Economics

In part one of “Is the Mountain of Corporate Cash an Illusion?” I argued that the growth in corporate cash balances is not as dramatic as is often reported by… READ MORE ›

Given the many moving pieces, it can be difficult for investors to keep track of the various elements of the European sovereign debt crisis. Here then is a multipart guide for understanding the origins, causes, and unresolved issues of the ongoing economic emergency in the eurozone. Each of the links below provides a more detailed discussion of the underlying issues.

Most commentators trace the beginning of the European sovereign debt crisis to 5 November 2009, when Greece revealed that its budget deficit was 12.7% of gross domestic product (GDP), more than twice what the country had previously disclosed. However, the real origins of the crisis can be traced to the very structures that govern Europe's institutions.

Michael Pettis reviews the growth track record of China over the past decades and discusses how rebalancing from an investment and export driven economy to a more consumption focused economy could take place going forward. He also discusses Renminbi internationalization and the impact that China’s rebalancing could have on Australia and similar commodity exporting countries.

Emanuel Derman spent two decades at Goldman Sachs, making valuable contributions to financial modeling. Before that, as recounted in My Life as a Quant (John Wiley & Sons, 2004), he was a physicist. Today, Derman is the head of risk management at Prisma Capital Partners and directs Columbia University’s financial engineering program. He also devotes energy to combating the belief that security markets can be analyzed with the same mathematical precision as heavenly bodies and subatomic particles.

It is one thing to talk about the European sovereign debt crisis and its many details and another to look at the statistics that are germane to understanding the crisis. Here then are… READ MORE ›

In the crisis that engulfed the global financial system in 2008, the collapse of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) inflicted the heaviest losses of all on U.S. taxpayers. The Congressional Budget Office has estimated that the cost of bailing out the government-sponsored enterprises (GSEs) could ultimately total $350 billion. Unlike the banks that received massive government loans, guarantees, and insurance, Fannie Mae and Freddie Mac have little prospect of ever repaying Uncle Sam. Notwithstanding this stark evidence of fundamental flaws in the structure and mission of the GSEs, the sweeping legislative response to the financial crisis — the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 — dealt with the GSEs only by calling for a study of how they could be reformed.

Various proposals to resolve the European sovereign debt crisis have not dealt with many nagging issues. Here is a list of major unresoved issues in the European sovereign debt crisis.

On 27 October 2011, after months of discord, European leaders ironed out a plan to address the escalating European sovereign debt crisis. Here is an overview of what exactly that plan… READ MORE ›

Andrew Smithers discusses why the U.S. equity market is currently overvalued and argues that central banks should be encouraging a reduction in debt levels and quality growth over time, rather than rapid growth now.