Tag: financial markets

Allison Schrager joins Brian Anderson to discuss how risk propels economic growth and why government efforts that go too far to mitigate risk undermine America’s economic vitality.

“Risk, for better and worse,” writes Schrager for City Journal, “is at the heart of economic growth, and successfully apportioning it—not avoiding it—is the key to prosperity.” While government has a role to play in managing risk, the U.S. economy has thrived by trusting markets to allocate it efficiently. Overly intrusive efforts to reduce risk in the economy—such as California’s new law regulating freelance or “gig” work—may prove counterproductive to workers of all incomes.

Economist Allison Schrager joins City Journal editor Brian Anderson to discuss her new book, An Economist Walks Into A Brothel: And Other Unexpected Places to Understand Risk.

Risk is a universal fact of life, but some of us manage more of it than others. Schrager examined how a broad cross section of people handle it: horse breeders in Kentucky, members of an elite tank unit during the Gulf War, paparazzi who stalk celebrities, prostitutes in Nevada brothels. She lays out five principles for dealing with risk and explains how financial tools can help guide people through uncertainty.

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Chinese stock markets were only open a short time over night and then closed after another 7% move down. U.S. markets are falling in sympathy with index futures for the S&P 400, 500, NDX 100, and Russell 2000 all down more than 2.25%. DJIA Futures are down 387 points. All as of 0525 Central Time. […]

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Defending the “Hedge Fund Guys” from Donald Trump

 

shutterstock_85839379Donald Trump has made financial elites one of his latest targets, recently declaring on Face the Nation that, “I have hedge fund guys that are making a lot of money that aren’t paying anything [in taxes]. They’re paying nothing and it’s ridiculous. I want to save the middle class. The hedge fund guys didn’t build this country. These are guys that shift paper around and they get lucky.” As I note in my new column for Defining Ideas, that considerably misstates the case:

The reality is the opposite of what Trump claims. When these hedge fund guys trade, they are not just haphazardly shifting paper around. They are shifting paper as a means to transfer wealth and reallocate risk. Nor do they do it in a self-contained universe. They have paying clients who need accurate information and reliable execution to enter into transactions essential to their business survival.

In countless ways, the financial system—and the bankers and hedge funders that are participating in it—supports the so-called real economy. Start with the simple notion of liquidity. People need to have access to cash and cash equivalents all the time to pay bills and to make investments and gifts. It is those hedge funders who organize complex payment systems—credit, debit, electronic funds transfers, and more—that allow for literally billions of small and large financial transactions to take place every second of every day.

Bear Week Begins

 

grizzlyIf you’re just waking up, chances are you’re waking up to the news that you’ve lost money.

The Greece crisis is being likened to an economic Sarajevo. The markets are sinking faster than I can type. Asian stocks began tanking hours ago. (Last I checked, the Shanghai Composite Index was down 3.7%; the Nikkei 225 down 2.4%; Hang Seng down 2.7%; Sydney’s S&P ASX-200 down 2.3%; Seoul’s Kospi … well, you get the drift. By the time I hit “publish” these numbers are sure to be down further.) The European markets opened a few hours ago and … wow. Stampede city.

Yesterday, Puerto Rico — well, I’m sure you heard:

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Important but less-prominent corners of the financial markets experienced some turmoil yesterday. In particular, high-yield (“junk”) bonds experienced a global selloff. Now, when the financial media attribute market performance to one thing or another, you should always take it with a grain of salt. Markets reflect the aggregate behavior of thousands of buyers and sellers, […]

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