Relief Program supposed to resolve the problem of bank failures? I haven’t seen any clear answer, so thought I would sketch out the skeleton of a simple model where […]
Some thoughts on the bubble/s and financial crisis/es
Nick Rowe provides us with some talking points on how we all got into this mess: I am taking part in a roundtable on the financial crisis next week at Carleton (Wednesday 8 October 5.30-7.00 in 360 Tory, just in case anyone is interested in attending). The audience and other panel members will be mostly […]
Mark Carney explains it all for you
I've been at times unimpressed with some of his interest rate decisions, but today's speech on the financial crisis builds on his strength, namely, his knowledge of financial markets. It's worth reading in its entirety, but this paragraph in particular jumped out at me: Canadian institutions are in considerably better shape than their international peers. […]
A good decision on income trusts
The federal Conservatives’ decision to eliminate income trusts has generated a certain amount of fuss (even The Economist noticed), especially in the form of sharply reduced share prices for companies that had structured themselves to take advantage of the tax breaks they provided. Much of the media coverage about the pros and cons of income […]
Canada’s shrinking stock market
The Financial Times reports on a series of high-profile foreign takeovers of Canadian companies: This is getting serious: on current trends Céline Dion might be the only Canadian icon left. Many others are being picked off by foreigners. This year’s disappeared include Canada’s oldest corporation, the Hudson’s Bay Company; its two biggest nickel miners, Inco […]
The Equity Premium and Fat Tails
New Economist discusses Robert Barro’s latest contribution to the equity premium literature over here, and Brad DeLong weighs in as well. As in Marty Weiztman’s recent paper "A Unified Bayesian Theory of Equity ‘Puzzles’" (pdf) (discussed by Brad DeLong here), the main result rests on a returns density with fat tails – that is, one […]
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