Category: Money

The U.S. government is trying to free up credit, by reducing interest rates and other steps. This is probably good for the economy. It also has the effect of reducing the risks faced by banks which made some very bad investment decisions in purchasing unsecured debt. This is a moral hazard: when things go well,…

Oil is currently purchased in dollars. That means that the price is set in dollars, and oil producers accept payments in dollars. There are occasional suggestions that the price should be denominated in some other currency, typically euros. This is generally intended to weaken U.S. hegemony. But does it make any sense? In today’s financial…

The flow of money in the U.S. for the last several years has been as follows. Somebody in the U.S. buys something made in China. The dollars are aggregated and sent back to the Chinese manufacturer. The manufacturer converts them to Chinese renminbi at a Chinese bank at the government mandated exchange rate. The Chinese…

The Fed made a big cut in interest rates today. These days everybody looks to the Fed to fix all economic problems, but the funny thing is that they don’t really have very much control. Since the dot com collapse, the U.S. economy has been driven largely by the housing market. Homeowners were able to…

Ethical investing is the practice of not investing in companies which engage in ethically reprehensible behaviour. There are many varieties, but, for example, some people refuse to invest in companies which sell tobacco. Does this make any sense? There are presumably two goals here. One is to punish companies which act badly, in the hopes…