Variant Perception: A Primer on the Euro Breakup

You may have already noticed that this one has been going the rounds. The piece is mainly driven by my colleague Jonathan Tepper’s work on the history of currency union breakups and how they work (or don’t).

It is a big piece in its entirety but the different sections can be read as standalone arguments. . . . → Read More: Variant Perception: A Primer on the Euro Breakup

The rupee: Frequently asked questions

q: How big is the market for the rupee?

The rupee is now a big market. Summing across both spot and derivatives, perhaps $30 billion a day of onshore trading and $40 billion of offshore trading takes place. Both these markets are tightly linked by arbitrage. In other words, for all practical purposes, it’s . . . → Read More: The rupee: Frequently asked questions

Shuttling wealth through a crisis

Quote from FOFOA’s latest post:

That’s right, gold is not at its highest and best use being spent (circulated) as a currency during a hunger crisis. Instead, if you are one with PLENTY of net worth, gold is the very best way to shuttle your wealth THROUGH a crisis to the other side. If . . . → Read More: Shuttling Wealth Through A Crisis

The Regression Theorem Understood And Applied

Regarding the regression theorem, can the grandson also be the great-grand father? Ideas can only be overcome by other ideas and words proffer the instruments to meaning. The ability to wield words concisely, accurately and orderly is essential for communication and persuasion. Much of discourse, particularly from court economists, has devolved into sophistry and . . . → Read More: The Regression Theorem Understood And Applied

High Court Judge Rules Paper Money “Almost Worthless”

In a recent High Court of Australia judgement on the Goods and Services Tax treatment of foreign currency transactions, I note with amusement Justice Dyson Heydon’s statement that:

“Apart from those rights [as legal tender], the pieces of paper had little value. They might have been used to stop an uneven table wobbling, or . . . → Read More: High Court Judge Rules Paper Money “Almost Worthless”

Is There a Problem With Rupee Appreciation?

There is a lot of talk about capital inflows, rupee appreciation, concerns about export competitiveness, etc. It made me pull up the data to look at what is going on. The graph shows the nominal and real effective exchange rate of the rupee. The source is the BIS: the best computation of these indexes . . . → Read More: Is There a Problem With Rupee Appreciation?

The Eurozone as a Non-Optimum Currency Area

In the WSJ, Vaclav Klaus, the president of Czech Republic, draw important conclusions from the long-term economic sustainability of the Eurozone (link), arguing that the Eurozone is not an optimum currency area as suggested by the famous four criteria from economic theory. In a puzzling essay, Mr. Klaus demarks the Eurozone as a monetary . . . → Read More: The Eurozone as a Non-Optimum Currency Area

Gold Demand Up, Supply Down

Two news stories in my inbox this morning from Sharelynx:

Demand Up: Gold a ‘Good Choice’ for Boosting Global Use of Yuan

“China’s trade in yuan-denominated gold investment products moves the currency closer toward global acceptance and the country should develop more of them, a central bank official said.”

Supply Down: South African gold . . . → Read More: Gold Demand Up, Supply Down

Currency Futures: An Example of How India Changes

Exchange-traded derivatives originally only did commodity underlyings. The world’s first financial underlying was : currencies. On 16 May 1972, the Chicago Mercantile Exchange started trading in currency futures. To any finance person, nothing is simpler than a currency futures, but unfortunately in India a mixture of ignorance, ideology and turf considerations has hindered progress.

. . . → Read More: Currency Futures: An Example of How India Changes

When a Currency Futures Market Dominates a Currency Forward Market

In recent months, a sense has emerged that the exchange-traded currency futures market in India is more liquid than the corresponding contract traded OTC (i.e. the forward market). As an example, we examine a dataset from NSE of 28,797 observations of data – one observation per second – from 3 November 2009, for the . . . → Read More: When a Currency Futures Market Dominates a Currency Forward Market