Economics and Finance

A Dangerous Fallacy

All men having power ought to be mistrusted.” James Madison

A few days ago, a major announcement was made by Mario Draghi, current president of the European Central Bank (ECB), intended to exorcise the spectre of the Euro disintegration. On September 6th, he announced the ECB would resume buying the bonds of troubled countries but upon the condition that those same countries submit to formal and externally monitored reform programmes.  Mr. Draghi justified the ECB’s action with the argument that high yields faced by certain European governments are not only the product of a higher credit risk, but also the result of markets’ “unfounded fear that the euro would break up”. My intention is not to assess the decision in technical terms but rather, the extremely worrying political assumptions and contradictions that can be detected in some aspects of the announcement and related press commentary.   Continue reading

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Who is on the other side of the trade?

This is something that a good friend of mine asked in the middle of a conversation around financial crises. In other words, in troubled times like the ones we are living in at the moment, is there anyone who is making money? I mean…big money! Our intuition told us that there had be someone so I decided to find out more. For those of you that may want to get a basic understanding of who (and how) has made money as a direct result of the current financial crises, I would strongly recommend the following books: “The Big Short” by Michael Lewis and “The Greatest Trade Ever” by Gregory Zuckerman. Continue reading

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