Economists’ crystal balls are clouded right now. They see signs of a burgeoning global recovery, but retail sales and other key data surprise with their weakness. There is no sign of inflation, yet commodity prices are extraordinary strong, given we are in the depths of a major recession. The reality is that fiscal and monetary […]

The Basel Committee on Banking Supervision last week issued new guidelines for mark-to-market accounting by banks. The new guidelines relax the requirements for using mark-to-market in downturns, failing to address the fundamental problems that helped to get the financial system into the current mess. Mark-to-market accounting, like the credit default swap, is a novel technique […]

As the world awaits with bated breath the revised Congressional Budget Office projections for the federal budget deficit in 2009, 2010 and beyond, one thing must remain perfectly clear. There is no way that the capital markets will put up with sustained US budget deficits over 10% of Gross Domestic Product. Since the current political […]

“I don’t see how you young chaps are going to make any money at all” said Sir Kenneth Keith to me in 1978 when told that insider trading was about to be made illegal in the UK, as it already was in the US. How wrong my esteemed merchant bank chairman was. Far from its […]

July’s Scientific American carried a fascinating article “The science of economic bubbles and busts” that summarized current biological research into the economic irrationality of human behavior. At the risk of boring readers whose coverage extends to biological research literature as well as the Wall Street Journal, I thought it worth exploring its implications for how […]

Shares are trading on 35 times earnings. Banks in the last six months have lent more than the entire Gross Domestic Product for the period. Interest rates are below the inflation rate, while monetary growth is far above it. The seven largest bond transactions in the world in 2009 were domestic deals in this country.

China’s recent announcement that it would use its $2 trillion of foreign reserves to boost its companies overseas acquisitions tells us that its economic beliefs are neither those of Adam Smith, nor of Karl Marx, but of the 17th Century mercantilist Thomas Mun. It is becoming clear that in economics, unlike in “hard” sciences, old […]

The mammoth profits reported by Goldman Sachs and the investment banking end of JP Morgan Chase last week surprised markets and demonstrated once again the power of trading operations to earn spectacular returns, for their protagonists and even occasionally for investors. It was of course the theory of Jeff Skilling and the late lamented Enron […]

British Chancellor of the Exchequer Alistair Darling has proposed a new banking regulation regime under which very large “too big to fail” institutions should be compelled to carry more capital than smaller banks. At first sight, this looks sensible, but on further examination the change may go in the wrong direction, having the perverse effect […]

The Waxman-Markey “cap and trade” global warming bill passed by the House of Representatives on June 26 introduces what are essentially government price controls on energy, which currently represents about 9% of the US economy. The impending healthcare legislation, if passed in one of its more extreme forms, will extend government price controls over healthcare, […]