January 2012
2 posts
Secured vs unsecured
Irish taxpayers are unhappy. Why? Because they’ve been told that they have to pay back investors who lent money to a bank called Anglo Irish, which went bust and was bought by the state last year.
The reason they’re upset is not just because it’s a lot of money - more than a billion euros, or because Ireland is in no shape to be paying vast amounts of money out to anyone....
Private equity explained
Here are two words we’ve been seeing a lot in the headlines recently. Private equity.
Private equity, or PE, as it likes to be known in the trade, doesn’t like being in the headlines. It’s been there before, back in the 80s, and it didn’t enjoy the experience. The press wasn’t exactly flattering. In fact the press was so bad that PE changed its name. PE It used to be...
December 2011
3 posts
Re-hypothecation
If ever there was a word that you’d expect to find in a Harry Potter novel, it’s rehypothecation. This a classic example of financial people inventing impenetrable terminology to make their business look like a black art. “Oooh, re-hypothecation, it must be magic!”
Well it isn’t. To explain re-hypothecation, we have to explain hypothecation. And hypothecation is pretty simple. It’s when you...
Why do they need our dollars?
The Fed’s announcement of its deal with the ECB this week means essentially one thing: it’s easier for Europeans to get dollars.
But why do they need dollars? Why can’t they use euros? After all, they spent ten years creating the euro, why not use it?
There are a couple of reasons why Europeans need dollars. First, because many companies always do business in dollars, rather...
November 2011
9 posts
Ring-fence
There’s been a lot of talk recently about the need to ring-fence certain economies in Europe. These aren’t the economies that have defaulted or been bailed out; these are the economies that are too big to fail. Italy is the most glaring example.
Right now Italy is solvent. Its bills are rising fast, but it can still pay them. If interest rates on Italian debt keep rising, however, it...
Why the big banks are like pinscher puppies
Elizabeth Warren is right, the people on Wall Street did break this country, but that kind of misses the point. Big financial institutions, public or private, are glands. Like a gall bladder, which is solely designed to produce bile, so a bank’s sole mission in life is to make money for its shareholders. These are not moral entities, they never have been, and we may as well get used to the...
So much for the golden years.
Most Americans believe their retirement won’t come early or be particularly comfortable.
Three-quarters of Americans think they’ll have to work during their retirement years. Nearly fifty percent of those say they’ll continue in the same job or one of similar responsibility. One quarter say they don’t believe they’ll be able to retire at all until they’re 80 years old.
These are the rather...
"Modern Family"
LUKE: Will you hurry up?
MANNY: I'm saving my strength. 'Cause if we don't find this helicopter, I'm walking to Canada.
LUKE (snidely): Hope you like taxes.
Seven percent doesn't spell disaster
When you climb very high mountains, at about 26,000 feet you enter the Death Zone. At that altitude, there’s simply not enough oxygen in the air to sustain human life, and humans who enter the Death Zone without supplementary oxygen know they can only survive up there for a small period of time.
Europe’s Death Zone appears to be the point at which interest rates hit seven percent. That’s...
“The reason I think it’s worth talking about a return to chivalry is because its...”
– I’m not particularly keen on the word chivalry - anyone who’s had a gutful of Chretien de Troyes knows it has little to do with gratitude, and a lot more to do with the twin mediaeval cultures of fear and shame - neither of which did much for women. Can I suggest plain old ‘good...
WatchGreek PM survives confidence vote. Paddy Hirsch explains what happens next on Marketplace. (from pm Friday 4 Nov)
Haircut - more dangerous than it sounds
Such an innocuous word. Haircut. It conjures up one of those Norman Rockwell images of a kid in a barber’s chair. Sometimes the kid is smiling, sometimes scowling. Either way, it’s just a haircut, no big deal. in a few weeks, the hair grows back and the kid comes back for another shearing. At some point in the cycle, everyone’s happy.
Not so if you’re a bank lending money...
Groupon IPO Shares Pop 40% On First Trade, Debuts... →
parislemon:
Wait wait wait!!! But but but!! Ponzi scheme! Should have sold to Google!
Yeah.
Groupon just went public with a market cap now 3x what Google was offering them. We’ll see if the good times last — now that they’re public, they’re going to have to show real growth in the numbers — but it’s pretty clear that either way, Groupon did the right thing in not taking that deal.
