Month: June 2019

Posted on

Geldzug: FACEBOOK’S LIBRA: STAR SIGN OR TAMPON?

28 June 2019

  • Libra is planned to be a global cryptocurrency suitable for international transfers. Its value will be stable because it is based on a Reserve of high quality assets.
  • There are many unanswered questions about Libra’s regulatory status, particularly about its compliance with anti money laundering rules. It will not be accepted in developed countries until it satisfies each country’s regulator.
  • Libra can productively target remittances, which are an important segment of the global money transfer market. Remittances from rich countries to middle income and poor countries totalled USD $529 billion in 2018.
  • The impact on Western banks will be modest until Libra changes its business model.

…[read more]

Posted on

Geldzug: ECONOMIC GROWTH AND EQUITY MARKETS

19 June 2019

It is natural to assume that a country’s share market performance is driven by its economic performance, and therefore that a country with high GDP growth will generate high equity returns. Unfortunately, completely the opposite is true. For most countries over most periods, equity returns are negatively correlated with economic growth. How could this happen?

We have known for four decades that share markets are much more volatile than they ought to be if their price movements were driven by changes in economic and business fundamentals alone. Robert Shiller pointed out in 1981 that, based on price and dividend data since 1871, share price volatility was more than five times the level you would expect if prices responded only to new information about future dividends or real interest rates. This conclusion suggested that more than 80% of share price movements were mere noise, unrelated to fundamental information. Or, as Paul Samuelson joked, “The share market has predicted nine of the last five recessions.”… [read more]