The Financial Economists Roundtable Weighs in on Financial Transaction Taxes

"Many concerns motivate these proposed taxes. Some people want the financial sector to pay for the tremendous economic costs that they believe it imposed on everyone in the global financial crisis of 2008. Others believe that the financial sector should bear its “fair share” of taxes; such beliefs are particularly strong in countries where financial transactions are exempt from value-added taxes and therefore “escape” taxation. Still others simply want new revenues to support additional government spending, reduce the deficit, or provide tax relief to other sectors. Finally, some commentators believe that too much financial activity focuses on short-term rather than long-term goals. They believe that a transaction tax would force investors and businesses to focus more on long-term values and less on short-term activities that they perceive to be wasteful."

"Not all taxes are economically sensible, regardless of how desirable they may appear. A transaction tax imposed at any economically meaningful rate by only some countries would cause many transactions to be shifted to other countries, resulting in far less revenue than a simple static analysis might suggest. Furthermore, to the extent that a financial transaction tax would generate substantial revenue, the tax and the associated reduction in liquidity would lower asset prices. Lower asset prices would cause decreased corporate investment, resulting in less capital per worker in the long run and thus lower wages throughout the economy. Therefore, governments should be extremely wary of introducing or increasing financial transaction taxes."

http://blogs.cfainstitute.org/investor/2014/02/27/the-financial-economists-roundtable-weighs-in-on-financial-transaction-taxes/

Credit Value Adjustment (CVA) implementation comes of age

"In banking, particularly recently, one often hears the term “Credit Value Adjustment” or CVA. Is it a new fashion trend in the world of finance world is it there more to it? Why are traders, quants, and risk officers at large institutions feverishly trying to deal with this topic all of a sudden? It turns out that the increased focus on counterparty risk after the financial crisis as well as the new Basel requirements for bank capitalization (see document) have added urgency to the CVA implementation by international banks, forcing them to focus on the topic."

"The CVA measure is different from the concept of standard Credit Risk because it combines the uncertainty of exposure with the bilateral nature of exposure. It measures the risk that the counterparty to a financial contract will default prior to its expiration and will not make the specified payments. At the same time the amount of those specified payments may have increased due to market movements." 

http://soberlook.com/2013/10/credit-value-adjustment-cva.html

The Fed’s Actions in 2008: What the Transcripts Reveal

"On Friday, the Federal Reserve released the transcripts of the 2008 meetings of its Federal Open Market Committee, which sets monetary policy. The transcripts provide a detailed account of some of the Fed's key decisions during that crisis year. Here is a look at the fuller picture that the documents have provided."

"Federal Reserve officials are unaware in January 2008 that the economy has already entered a recession. But the Fed's chairman, Ben S. Bernanke, and his closest advisers are feeling nervous. They worry that the Fed's actions at the end of 2007 have been insufficient, and that tumbling stock prices represent the start of a broader pullback in investment."

http://www.nytimes.com/interactive/2014/02/21/business/federal-reserve-2008-transcripts.html

European Banks: Between a Rock (Need of More Capital) and a Hard Place (Low Profitability)

"The financial crisis has put to the forefront the long-debated issue of banks’ capital adequacy, showing that banks were much more fragile than they (and their regulators) pretended, also because they were allowed to push their leverage to levels much higher than any industrial company, or even a hedge fund, has never dreamt of."

"This column aims to discuss this issue, looking at a sample of 20 global banks, analysed by R&S, a Mediobanca subsidiary. The main conclusion is that banks have not reached a new equilibrium after the financial crisis and that, if banks really want to be more robust in the future, they must implement radical strategic changes, aiming at deleveraging through reduction of non-core assets and/or achieving substantial reduction of operating costs."

http://www.nakedcapitalism.com/2014/02/european-banks-rock-need-capital-hard-place-low-profitability.html

Neoliberalizm wprowadził zachodnie gospodarki na ścieżkę samozniszczenia

Architekt reaganomiki krytykuje neoliberalizm: 

"W Stanach niezależnie od politycznego rozdania rządzi więc kilka potężnych organizacji lobbystycznych. Najważniejsza z nich to Wall Street, a więc banki i instytucje finansowe. Drugą jest sektor militarny oraz bezpieczeństwa. Wyjątkowo groźny dla reszty świata, co pokazały wypadki sprzed dekady. Trzeci blok to potężne lobby izraelskie. Potem jeszcze lobby górniczo-naftowe."

