Finance: Past, Present and Future

Owen Sims , a PhD student at Queen's University Management School, recently gave a TEDx talk in Belfast on the future of banking. You can view Owen's slides and script here . Unfortunately he hasn't put up the video!! It was kind of Owen to give my book Banking in Crisis a plug during his talk and he seems to agree with the conclusions I reach in my book.

Click here for a comprehensive list of books and  here for a list of papers which have been written on the financial crisis. A list of film documentaries on the crisis can be found here .

A new paper by Luigi Zingales  asks whether finance benefits society (hat tip - Ronan Gallagher). In the wake of anti-finance sentiment, Zingales argues that academic financial economists have a duty to promote the right sort of finance. Finance, according to Zingales, can quickly degenerate into rent-seeking activity. Zingales argues that financial economists should use their "research to challenge the existing practices in finance and blow the whistle on what does not work. We should be the watchdogs of the financial industry, nots its lapdogs".  

The Economist's Christmas double issue always has interesting articles. This year's was no different. An article on the baseball-card bubble particularly caught my eye. The article describes how a children's hobby turned into a classic financial mania in the 1980s and early 1990s. The article is available here .  I was intrigued by how the author ended the article - "Just a few years after the collapse of the baseball-card boom, many of the same kids were intoxicated again, swapping tech stocks across fancy new online trading platforms from dorm rooms and group houses. And then, older, but no wiser, they were at it once more, borrowing recklessly for a first home and a ticket to future wealth. Three strikes, as it were."

Every six years or so, the UK university system is subject to a research assessment exercise (currently known as the Research Excellent Framework - REF). The stated purpose of this exercise is to guide government funding for universities to those doing the best research. The 2014 REF assessed the quality of research outputs (books and journal articles), the quality of research environment, and the societal impact of research over the period 2008-2013. Each broad university discipline got a score somewhere between 1* (not good) and 4* (top of the pile).  The results of REF 2014 were released just before Christmas. Many university departments and universities were delighted with the high grade point average (GPA) scores they achieved. But a deeper analysis of the results reveals that there was a lot of game playing taking place. First, some university departments only submitted their best researchers, which pushed up their GPAs. But this doesn't reflect the true research qualit...

The Eurozone has recently moved into deflationary territory ( story here ). But is deflation such a bad thing? Deflation has two major consequences. First, it means that debtors have to pay back more in real terms than they borrowed (inflation, on the other hand, helps debtors by reducing the real amount they have to repay on their loan). This, as was the case in the Great Depression of the 1930s, can have detrimental consequences for financial stability. Second, nominal wage rigidity makes it very hard for employers to reduce nominal wages in line with deflation. What does the historical experience with deflation have to say? Click here to read a BIS working paper by Michael Bordo and Andrew Filardo which looks at deflation in a historical perspective. They find that some deflation experiences have been good, other have been bad, and some have even been ugly.