Productivity isn’t everything, but in the long run it is almost everything.
Paul Krugman
International datasets on productivity:
EU KLEMS (‘measures of economic growth, productivity, employment, capital formation, and technological change at the industry level for all European Union member states, Japan, and the US’)
CompNet (‘micro-based competitiveness dataset for European countries, unprecedented in terms of coverage and cross-country comparability’)
I currently have a backlog of 28 (!) posts and 3 book reviews.
Writing is hard 🙁
Useful post on FT Alphaville about GMO’s value investing thesis. The reason why value investing has underperformed might be due to the lack of inflation.
The Belgian Financial Forum and SUERF held a colloqium about cross border financial services in Europe.
An impressive line-up of speakers from the public and private sector discussed why European banks don’t sell more services outside their home countries.
Some pointed out that regulation is still fragmented along national borders – despite the banking union.
But the recurring theme of the day was the lack of profitability. There is no business case for mergers and acquisitions. Countries like Germany and Italy have way too many banks.
The industry would be better off with fewer players, but nobody wants to take over small banks with wafer-thin margins.
You can read my Twitter thread about the event here.
The slides of the presentations are available here.
In a 2017 blog post, I wondered why Germans remember the hyperinflation of the Weimar Republic era.
Nils Redeker, Lukas Haffert and Tobias Rommel have recently published a paper about this very question. In Misremembering Weimar: unpacking the historic roots of Germany’s monetary policy discourse, they show that
most Germans do not know that Germany’s interwar period was shaped by two separate crises, but rather see them as being one and the same.
Furthermore,
Looking back into a skewed version of their own history, many Germans conclude that mass unemployment and high inflation are just two sides of the same coin. What makes this worse is that this misconception is especially prevalent among well-educated and politically interested Germans. Hence, the group of people following the ECB’s monetary policy most closely is also the group most likely to draw the wrong lessons from German history. But public thinking about Weimar economic history is not just substantially flawed. We can also show that the skewed memory of the Weimar Republic still affects the way in which at least some Germans think about monetary policy today.
Update 15/02/2020: The following comment on a FT Alphaville article about German financial assets corroborates Redeker et al‘s thesis:
The commenter is probably well-educated, or he wouldn’t read Alphaville. But he makes two mistakes. First of all, the hyperinflation did not occur in the 1930s. Secondly, there is a logical inconsistency. If Germans fear hyperinflation, why do they hold 40% of their assets in currency and deposits? That doesn’t make any sense, as a new hyperinflation would make these assets worthless.
AI will disrupt finance, but not in the way some tech bros think.
In a viral thread, David Heinemeier Hansson describes how Apple Card discriminates against his wife. Nobody at the company can explain how the algorithm makes its decision. Just “computer says no”.
That’s the kind of bureaucratic horror you expect from an old-fashioned state-run company. Ironically, Apple markets its credit card as “built on the principles of simplicity, transparency, and privacy” and “Created by Apple, not a bank”.
Yeah, I’ll stick to my bank, thanks.
If you can’t explain your AI, lawsuits are coming.
Long lawyers, short black box AI.
Pseudonymous banking expert Johannes Borgen recently discussed the impact of low interest rates on European life insurers. Because insurers discount the value of their liabilities, low rates are a huge problem.
But as Johannes Borgen points out, the regulator lets insurers use a hypothetical long term rate that “is a f**** joke. IT IS NOT EVEN REMOTELY LOOKING LIKE REAL WORLD INTEREST RATES ; which mean that all insurer liabilities are grossly undervalued.”
Yikes.
You can read his thread here: https://threadreaderapp.com/thread/1184391852046409729.html
By the way, yieldbug is a term used by Bloomberg journalist Joe Weisenthal to troll people who believe they deserve to receive interest on their risk free investment.
I recently started working at the Social and Economic Geography research group of Ghent University, in the team of professor Ben Derudder. We study financial networks in collaboration with the team of professor Sabine Dörry at the Luxembourg Institute of Socio-Economic Research.
But why am I at the department of geography instead of economics? In other words, what exactly is financial geography? I have to admit that I didn’t know until a couple of months ago.
This post is an attempt to describe what financial geography is, and what sets it apart from other fields that study finance.
Continue reading “What is financial geography?”“In Europe, the relative underperformance of value [stocks] versus growth has not been as sustained since the early 1980’s. In the US, according to research by O’Shaughnessy Asset Management, investors have to go back to 1926-1941 to find a comparable period of sustained relative performance.”
That’s from Inflection Point, a blog post in which Marc Rubinstein takes a long term look at the valuation of stocks and the impact of technology on markets and the economy. The article has a lot of references.
Update: Chris Meredith of O’Shaughnessy Asset Management talked about his research on Odd Lots.
President Trump couldn’t buy Greenland from Denmark. In response, he tweeted that most NATO members don’t pay their fair share.
For example, Belgium, home of the NATO headquarters, spends only 0.93% of its GDP on defense. But the worst offender is Luxembourg at 0.55%.
At the same time, Luxembourg is enabling massive tax arbitrage for American multinationals like Amazon.
Luxembourg should pray it doesn’t wake up to the following tweet 🙂
