China’s Economic Rumbles
The People’s Congress puts on a brave face, but signs of trouble build.
Interest Rates: Another Ominous Signal For The Market
by: Brendan O'Boyle
In the past declining rates have preceded recessions and troubled times for investors.
Most often this signal occurs after an inverted yield curve, but today this may not be the case.
What this means is that while the S&P 500 (NYSEARCA:SPY) is discounting approximately the same odds of recession as in January (-1.1% YTD), the Treasury market sees a higher probability of challenging economic conditions.
The Politics of Anger
The chilling math of inequality
By Mark Buchanan
Now some European physicists have used such a model to examine a different question: How does a significant change in inequality affect the overall level of exchange? Their study makes use of some fairly abstruse mathematics coming from physics, developed precisely for messy network problems of this kind. What they find is troubling, although not all that surprising -- rising inequality tends to undermine exchange.
The reason is quite simple. As inequality gets more pronounced, a larger fraction of the population faces more stringent budget constraints, and the spectrum of possible economic interactions open to them narrows. Fewer people have the wherewithal to engage in economic activity. This mathematical economy actually demonstrates a sharp transition, akin to the abrupt freezing of a liquid, as the level of inequality exceeds a certain threshold. Worryingly, the wealth distribution in the U.S. over the past few decades has been moving ever closer to this critical edge.
To be sure, the model is far from complete, and can only suggest possibilities. That said, it gets at the intricacies of exchange in a way that traditional macroeconomic models do not.
Moreover, the effect of budget constraints on people's economic capabilities makes intuitive sense. There is every reason to believe that more realistic models would show a similar dynamic, changed only in minor details.
This inequality mechanism has nothing to do with ordinary recessions and the usual business cycle.
Significant changes in the distribution of wealth take place much more slowly -- an attribute consistent with what many economists have identified as the different and more profound nature of the current global slump. The concept of secular stagnation that Larry Summers has popularized could have a number of contributing causes, including rising inequality.
If so, the inequality diagnosis opens up interesting possibilities for policy solutions. The researchers found another interesting effect -- a “trickle up” flow of wealth quite different from the usual “trickle down” picture of supply-side economics. In an economy with appreciable inequality, capital tends to flow from those with less to those with more, generating a cascade of transactions along the way.
Hence, policy interventions aiming to spur economic activity should work better if they inject money into the system at the lower end, rather than from the top.
This fits with the argument that quantitative easing -- in which central banks purchase securities -- may ultimately be misguided. Such a policy is supposed to encourage spending by propping up the prices of stocks and bonds, which tends to boost wealth only at the top end of the distribution. Central bankers might have a more powerful and beneficial effect if they instead injected money directly into the accounts of citizens, who could then use it to pay down debts or spend as they like.
Share-trading joins the list of ostensibly free online services
BACK in the 1970s, after American regulators abolished fixed commissions for brokers who helped their clients trade shares, the likes of Charles Schwab and Fidelity were the insurgents.
They dispensed with the expensive frills that most rivals offered, such as research and investment advice.
That, in turn, allowed them to offer share trading to the masses at bargain prices. Twenty years later, the internet spurred the growth of a new wave of discount brokers, including E*Trade and TD Ameritrade. Now for the next challenger.
Whereas full-service brokers demand a percentage of the value of the assets in their clients’ accounts (typically 1-1.75% a year), the discount firms charge around $9 a trade. That is highway robbery, however, by the standards of a new online brokerage, Robinhood, which enables clients to trade shares free of charge, via a new mobile app.
Instead of taking commissions from customers, Robinhood receives them from the trading venues to which it steers their orders, a controversial but common practice. It also earns returns from the cash clients leave in their accounts, and plans soon to offer margin trading—the buying of stock with borrowed money—for which it will charge a fee.
Whether this is enough to cover Robinhood’s costs is unclear (the firm does not disclose its financial results). But it provides an even leaner service than its rivals. It does not yet offer trading on its website, for example, catering to clients, whose average age is 28, exclusively via its app.
Robinhood is also easy to use. Setting up an account can take as little as four minutes. To confirm customers’ identity, the firm asks them to take a picture of an ID with a smartphone.
That has helped it to attract almost 1m customers since it started operations a year ago. It says it continued to recruit new clients during the recent market turmoil, even as activity declined at other firms. To bring in even more custom, it has begun integrating its service with apps such as Stocktwits, a social-media platform for retail investors. Increased turnover should boost its income more than its costs. In time, it may make life difficult for the disruptors of yore.
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
Pensamos que solo comprendiendo cabalmente el presente, es que podemos proyectarnos acertadamente hacia el futuro.
Gonzalo Raffo de Lavalle
Las convicciones son mas peligrosos enemigos de la verdad que las mentiras.
Quien conoce su ignorancia revela la mas profunda sabiduría. Quien ignora su ignorancia vive en la mas profunda ilusión.
“There are decades when nothing happens and there are weeks when decades happen.”
Vladimir Ilyich Lenin
You only find out who is swimming naked when the tide goes out.
No soy alguien que sabe, sino alguien que busca.
Only Gold is money. Everything else is debt.
Las grandes almas tienen voluntades; las débiles tan solo deseos.
Quien no lo ha dado todo no ha dado nada.
History repeats itself, first as tragedy, second as farce.
We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.
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