The potential downgrade to AA in the U.S. credit rating has exposed one massive fallacy of modern finance: there is no such thing as “risk-free” investment. Much of the modern finance canon will need to be re-written, or better still, scrapped altogether. However this discovery has considerable implications even for those of us who adhere […]

The warning by Standard and Poor’s that there was now a 50% chance that it would downgrade U.S. Federal debt from its traditional AAA-rated status has concentrated a lot of minds, in Washington and elsewhere. At one level it has forced commentators and investors to recognize that without the United States and the European countries […]

In previous pieces I have compared the current global political and economic situation to the 1930s, suggesting that neither economically nor politically is the current position so dire, but that there are important similarities. However a much closer comparison is to the 1970s – not to the U.S. 1970s, a relatively benign comparison that has […]

The 2008-9 Great Recession centered on the wealthy Western economies with emerging markets suffering significantly shorter, less painful downturns. Then in 2009-11 the emerging markets, particularly the BRIC countries (Brazil, Russia, India and China — so named by Goldman Sachs’ Jim O’Neill in 2001) soared ahead of the wealthy West, leading to considerable talk of […]

The 1930s is remembered in the United States as a period of economic despair, with unemployment well into double digits throughout the decade and a generation’s lives ruined. In Britain it is remembered as a “Gathering Storm” with satisfactory economic performance after 1932 marred by an increasing fear about the inevitability of future conflict with […]

As Voltaire remarked in his 1759 masterpiece Candide “in this country (Britain) it is good to kill, from time to time, an admiral to encourage the others.” Admiral John Byng, shot in 1757 for losing Minorca, is generally thought to have been unfortunate in his fate. Nevertheless the treatment worked. Only two years later Sir […]

A Wall Street Journal article last weekend suggested that discomfort with novel applications of technology such as Twitter was a function of age. By refusing to sign on to Facebook or buy the latest expensive gadget one was merely confessing to being old (the author claimed to be 33, and seemed worried about the symptoms […]

The great Montagu Norman (Bank of England Governor, 1920-46) said when considering Britain’s return to the Gold Standard in 1925 “the merchant, manufacturer, workman, etc, should be considered, but not consulted any more than about the design of a battleship.” It’s quite clear that Fed chairman Ben Bernanke shares Norman’s view. He consults closely with […]

Recent economic data have caused economic commentators to begin wondering whether the U.S. economy is heading into a “double-dip,” prolonging the period in which employment and output run far below potential. Once again, this raises parallels with the 1929 crash, which led to a Great Depression that in the United States was only ended by […]

In the endless negotiations about Greece’s approach to bankruptcy, EU leaders suggested last week that a “fund of experts” might take over $200 billion or more worth of Greek state assets, with a view to speeding their privatization and repaying much of Greece’s staggering debt load. The idea has some merit, as it reverses the […]