Saturday Aug 11, 2007

Lender of Last Resort

Charles P. Kindleberger describes the concept of "lender of last resort," in great detail in his Manias, Panics, and Crashes: A History of Financial Crisis

As of late last week, central banks in the EU, the US, Japan and Canada have begun claiming their mantle as lender of last resort within their economies, pumping lubricating liquidity into financial markets (at least some $120B of it) to put a break on an impending credit crunch. The coming weeks will reveal more. (John Authers speaks about it here. He calls it "very dangerous times" and speaks of a potential "melt-down" and hopes that this injection of liquidity can push back the tide of "bad news.")

Friday Feb 16, 2007

Maturity and Interest Rate Risks

China seems prepared to deal with some interest rate and maturity risks.

Saturday Jan 20, 2007

Google's Capital Spending

Google's capital spending more than doubled to $800m in 2005. Expansion has continued, and capital spending numbers for 2006 will be released next month. It will be interesting to watch.

Wednesday Jan 10, 2007

Patents on Financial Instruments

Many investment banks have filed U.S. patents on concepts for financial instruments, these patents have been filed on a vareity of instruments from derivatives to Islamic asset-based investments. Apparently such financial patents are not granted in Europe. It may be clear to some that if an instrument has a great market power, its exclusive availability to one firm can lead to particular instabilities when combined with unavailability to other firms of counter-instrument sor balancing instruments or instruments that "bet" in the same direction. This is a hypothesis worth studying but I think the investigation would be quite subtle and only simple cases can be modeled. Even so, the study of such cases can be illuminating. Economnic efficiency models suppose multiple actors capable of taking parallel actions to make corrections to market swings. Perhaps that story was simply what it was: a simple fiction.
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