Dirk Niepelt

The Mexican Peso has been recovering ever since Donald Trump assumed office. Its value has climbed back to nearly where it was at the time of the US election. Time series as reported by xe.

In an open letter, L. Rafael Reif, President of MIT, encourages Americans to oppose the White House’s budget plans.

On his blog, JP Koning discusses the case of Somalia which has managed without central bank issued money for decades. Old, legitimate notes and newer, counterfeit notes trade at the same price which equals the cost of producing counterfeits. See also this previous post.

In a CEPR discussion paper, Òscar Jordà, Björn Richter, Moritz Schularick, and Alan M. Taylor suggest that higher bank capital ratios help stabilize the financial system ex post but not ex ante, and that illiquidity breeds fragility. Abstract of their paper: Higher capital ratios are unlikely to prevent a financial crisis. This is empirically true both for the entire history of advanced economies between 1870 and 2013 and for the post-WW2 period, and holds both within and between...

The Economist reports that forthcoming European payments regulation has the potential to disrupt the industry. Provided the customer has given explicit consent, banks will be forced to share customer-account information with licensed financial-services providers. … payment services … could become more integrated into the internet-browsing experience … With access to account data … fintech firms could offer customers budgeting advice, or guide them towards higher-interest savings accounts...

On the Liberty Street Economics blog, Catherine Chen, Marco Cipriani, Gabriele La Spada, Philip Mulder, and Neha Shah discuss last year’s regulatory changes regarding money market mutual funds: First, institutional prime and muni funds—but not retail or government funds—must now compute their net asset values (NAVs) using market-based factors, thereby abandoning the fixed NAV that had been a hallmark of the MMF industry. Second, all prime and muni funds must adopt a system of gates and...

In the Berner Zeitung, Mischa Aebi reports that many firms have closed their accounts at WIR-bank. The bank had imposed new requirements stipulating that account holders must accept at least 3% of their sales to be paid in WIR money.

On his blog, John Cochrane discusses the possibility of an alternative monetary policy regime in which the Fed tightly controls expected inflation. He states, repeatedly, that given our current understanding of the matter he would refrain from implementing such a regime if he became Fed chair (rather than stating that he would not currently advise to move in that direction). Given that Janet Yellen is expected to retire next year and John Cochrane is mentioned as a possible successor, I...

Shop window in Turin.

On Bloomberg, Yuji Nakamura and Lulu Yilun Chen report about conflicting views in the Bitcoin community on how to address capacity limits in the blockchain. Bitcoin Unlimited is essentially a software upgrade to the blockchain. Years ago, bitcoin’s early developers imposed a cap on the amount of data it could process. While that slowed down the network, it was seen as a necessary safety measure against potential attackers who could overload the system. Now, Unlimited supporters say the...