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Why do Labour-run councils pay more to borrow than Conservatives?

Two weeks before a general election, the positions of the two main parties are being repeated ritualistically and endlessly. Who is most competent to run the economy? Since we can’t rerun history with different electoral counterfactuals, we have to take most of this on trust. However, at the local government level, there exists data that … Continued

Do we really need fund managers to save the CDS market?

Do we really need fund managers to save the CDS market?

Blackrock, the world’s biggest asset manager, is on a “mission” to save the credit default swap market, according to Bloomberg News. In particular, CDS on single names – as opposed to index trades – have declined in volume, as big dealers like Deutsche Bank have decided to exit the market. Now you might think that … Continued

Borges, Babel and the race against the machine

Borges, Babel and the race against the machine

In a world of information, the way we measure combinations of words or ideas is important. Some people say it might even save humanity. Last year, economists Eric Brynolfsson and Andrew McAfee suggested that increasing combinations of business ideas could save us from being supplanted by intelligent machines.

Like any powerful algorithm, combinatorics is … Continued

Why Goldman nearly failed the stress test

Last week’s Federal Reserve stress test results produced a surprise: under a ‘severely adverse’ scenario, a key Goldman Sachs capital ratio came within shouting distance of its regulatory minimum. The scenario may be hypothetical but performing worst among the biggest American bank holding companies is more than a slight embarrassment for Goldman. It could put … Continued

Burning down the house

Burning down the house

They rated every deal, including the ones structured by cows. But were they fraudulent? Until last Tuesday, when Standard & Poor’s parent company McGraw Hill paid $1.3 billion to settle a US Department of Justice lawsuit, there existed the tantalising possibility that this question about S&P’s structured finance ratings business might be answered in court.

Continued

When the Old Lady slept: the Bank of England and the financial crisis

When the Old Lady slept: the Bank of England and the financial crisis

Among those responsible for UK regulation during the financial crisis, the Bank of England came out of it rather well. The Treasury had to bail out the banks (and unlike its US counterpart, it hasn’t yet been paid back). The Financial Services Authority was disgraced and dismantled. The BOE on the other hand, emerged with … Continued

Most-read articles of 2014

Is the sharing economy a new form of regulatory arbitrage? That was the question posed by my most popular article this year. Published in January, my take on Uber turned out to be prescient, as the ride sharing company attracted increasing regulatory headwinds around the world. The second most-read new article is actually a pair … Continued

The Imitation Game and The Interview

Jack Good

I saw The Imitation Game last week – the biopic of Alan Turing – and it prompted me to write something about Jack Good, one of the Bletchley park codebreakers depicted in the movie.

In April 2003, while researching my unpublished probability book, I visited him in Blacksburg, Virginia. I was in New York on … Continued

Review: House of Debt

House of Debt

by Atif Mian and Amir Sufi

(University of Chicago Press 2014)

The financial crisis that began in 2007 was accompanied by a Great Recession which in Europe may have never really ended. Until now, policymakers have acted on the basis that to bring about recovery in the wider economy meant fixing the troubled banking system and … Continued