Greece is still in the news. Not surprising, since the European Union (EU) has never had such a huge problem as this with a member country. I’ve written a lot on the subject already and don’t want to belabor the point. But I’ll try to summarize here (data from Eurostat in billions of euros). Background. […]
Keynes on Pessimism
We all know that we as human beings have a hard time separating ourselves from the present situation. If we are in a crisis, we think the tough times will last for years, and the contrary if we are in an economic boom. The opinions of experts, institutes and others reflect that behavior: most of […]
What does it mean for a country to default?
The case of Greece has put the subject of sovereign default back in the news. What does it mean when a country is in default? What are the implications? Many people have asked me about this, so I think a little clarification is in order: . Argentina’s government may default even though many Argentine companies […]
Greece: a quick summary
The recent victory of the leftist party Syriza and the defiant attitude of its Government towards its lenders (EU, BCI and IMF, the so called troika) has thrust Greece into the headlines once again. Here we look at the numbers (from Eurostat, 2013), the problems and the negotiation alternatives of both sides – the Greek […]
Risk-Free Rate: An Irrational Financial Practice
A key concept at the heart of financial theory is the “risk-free rate.” The idea is simple: the rate at which you would lend money to a very secure borrower, one with 0% probability of default. If you lend money to a riskier borrower (one with some probability of default) you would charge a “risk […]
