Finance: Past, Present and Future

A recent report for the Tax Justice Network has revealed the extent to which the global super-rich hide their wealth in tax havens.  The report finds that "At least $21 trillion of unreported private financial wealth was owned by wealthy individuals via tax havens at the end of 2010.  This sum is equivalent to the size of the United States and Japanese economies combined." The implications of this study for wealth inequality measures suggests that wealth is a lot more concentrated than official figures state.  The findings of this  study also imply that there are huge lost tax revenues for most economies, particularly developing economies. The report also finds that the offshore sector is effectively operated not by shady banks, but by the world's largest banks and financial institutions.  

My previous posts ( here and here ) on Facebook indicated that I thought Facebook stock was a poor investment.  Yesterday Facebook made its maiden quarterly report to the market and investors did not like what they heard.  Facebook shares were floated at $38.  In after-hours trading yesterday, they were trading at $23.75!  The Daily Telegraph's coverage of Facebook's maiden financial report is available here .

A few months ago, I had a post about the interim report of the Kay Review of UK equity markets.  The final report was published last week - click here for the full report.  Kay's report suggest that short-termism is an underlying problem in UK equity markets.  The recommendations of the Kay Report are radical and it will take a brave politician to implement them as the Kay Review is regarded as anachronistic by many ( click here   and here  for examples).  As someone with a keen interest in financial history, the Kay Report certainly seems to pine for the halcyon days of equity markets before Big Bang.   Modern equity markets certainly seem to have major problems.  Why have these arisen?  My hunch is that short-termism is symptomatic of a deeper problem - the rise of the institutional investor and the democratization of stock markets.  I think that an examination of this issue would make a fascinating PhD topic if anyone...

British banks are not getting good press at the minute between technical problems at RBS, the LIBOR scandal at Barclays, and now the appearance of HSBC executives before the US Senate to apologise for  laundering the money of drug cartels.  The Guardian has a  thought-provoking op-ed piece on this -  click here .  Bank executives should be held liable for such criminal activity.  If I, as a private citizen, laundered the money of drug cartels, I would face a lengthy period behind bars.  Why should it be any different for a corporation and its executives? Is this not an occasion for piercing the corporate veil?

The 2012 London Olympics are nearly upon us.  As is to be expected, the government is prattling on about the economic benefits of the games and how the nation will become inspired to be healthier as a result of watching all those McDonald's adverts!  However, I want to focus on something more important than this - the GB football team.   Stuart Pearce is not the most astute manager in the world.  He has already made two political / marketing blunders.  Firstly, he hasn't picked one player from either Scotland or N. Ireland.  Secondly, and more importantly, he hasn't picked David Beckham.  Beckham should have been picked purely for marketing  / promotional reasons.  In addition, however, his experience and ability would have come in useful for team GB.  Beckham was player of the season last year when LA Galaxy won the MLS, and he still has the ability to score amazing goals as the video clip below from a recent match...

In this short video clip , the curator of the British Museum's Citi Money Gallery gives a 5-minute overview of the history of money. If you are ever in London, a visit to the British Museum's Citi Money Gallery is highly recommended.

I have just spent a week in Ellmau , a picturesque village in the Austrian Tirol.  I love visiting Austria.  However, it had been five years since I was last in Austria, and the changes in the make-up of my fellow holidaymakers was remarkable.   On my visits before 2007, there had been many Irish, English, Scottish, French and Italian tourists. In 2012, 95% of the tourists in our resort were German.  What does this tell us about the respective health of these European economies?   In addition, I was taken aback by the levels of freight traffic out of Austria and into Germany.  Germany (using my extremely unscientific methods) appears to be booming. 

During my time at Harvard last academic year, I attended some really interesting seminars.  My favourite paper was by  Nathan Nunn and his co-authors - click here .   They argue and present compelling evidence that the intensity of a society's plough usage in the past predicts the female-male wage gap as well as female participation in the labour market and in politics in the present.  As males had a comparative advantage in using ploughs due to greater physical strength etc., societies which used the plough more intensely developed a culture where females dealt with domestic affairs whilst men went out to work in the fields.  Even though ploughing has been mechanised for a century plus, the cultural attitudes towards gender roles developed over many centuries have been persistent and slow to change.   This is yet another paper by leading economists which demonstrates the need to study the past in order to understand the economy in the present...

The technological problems at the Ulster Bank, RBS's Northern Irish subsidiary, are still causing problems for its customers.  The bank's CEO appeared before the N.I. Assembly today ( click here ) and David Cameron spoke in Parliament yesterday about the crisis ( click here ).  My concern is that the technological problem is symptomatic of a deeper problem with mismanagement at our major banks, where they no longer care about providing a quality service to their customers.  My advice to Ulster Bank customers - transfer your account to another bank!  You can read the FSA's advice on moving accounts here . 

All my Money and Banking students understand the importance of LIBOR (London Interbank Offered Rate) to the economy.  The vast majority of lending rates are determined by LIBOR, and central banks are trying to influence this key interest rate whenever they engage in monetary policy.  LIBOR also plays an important role in many derivative contracts.  LIBOR is simply the rate that banks pay to borrow funds from other banks.  Some banks have insufficient reserves to back their deposits, whilst others have excess reserves.  These reserves are traded on the interbank market and the rate banks pay is LIBOR.  LIBOR is ultimately what banks pay to get their funds, which is why it is so closely connected to the rate borrowers pay.  LIBOR is determined on a daily basis by the British Banking Association.  They conduct a daily survey asking major banks what they would pay to borrow funds in a reasonable market just before 11am.  The survey resu...