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 […]
We don’t understand the Greeks
Everyone is uneasy about the electoral victory of Syriza in Greece and the threat of populism in Europe. The media has been buzzing for days now with comments and analysis, largely talking about what Syriza should do, what should be done by the European Union, Germany, the International Monetary Fund… the consequences of the policies […]
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 […]
Fracking Unmasked: the Real Effect on U.S. GDP
In past articles I have commented on the economic growth of the United States and the languishing European economy. Bottom line, in the United States measures have been taken since 2008, while Europe has mostly sat there twiddling its thumbs. Nevertheless, some experts remain skeptical, asking: Is the United States really growing because of its improved […]
The Economy Has Adjustment Mechanisms
We already knew that the economy tends to sort itself out. Not always, of course, since there are no fully automatic mechanisms, except in the field of physics. In human activities, the presence of human beings continues to be a source of irritation. Things would run so smoothly if we were all machines without our […]
