Analysis of Forex Trading, Financial Markets, and Economic Policies
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Sub-prime and everything that followed has been pretty bad. However, there seems to be another financial instrument that people refuse to go talk about: Credit Default Swaps. The estimates on the notional amount, or the total face value, of these contracts ranges from $15 trillion to $54 trillion. An article on the New York Times [...]
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Investors always like to look back at history when trying to figure out what is happening in the economy today. It is true that history can gives us great insights to the mechanics of what is happening in the economy, however, we cannot overestimate the power of this tool to understand the full picture of [...]
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In the post, ” The Fed and The Banks“, I had three different graphs showing the activity level between the Fed and its member banks. Since the post on October 19, the trend continues to be the same. In October, the total borrowing of depository institutions from the Fed was reaching $300 Billion. It’s now [...]
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This is the second part of the educational series on the flaws of the current financial system. Here is the link to the first part. 4. Relying on Market Discipline In the recent past, regulatory regimes have moved in the direction of emphasizing self-regulation and market discipline instead of strict regulations. One argument for this [...]
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This is an educational post covering some of the flaws in our current financial system. 1. Banker Compensation The banking compensation system has created incentives for excessive short-term risk taking. Executives are usually compensated with bonuses that are tied up to short-term profits. This puts a great incentive on executives to take larger risks in [...]
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