Link: http://forsal.pl/artykuly/774500,paul-craig-robert-neoliberalizm-wprowadzil-zachodnie-gospodarki-na-sciezke-samozniszczenia.html

Rafał Hirsch: Polska stabilność podatkowa

"Podatki są ważne, a z punktu widzenia gospodarki kraju i prowadzenia działalności gospodarczej najważniejszy jest VAT. Wiadomo też, że wspólną korzyścią zarówno dla pobierającego podatki państwa, jak i odprowadzających podatki firm jest stabilność opodatkowania. Kiedy podatki zmieniają się zbyt często, firmy mają poważny problem z formułowaniem własnych oczekiwań i prognoz, przez co trudniej im cokolwiek zaplanować, co z kolei może przekładać się na tempo ich rozwoju, a więc także na tempo rozwoju gospodarczego całego kraju. Panuje też u nas powszechne przekonanie, że żyjemy w państwie o wyjątkowo niestabilnych podatkach."

"Polska ma jeden z bardziej stabilnych podatków VAT w Unii Europejskiej. W ostatnich latach byliśmy też stosunkowo ostrożni w jego podnoszeniu, na tle innych krajów unijnych."

http://tvn24bis.pl/blog-rafala-hirscha,190/rafal-hirsch-polska-stabilnosc-podatkowa,398930.html

When Will the Fed End Its Zero Rate Policy?

"U.S. Treasury yields and other interest rates increased in the months leading up to the Federal Reserve’s December 2013 decision to cut back its large-scale bond purchases. This increase in rates probably at least partly reflected changes in what bond investors expected regarding future monetary policy. Recent research on this episode tentatively suggests that investors moved earlier the date when they believed the Fed would exit its zero interest rate policy, even though Fed policymakers made few changes in their projections of appropriate monetary policy."

http://www.frbsf.org/economic-research/publications/economic-letter/2014/february/zero-interest-rate-investor-expectations-liftoff-monetary-policy/

Co zrobić z płonącym lasem?

"Bez wątpienia Wielka Depresja (znana w Polsce bardziej jako Wielki Kryzys) odegrała istotną rolę w kształtowaniu poglądów Keynesa a rozważania dotyczące pożądanych działań rządu w czasie osłabienia gospodarczego stanowiły ważną część jego dorobku. Od dawna chciałem w przystępny sposób pokazać najważniejsze ekonomiczno-ideologiczne stanowiska dotyczące preferowanej polityki rządu w okresie recesji. W tym celu wymyśliłem przykład, parabolę z płonącym lasem.

Wyobraźmy sobie, że jest wioska, która utrzymuje się z eksploatacji lasu. Jej mieszkańcy pozyskują drewno, zbierają jagody, polują na zwierzynę. Wyobraźmy sobie, że las opanował poważny pożar (na przykład wskutek zbyt intensywnej albo nieostrożnej eksploatacji). Co należy w takiej sytuacji zrobić?"

http://www.trystero.pl/archives/13007

Dilbert Does Behavioral Economics

"The Dilbert comic strip series, written and drawn by Scott Adams, is not only a hilarious caricature of office life, it also offers many concise yet spot-on lessons about behavioral economics (plus one about financial literacy)."

http://www.psychologytoday.com/blog/markets-in-mind/201401/dilbert-does-behavioral-economics

Everything You Need to Know About the Emerging-Market Currency Collapse

"First, money poured into emerging markets when it looked like they offered juicy returns. Then it poured out after they didn't. Currencies are collapsing. Stock markets are falling. And central banks are sacrificing the real economy to save the exchange rate.

We've seen this movie before. It was called the East Asian financial crisis, back in 1997. But, for once, the sequel won't be worse than the original. Emerging markets don't have enough foreign-money debt this time around to make their falling currencies much of a concern. What is a concern is whether their central bankers realize this. They might overreact—they might already be—and raise rates to prop up their currencies, when they should be lowering them to prop up their economies.

