City and metropolitan income inequality data reveal ups and downs through 2016

.. many cities’ aggressive bids for Amazon’s second headquarters are heightening anxieties that the company’s expansion could further accelerate inequality wherever it eventually lands (as many say it has in Seattle).

The debate about Amazon fits into a wider set of concerns about the tech sector’s role in contributing to income inequality, via the winner-take-all dynamics of the digital economy.

Source: City and metropolitan income inequality data reveal ups and downs through 2016

From Davos: Is paying for results with blended finance ready to take off?

One of the big questions was how to fill the estimated $2.5 to 3 trillion annual investment gap needed to fulfill the 17 ambitious Sustainable Development Goals (SDGs), their 169 targets, and 230 indicators of success. Mind you, beyond finding the needed trillions of dollars, achieving these goals is no small feat.

Enter innovative financing for development.

Innovative finance intends to both increase resources and improve the use of existing resources. One particular form of innovative finance, payment by results, or results-based financing, seeks to create incentives to achieve critical social outcomes by only paying when results are achieved.

Source: From Davos: Is paying for results with blended finance ready to take off?

The Next Financial Crisis | YouTube

Are the overheated markets headed towards another financial crisis?

Dimensions addressed:

  • Concerns over leverage and liquidity
  • Implications of passive investing
  • Transforming financial services business models

Source: The Next Financial Crisis | YouTube

How Inequality Is Killing Off Humanity

The Richest .01% Are Wealth-Obese

In the United States, where wealth inequality is extreme and getting worse (see analysis here):

— The richest 12,600 households (the .01%) have an average of over $800,000,000 in wealth (mostly financial)
— The poorest 63,000,000 households (the bottom 50%) have an average of about $16,000 in wealth (mostly housing)

Global inequality is similar in the degree of disparity:

— The richest 500,000 adults (the .01%) have an estimated average of $30,000,000 in wealth
— The poorest 2.5 billion adults (the bottom 50%) have an average of about $673 in wealth

Neoliberalism disdains government regulation, and one result has been trumpeted to the ends of the earth by the Panama Papers and Paradise Papers: Despite their immeasurable benefits from society — the financial system, tax law, security forces, computer technology — the world’s richest individuals and corporations are stashing away their gains rather than paying for all their benefits.

If researchers Saez and Zucman are correct (and they usually are), an incredible $14 trillion of global wealth is being hidden in offshore tax havens.

Source: How Inequality Is Killing Off Humanity

Today’s Rational Exuberance

A second reason for confidence is that the financial impact of zero interest rates and the vast expansion of central bank money known as “quantitative easing” (QE) are now much better understood than they were when introduced following the 2008 crisis.

In the first few years of these unprecedented monetary-policy experiments, investors reasonably feared that they would fail or cause even greater financial instability.

Monetary stimulus was often compared to an illegal performance drug, which would produce a brief rebound in economic activity and asset prices, inevitably followed by a slump once the artificial stimulus was withdrawn or even just reduced.

Many investors still believe the post-crisis recovery is doomed, because it was triggered by unsustainable monetary policies. But this is no longer a reasonable view.

The fact is that experimental monetary policy has produced positive results.

Source: Today’s Rational Exuberance

Demonetisation: Economy shaken, GDP hurt, trust in government undermined


The difficulty in making a cost-benefit analysis is that the move was not purely economic, given the fact that the currency issuer Reserve Bank of India (RBI) had no role in the decision, as testified by former Governor Raghuram Rajan.

Coming back to the beginning, this is what Nobel winning economist Amartya Sen had to say of demagnetization:

It is a despotic action that has struck at the root of the economy based on trust. It undermines notes, it undermines bank accounts, it undermines the entire economy of trust. That is the essence in which it is despotic.

Source: Demonetisation: Economy shaken, GDP hurt, trust in government undermined

Trump Is About to Own This Credit Cycle | Bloomberg Gadfly

If Trump decides to renominate Yellen, he’ll incur the wrath of conservative Congress members who think she’s gone outside her monetary policy mandate.

Should Trump make a bigger change, say, by nominating Kevin Warsh, a former Fed governor, he’ll be viewed as somewhat responsible should the central bank raise rates too quickly, or make some policy error that craters the U.S. economy.

Stanford University economist John Taylor is also in the running, as is Trump adviser Gary Cohn.

Whoever he picks will have a tough job cut out for them.

Source: Trump Is About to Own This Credit Cycle – Bloomberg Gadfly

Unfinished Business review: The financial crash and its terrible cost, 10 years on

The section on how regulators allowed financial assets, backed by mortgage loans, to be classed in such a way as to allow their conversion into cash might require perseverance. But it is worth it, as it details the subtle but profoundly important interplay between regulation and banking behavior.

This spurred an alchemy that had deep consequences for the American housing market.

We are reminded that European currency crises had a long history before the arrival of the euro.

Attempts to co-ordinate major global currencies ended in 1970 with the collapse of the Bretton Woods agreement. Attempts to align European currencies culminated with the creation of the exchange-rate mechanism in 1979.

Ironically, the seeds for the eventual creation of the euro were laid in the infamy of Black Wednesday, in September 1992, when the financial markets lost faith in the credibility of these initiatives.

Source: Unfinished Business review: The financial crash and its terrible cost, 10 years on

Reforming the sovereign debt regime | OUPblog

What went wrong?

There are many valid answers to this question, but an important one has to do with the politics of sovereign debt restructuring. As countless experts have argued and the IMF now admits, Greece should have undergone a sizeable debt restructuring at the outset of its crisis.

And when the country did restructure its debt in the spring of 2012, it proved ‘too little, too late’ and was complicated by opportunistic ‘holdout creditors’. Moreover, Greece hasn’t been given any significant debt relief since 2012.

All of this speaks to the core problem in managing sovereign debt crises: the lack of an effective global framework or set of institutional arrangements for restructuring government debt obligations when they become unsustainable.

Source: Reforming the sovereign debt regime | OUPblog

The seven sins of economists | Livemint

The edifice built atop the rational expectations model also came crashing down then, and the policy response to the crisis reverted back to old-fashioned Keynesian demand-management policies (read fiscal stimulus packages), which the ‘superior’ and ‘rigorous’ rational expectation model had supposedly supplanted three decades back.

Why did the state-of-the-art rational expectations model fail? The answer lies in its deeply problematic assumptions. The model collapses all distinctions between firms, and homogenizes all individuals and commodities.

“If you homogenize all individuals and commodities in aggregate models, it is mathematically easy to build stability into the defining equations as a pure assumption,” wrote the Harvard Business School scholar Jonathan Schlefer in his 2012 book on the subject—The Assumptions Economists Make. “But it is a pure assumption. If you want, you can just as easily build instability into the model’s defining equations.”

Source: The seven sins of economists – Livemint