Category Finance
Does capital income exist?
[Ages ago, as a graduate student, I "wasted" my time (when I should have been finishing my thesis) reading capital theory, including the more "heterodox" stuff. My memory is pretty hazy, but I still think about the old questions occasionally. There's nothing really new here for economists familiar with "dated goods".] 1. Suppose I know […]
Do the Greeks need Greek banks?
Or could they all use foreign banks? Dumb question. I don't know the answer. Are there some laws that make it hard to use foreign banks? Tourists seem to manage OK without opening a foreign bank account. It ought to be easier still if the foreign country uses the same currency. Could the foreign banks […]
Do economically illiterate slobs use duality theory?
Dunno. I was never that good at micro/math. That's why I'm asking. The government has a banana machine that converts any number of apples into the same number of bananas. If it starts the machine up we get a new equilibrium, where people will produce more apples and fewer bananas, and/or consume fewer apples and […]
Money as closed-end mutual fund
[I don't think this is very original, but it's a fun and instructive metaphor to play with. The most important lesson is the way the metaphor fails.] Suppose I start a closed-end mutual fund. (Brits call it an "investment trust".) I issue shares, and use the proceeds to buy assets like bonds and stocks. Shares […]
Another Canadian Debt Ranking
Statistics Canada has released provisional estimates of the Canadian Government Finance Statistics (CGFS) for financial flows and the balance sheets of general government and government business enterprises for the period 2007 to 2012. The net liabilities per capita picture for provincial and territorial governments has changed since the 2008 global financial crisis.
What is the right sort of risky asset for central banks to own?
Should inflation targeting central banks hold a portfolio of assets that consists only of foreign lottery tickets? No, because if its portfolio of foreign lottery tickets became worthless, and the central bank were unable to get a bailout from the government, it would be unable to buy back the currency it has issued. So if […]
Why shouldn’t central banks buy risky (and illiquid) assets?
Like Greek bonds. Dumb question of the day. "Because risky assets are risky!" is not the answer. Other things equal, I would prefer to hold a safe asset than a risky asset, because I don't like risk. But other things are not equal, precisely because other people don't like holding risky assets either. So risky […]
Ontario Finances Not Quite On Target This Year
As Ontario moves into budget season, it is instructive to take a quick look at the finances to date as revealed in the most recent Ontario Economic Outlook and Fiscal Review which was presented November 2014. Ontario’s aim then as no doubt now was to have the budget balanced by 2017-18. According to the Review, […]
Monetary policy is always and everywhere about expectations
Paul Krugman is frustrated because people aren't taking his model of the liquidity trap seriously. OK, let me take it seriously. Suppose Paul's model is 100% true. And suppose that Paul's model economy is humming along nicely, at full employment, and everyone in the model expects it to continue humming along nicely, at full employment, […]
FTPL: a federal or provincial issue?
[Apologies for the title. It's a Canadian joke, about our fixations, that can be told various ways, but always ends with the punchline: "Elephants: a federal or provincial issue?"] Does fiscal policy affect the price level? If so, are we talking about federal fiscal policy only, or are we talking about provincial fiscal policy too? […]
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