Now, emerging market currencies have been in a world of pain since last May. That's when Ben Bernanke first hinted that the Fed would soon draw down—or "taper"—its bond purchases. If that meant the Fed would start raising rates sooner too, as markets assumed it did, there wouldn't be any need to park money overseas to get a decent return. You could do that in the U.S. So investors pulled their money out just as quickly as they had moved it in—and emerging market currencies fell."

http://www.theatlantic.com/business/archive/2014/02/everything-you-need-to-know-about-the-emerging-market-currency-collapse/283590/

The Corporate Profit Equation Derived, Explained, Tested: 1929-2013

"In this piece, I’m going to derive and explain the Kalecki-Levy Corporate Profit equation, and then demonstrate its truth empirically using data collected by the BEA.  I’m then going to present tables that show the values of the components of the equation, as a percentage of GNP, from 1929-2012 annually, and from 1951 to 2013 quarterly, with recessionary periods shaded in.  I’m going to conclude with a brief comment on mean reversion."

"The ratio of Corporate Profit to GNP is currently near a record high, well above highs seen in prior cycles.  Considered in itself, this condition is negative for equities: it makes corporate profit growth more difficult going forward.  However, it would be a mistake to assume that the ratio has to revert to the average of a prior era.  It doesn’t, and neither does any other part of the equation.

As a percentage of GNP, corporate profit has remained elevated relative to historical averages for a full 10 years.  It was given an excellent chance to mean-revert in the Great Recession–but it didn’t.  It fell slightly, and then immediately bounced back–barely breaking below prior highs."

http://philosophicaleconomics.wordpress.com/2013/11/24/cp/

Jak sobie radzić z ucinaniem strat?

"Obrona własnego ego czyli niechęć do przyznania się do błędu jest jednym z proponowanych wyjaśnień problemu inwestorów z zamykaniem stratnych pozycji."

"Richards proponuje inwestorom test „nocnego czyszczenia portfela”. Polega on na wyobrażeniu sobie sytuacji, w której ktoś zamknął w nocy wszystkie nasze pozycje i obudziliśmy się z portfelem składającym się w 100% z gotówki. Gdybyśmy mogli odkupić te pozycje bez kosztów transakcyjnych, ile z nich byśmy odnowili?"

http://blogi.bossa.pl/2014/01/31/jak-sobie-radzic-ucinaniem-strat/

Merge or Die: Slow Economy Sheds New Light on M&A

"Merger activity will get a much-needed lift when companies realize that acquisitions are the only way to expand in a slow-growth economy."

"M&A has long been a business that runs on optimism. The effort required to buy another organization — negotiate a price, perform effective due diligence, resolve legal and regulatory requirements and defeat other bidders — is daunting and time-consuming, high drama and remarkable tedium. The machinery of M&A is large, complex and fragile, a fluid constellation of bankers, lawyers, accountants, consultants, corporate executives, directors and investors of all kinds. It is both a mechanism of change and an intricate set of financial, organizational and legal technologies. Perhaps the greatest and most commonly overlooked aspect of M&A happens when the deal is done: postmerger integration, or effectively knitting two corporate entities into one.

None of M&A is easy, and the risks are considerable — too large, apparently, for many companies still focused on disaster and seemingly content to accumulate cash, passing some of it to shareholders when they grow restive. This is a big change. The modern era of M&A, which began in the mid-’70s and was characterized by shareholder governance and deregulated markets, has been both cyclical and expansionary. Recessions reduced the size and number of M&A deals for two or three years only to see them roar back, each wave mightier than the last. What drove those successively higher waves was the expansion of M&A into the middle market and into the developed, then emerging, economies. Throughout this period M&A was broadly tamed and routinized, moving beyond an activity that once seemed to belong to cowboys, pirates or, most famously, barbarians."

http://www.institutionalinvestor.com/Article/3293151/Banking-and-Capital-Markets-Corporations/Merge-or-Die-Slow-Economy-Sheds-New-Light-on-M-A.html#.Uu4xtoX6Q1k