Good for...
October 2011
7 posts
Are municipalities an endangered species?
When I was a lad I decorated my room with a poster of a nuclear mushroom cloud, with “Harrisburg is Everywhere” written in big letters across the front. It was the 80s, and back then the devastation was caused by a nuclear accident at the Three Mile Island Nuclear Generating Station. This time the damage was done by debt, $458 million of it, to be precise. Burdened by those liabilities, and...
September 2011
9 posts
A triathlete's guide to company cash
The Federal Reserve says that non financial companies are holding more than $2 trillion on their balance sheets, more than at any time in fifty years. Cash accounted for 7.1 percent of all company assets, everything from buildings to bonds, the highest level since 1963, the Fed said.
But “Cash” is not necessarily … cash. That is, not necessarily piles of benjamins. The...
4 tags
I go to bed every night, I dream of another... →
refrshingapathy:
paddyhirsch:
Feeling down?...
5 tags
August 2011
8 posts
Eurobonds, and why Germans hate them
Rising debt in several Euro-member countries is forcing Europeans to consider … issuing more debt! This time, in the form of a Eurobond.
So, what is a Eurobond? Well, it’s a government issued bond, just like the bonds issued by the US Treasury. Only the government would be a combination of all the governments in the eurozone.
Confused? OK, try this for an analogy. Five students share a house....
The Truant Muse: Keep Calm and Carry On. →
moorehn:
I am interviewing bankers, hedge fund managers, mutual fund managers and economists today about the U.S. downgrade.
I am impressed by their refusal to panic. They are wary, certainly, and acknowledge a lot of uncertainty. They assume things will be ugly for a while. But as one of them said,…
S&P Blames Republicans, MSM Fails to Report It →
Keep your ears open: you’ll hear plenty about this on Marketplace Radio on Monday.
technipol:
Have you seen, anywhere, in any media, or even heard reported or repeated on NPR, the following sentence?
“We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced...
What is a ratings agency, anyway?
Here’s how I look at it. Imagine a house, full of medical students, none of whom have a car.
One day, John moves in. He has a very nice new VW Jetta TDI SportWagen, and he is immediately bombarded with requests from his housemates to lend him the vehicle for one thing or another. They’ll pay him of course, and John would like to lend his car to his housemates, but he knows there’s a reason...
July 2011
8 posts
Piers Morgan and phone hacking - guardian.co.uk →
felixsalmon:
Roy Greenslade finds an old piece from the Daily Mail, in which Piers Morgan admits to listening in to a private voicemail from Paul McCartney:
“Stories soon emerged that the marriage was in trouble - at one stage I was played a tape of a message Paul had left for Heather on her mobile phone.
It was heartbreaking. The couple had clearly had a tiff, Heather had fled to India, and...
Why the debt ceiling debate is affecting the...
We’ve had a lot of questions about this at Marketplace. A lot of people don’t get why a pathetic political spat on Capitol Hill is making the economy so sluggish. Especially when the markets seem to be shrugging the whole thing off.
I find it’s helpful to think of a small economy when I’m explaining this. Like an airport. Airports thrive when they get lots of traffic. The more planes that fly in...
The ratings agency as Anarchist
Over at Baseline Scenario, James Kwak makes an excellent point about ratings agencies: they’re really only useful for ratings on stuff that we don’t know about. And we know pretty much everything there is to know about the US.
Enormous amounts of information about the government’s finances are open to the public and are pored over by thousands of analysts from all around the world....
The debt ceiling for the rest of us
There’s not much out there for the average human being looking to understand what’s going on with the debt ceiling. Why is it such a big deal? What are the dangers? How would it affect ordinary Americans if we didn’t push the debt ceiling up? Default isn’t the end of the world for most people (and for companies it can be a good thing) so what’s the problem?
These are...
June 2011
6 posts
Why is Greece such a big deal?
@thekarenforeman tweeted me today, asking if I could explain why Greece is so important to the world economy.
A good question, to which people have given a wide variety of answers. On the one hand, some people reckon Greece should be cut loose and allowed to default. At the opposite end of the spectrum are those who say a Greek bankruptcy represents an enormous risk, as it could bring the global...
School's out! KPCCs Cyberfrequencies interviews... →