Central bank digital currencies
13 January 2021

Central-bank digital currencies will make the financial system more efficient. But will they make it safer? Maybe, but they could easily end up increasing systemic risk. Depends on the implementation.

Erasmus and Turing
11 January 2021

As a part of its quest for independence, Britain decided to leave the Erasmus program. We now have Turing, the global version. So, will it lead us to the sunny uplands?

Brexit and Marxism
3 January 2021

The Brexiteers and Karl Marx have more in common than often thought. Both were guided by ideology, and both refused to tell us how to get to the sunny uplands they promised.

What to do about the Covid financial system bailouts?
22 December 2020

Financial crises and bailouts of financial institutions are inevitable and can’t be prevented without paying too high a price. Diversity is the best way to minimise the frequency and severity of crises and ensure sustainable high economic growth.

The crypto-technical response to the Covid-19 bailouts
13 December 2020

Are cryptocurrencies and blockchains the solution to the problem laid bare by the Covid-19 bailout of the financial system? No.

The libertarian response to the Covid-19 financial turmoil
9 December 2020

A libertarian sees the Covid-19 bailout of the financial system as a predictable failure of regulations. Much better to have a laissez-faire economy and never, ever bail private firms out. But does the laissez-faire utopia survive contact with reality?

The socialist response to the Covid-19 financial turmoil
4 December 2020

The state just saved the financial system from itself. What is the point of privately owned banks if they need to be bailed out every decade?

On the response of the financial authorities to Covid-19
2 December 2020

The financial authorities have just bailed the financial system out for the second time in a decade. While the authorities are proud of having prevented a financial crisis, are we really better off? No, one cannot judge the policy intervention a success if it is only due to the promise of the intervention that the problem arose in the first place.

The Covid-19 bailouts and the future of the capitalist banking system
26 November 2020

The central banks bailed out the financial system in March 2020, the second time they have done so in 12 years. What is the point of privately owned banks if they require a bailout every decade?

Which programming language is best for economic research: Julia, Matlab, Python or R?
20 August 2020

The most widely used programming languages for economic research are Julia, Matlab, Python and R. This column uses three criteria to compare the languages: the power of available libraries, the speed and possibilities when handling large datasets, and the speed and ease-of-use for a computationally intensive task. While R is still a good choice, Julia is the language the authors now tend to pick for new projects and generally recommend.

ARM on AWS for R
15 June 2020

Amazon AWS has been recommending ARM Graviton2 as a cost-effective alternative to Intel/AMD instances. So I tried it out.

Low vol strategies
8 May 2020

Does it make sense to invest in low vol funds?

Of Julia and R
8 May 2020

I just tried the same code in R’s data.tables and Julia’s DataFrames, and the results are a bit surprising.

How to manipulate risk forecasts 101
30 April 2020

It is easy to manipulate risk forecasts. If your regulator or compliance officer sets a risk target you don’t like, just tell them what they want to hear and continue taking the risk you like.

The five principles of correct riskometer use
27 April 2020

It is easy to criticise risk forecasting, but it’s rather pointless unless one can come up with proposals. Here are my five principles for the correct use of riskometers.

The problem with Backtesting
25 April 2020

Backtesting is the magical technique that tells us how well a forecast model works. Test the model on history, and we have an objective way to evaluate how good the model is. But does it really work in practice?


What Brexit has done for us

With Britain finally out of the European Union, will the promises of the Brexiteers be fulfilled? — Are the sunny uplands ahead? Maybe, but more like an Icelandic, not a mediterranean summer, i.e. cold.

If we just look at the economy, it doesn’t look all that good.

Starting with GDP, when we were voted for Brexit our GDP was 21.6% of the European GDP and today it is only 19.9%. That means our GDP would have been £183 billion higher if we had stayed in the same relative place compared to the EU.

I can hear the retort. What about Covid? Doesn’t that explain 2020? Yes, but it also affects Europe, and this is relative. If I assume Covid affects UK’s GDP by the same amount as Europe’s (reasonable as UK has quite similar Covid stats), it is quite reasonable to blame Brexit for the relative shortfall.

So, the Brexit shortfall is £183 billion.

And if we look at the stock market, the FT100 is up by 3.2% since the day before the Brexit vote, while the S&P-500 is up by 80.1% and the DAX up by 36.2%.

The rational investment strategy clearly seems to be to put ones money anywhere but in FT100. Now, the FT100 is not the British economy. So, is there a case for investing in Britain than than somewhere else?

More GDP details

When I calculate the British GDP relative to the European Union’s GDP, we just about peaked around the Brexit vote and it has been declining since.

Our GDP ranking remains the same, with 10 European countries ahead.

More stock market details

I don’t have every stock market in Europe in the figure below, but do have all of the important ones. And, FT100 has performed abysmally. For more on stock markets see my Covid-19 page.

Brexit disappointments

In all the disappointments about Brexit, one stands out — the inability of the libertarian Brexiteers to outline a coherent vision of what Brexit will accomplish. They used to see rational economic management as as a virtue, now what matters is culture. For more see “the Brexit culture war”.

Brexit bloggs

© All rights reserved, Jon Danielsson, 2021