Finance and Economics

Chinese Rebalancing

With an annualized economic growth rate of over 9.5% per year for the last three and a half decades, China’s growth story has been dubbed nothing short of an economic miracle. But, in recent years there has been a lot of talk of the “Chinese Rebalancing” i.e. shifting the Chinese economic growth from being investment more »

Debt: The First 5000 Years

“For most of the last several centuries, most people assumed that credit could not be generated indefinitely because they assume that the economic system itself was to endure forever. The future was likely to be fundamentally different. Yet somehow, the anticipated revolutions never happened. The basic structures of financial capitalism largely remained in place. It’s more »

Crude Oil Market

In the summer of 2014 crude oil cost $105 per barrel, it is 2016 now and a barrel of crude oil costs around $40. This is a near 60% drop in oil prices over the two years. Low crude oil prices are causing many firms to stop production at their oil rigs since the low more »

Collateralized Debt Obligations

The term Collateralized Debt Obligation (CDO) is often mentioned while talking about the financial crisis of 2008, but not many of us know how a CDO functions or is created. The first CDO was issued by Drexel Burnham Lambert Inc. in the year 1987, they were initially issued using corporate bonds or bank loans as more »

The Signal and The Noise

“Prediction is indispensable to our lives. Every time we choose a route to work, decide whether to go on a second date, or set money aside for a rainy day, we are making a forecast about how the future will proceed and how our plans will affect the odds for a favourable outcome.”(The Prediction Solution) more »

U.S. Housing Bubble:Cheap Credit

The US housing bubble was one of the major contributors to the 2008 recession. The bubble had been developing since 1996 and reached its peak in 2006. The bubble burst and pushed the world into recession. “The Greater Recession,” was the worst recession to hit the world since “The Great Depression.” In this article I will more »

Fault Lines

“The Fault Lines that have led to the global trade imbalances and created todays’s Mandevillean world are deep. Moreover, because the imbalances are the result of deeply embedded strategies, change will be painful, It is not a matter of raising an interest rate here, a tax there, or an exchange rate somewhere else.”(conclusion) Fault lines more »

Panic of 1907

On October 16, 1907, Fritz Augustus Heinze, who had attempted to corner the stock of United Copper Company failed. This led to what is now know as the “Panic of 1907.” The panic of 1907 was characterised by a run on Trusts (financial institutions). This run lead to the freezing up of credit markets and more »

Goods and Services Tax

The Goods and Services Tax(GST) is a form of indirect taxation. This is a tax on final consumption i.e. people pay this tax at the final point of purchasing goods and services. Countries such as France, Australia, Singapore and Canada follow this form of indirect taxation. Since 2006 India has been making attempts to adopt more »

Chartalism

Chartalism is a concept that was proposed by George Friedrich Knapp, a German economist. He coined this term in his book, State Theory of Money, which was published in 1905. Chartalism goes against the conventional wisdom that money was created by private individuals to facilitate trade, the theory proposes that money was created by the more »

Saving Capitalism from the Capitalists

“This book aims to see beyond the immediate consequences of market fluctuations to their deeper and more long lasting effects on the system of free enterprise. Through our focus on financial markets, we seek to identify the fundamental strengths and weaknesses of the capitalist system, not only in its ideal form, but also in its more »

Fiscal Cliff of 2012

At 12a.m on January 1st of 2013 the United States went over something called the Fiscal Cliff. This situation was short lived and at 2a.m the Senate in the United States came up with a solution. The solution came in the form of the American Taxpayer Relief Act of 2012. The CBO (central budget office) more »

Currency Wars:The Making of The Next Global Crisis

“A book on currency wars is inevitably a book about dollar and its fate. The dollar, for all its faults and weaknesses, is the pivot of the entire global system of currencies, stocks, bonds, derivatives and investments of all kinds.”(conclusion) Currency wars published in 2011, is a book written by James Rickards, a risk manager more »

Negative Interest Rates

On 11th June 2014 the European Central Bank reduced the interest paid to commercial banks on deposit to -0.10% i.e. it started charging commercial banks for depositing money with the central bank also known as Negative Interest Rate. In the following months the central bank cut interest rates further into the negative territory and as more »

The Classical Gold Standard

The “Gold standard” was a monetary system used by the world in some form or the other till the year 1971. In 1971 Richarch Nixion the American President finally brought the curtains down on the relation between gold and the monetary system. Under this system, every country would tie its currency to a fixed value more »