Finance: Past, Present and Future

The famous Burlington Hotel in Dublin was bought for 228 million euros in 2007 at the height of the Irish property boom.   The hotel is now back on the market with a guide price of 65-75 million euros.  This one hotel is but a microcosm of the Irish property boom and bust. You can read more on this story  here . 

Click here to read what eight young economists think the future holds for their discipline.  They each identify big unanswered questions in economics. 

Several months ago I had a post on Ron Paul's monetary views, which are to re-introduce the gold standard and abolish the Fed.  Well it looks like the Republican Party have listened to Paul as they have stated that a gold commission will become official Republican party policy - click here to read more. 

Online reviews of products, shops, hotels etc. are very common, but are they helpful?  Hotels, for example, could receive fictitious negative reviews from neighbouring hotels or they could even give themselves fictitious positive reviews.  You can read an interesting piece over at Slate on the economics of internet reviews.   Click here for an academic paper which empirically investigates the authenticity of online promotional reviews by comparing reviews on Tripadvisor with those on Expedia.    

A recent report by Davy Stockbrokers has found the following: 1. 50% of all Irish mortgages are in negative equity. 2. At March 2012, 13.4% of owner-occupier mortgages were more than 90 days behind payment.  The arrears rate on buy-to-let mortgages was at least double that figure. 3. AIB, Bank of Ireland and Permanent TSB could lose as much as €11.5bn on Irish mortgages. Despite these problems in the mortgage market, write-downs and repossessions have been negligible.  This could be because it would be politically unpopular to do so as Irish banks have received huge taxpayer bailouts.  Alternatively, maybe the banks and politicians are hoping for the housing market and economy to recover.  Whatever the reason, there is a wealth transfer in Ireland from those who don't have mortgages in negative equity towards those who do.    A 'Ghost' Estate in Co. Leitrim

Stephen Davies of the IEA has an interesting post on whether current policy-makers are fixated by the Great Depression of the 1930s, whilst they really should be considering the Long Depression of 1873-1896. According to Davies, if they did consider the Long Depression, they would realise that "a fiscal stimulus would be ineffective and wasteful, since the underlying problem is one of a long-term economic realignment rather than a simple decline in demand". The Panic of 1873

Economists get everywhere!  For example, the Financial Times got some economists to forecast how many medals each country would win in the London Olympics ( click here ).  The econometric models which were developed by the economists used things like GDP, population, home-country advantage, past performance etc. to help forecast the number of medals each country would win.  In terms of pre-Games expectations, Japan got 10 more medals than predicted and Team GB got eight more medals than predicted.  Unsurprisingly, Australia did a lot worse than predicted, falling seven medals short of the pre-Games prediction. The Wall Street Journal also has a twist on the traditional medal table – they awarded lead, zinc and tin medals for bottom three finishes.  Guess who topped the table – Team GB!  Click here for further details.

Two years ago, I left for a sabbatical at Harvard Business School.  During my time at HBS, I spent many Friday afternoons at the famous Harvard economic history seminar.  You can click here to read a recent article about the prospects for  economic history at Harvard (hat tip - Ryan Kee).  Economic and business history is also thriving at HBS - click here to learn more.  Business history has significant place in the curriculum at HBS, with MBA students taking courses in business history and the history of capitalism.  It is my firm belief that students in business schools need to have a better grounding in history if they are to understand capitalism.       

Esther Duflo , an MIT economist and a co-founder of Jameel Poverty Action Lab , is passionate about eliminating poverty in the developing world.  She is best known for her work where she applies randomized control trials (RCTs) to economic and development problems.  Click here for a crash course on RCTs.  Alternatively, you can watch the 20-minute video below.  Angus Deaton’s critique of RCTs is available here .

My son has a football (soccer) shirt that has Standard Chartered emblazoned on it.  Standard Chartered was one of the most stable British-listed banks during the financial crisis.  They also seemed to be paragons of corporate virtue in the messy world of British banks.  Not any longer!  Yesterday, US regulators claimed that Standard Chartered have for a decade or more run a 'rogue' unit that schemed with Iran's government to hide £160bn in illegal transactions ( click here for BBC coverage).  Its shares at one stage today were down 25%.  Michael White has an interesting piece over at the  Guardian  on this story. 

The preoccupation with the Olympic medal table by the UK news media is somewhat bizarre.  Channel 4 have an interesting gizmo which allows you to adjust the medal table for population, GDP, human rights, freedom, national debt, and carbon dioxide emissions - click here   for the 2008 table and here for the 2012 table.   In 2008, North Korea came out top once one adjusts for GDP! Apparently the medal table used by US tv networks in 2008 looked at number of medals rather than number of golds - strangely this methodology placed the US at the top of the 2008 table!  

According to today's  Daily Telegraph , the UK government has discussed full nationalisation of RBS - click here for the story.  The cabinet apparently believes that a full nationalisation will enable the bank to lend more freely to business.  However, this assumes that there is a pent-up demand for bank finance and that RBS has funds to lend.  Full nationalisation makes no difference to either of these.  In addition, full nationalisation could lead to RBS becoming a bank run in the interests of the government's supporters rather than taxpayers as a whole.   Click here to see an interesting article over at VoxEU on state banks and lending.