The End of Alchemy

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• When the world economy is functioning well, capital normally flows from mature to developing economies where profitable opportunities abound, as happened in the late nineteenth century when Europe invested in Latin America. A strange feature of the savings glut was that because emerging economies were saving more than they were investing at home, they were actually exporting capital to advanced economies where investment opportunities were more limited. In effect, advanced economies were borrowing large sums from the less developed world. The natural direction of capital flows was reversed - capital was being pushed "uphill". (查看原文)

  不过如北 2017-04-14 13:11:39

• What is it that makes banks special? The distinguishing feature of a bank is that its assets are mostly long-term, illiquid and risky, whereas its liabilities are short-term, liquid and perceived as safe. Returns on riksy long-term assets are normally higher than the returns which the bank has to offer on its short-term liabilities. So banking is highly profitable. Unfortunately, the notion that a bank can offer safe returns on deposits that can be withdrawn at a moment's notice by using them to finance long-term illiquid risky invesments is, as common sense would suggest, generally false. The transformation of short-term liabilities into long-term assets - borrowing short to lend long - is known as maturity transformation. And the creation of deposits, which are regarded by the depositors... (查看原文)

  不过如北 2017-05-03 22:28:49

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