Thursday, May 28, 2020

Proposing Zero Percent, Standardized Loan Documents

I like Brian Romanchuk's work. While I often challenge his thinking, I find his work tantalizing. His latest tantalus[1], entitled "The Incoherence Of Yield Curve Control", was incomprehensible to me and now I think I know why. I needed a key.

Bonds and interest rates meet in the bond market where bonds are bought and sold. Sometimes you even find new loans coming out of this market. Where it gets confusing is how pricing is conducted.

I'll not try to explain pricing today. I am not the expert to undertake such an effort. My mission today is to propose a simpler way to understand market basics. I will propose that we follow the sometimes expressed preference of Modern Monetary Theory (MMT) advocates who want to have universal interest rates set at zero.

Saturday, May 2, 2020

Rethinking the Business Control Structure

This covid-19 pandemic and world wide response has certainly thrown the economy some unexpected economic shocks. Shocks styled in ways that I have never seen considered in economic models. The first shock comes from a division of the economy into essential and non-essential sectors. I wrote about that surprise previously.[1]

A second shock comes from seeing government shut down a large segment of the economy. I guess I knew that government could do such a thing but dismissed it as a meritless concept. In reality, this action should open our eyes as to who controls what in the business sector. We briefly explore the business control structure in this post.