Tag: Finance

Commentary, Macroeconomics

COMMENTARY: Is Banking Regulation a Vicious Cycle?

Eric Gao

Araha Uday, Stanford University -- Supervision and regulation as we know emerged following the Great Recession when policymakers vowed to prevent what took place then–billions of dollars in bailouts for the biggest banks—from happening again. Although the majority of bailed-out banks eventually repaid their loans (leading to the federal government profiting $109 billion), some still have outstanding balances.  Still, a few missed payments are a small price to keep banks afloat; at least a chance of future repayment remains. A complete bank failure, on the other hand, would mean no repayments at all, highlighting the high stakes in maintaining a stable banking system.

Uncategorized

Analyzing the Effects of Geopolitical Shocks on the Cryptocurrency Market

Karthick Arunachalam

Tucker Saland, Princeton University -- The Russo-Ukrainian war had an asymmetric effect on cryptocurrency prices, with some cryptocurrencies appreciating and functioning as hedges against geopolitical risk, even as the rest of the market experienced a downturn. In the aftermath of the war, exchange-level data indicates that individuals in Russia and Ukraine purchased increased amounts of Tether, a stablecoin pegged to the US dollar. This paper has two objectives: (1) examine whether there exists a geopolitical risk premium in the cross-section of cryptocurrency returns using a rolling regression of excess weekly returns on the geopolitical risk index by Caldara, Iacoviello (2018) and control factors, and (2) understand the role of stablecoins during times of geopolitical turmoil.

Commentary, Macroeconomics

LONG-FORM COMMENTARY: Can Benjamin Keep His Throne as the King of Currency?

Karthick Arunachalam

Gabriel Bo, Stanford University -- The US dollar (USD) has been the default global reserve currency since the end of World War II, meaning most countries see the dollar as a safe investment and typically keep it in their coffers to conduct trade. At its highest, more than 71% of the world’s central bank reserves utilized dollar assets—that number has dropped to 59% today, but it still remains unrivaled. 

Commentary

COMMENTARY: San Francisco’s Real Estate Nightmare: Office Vacancies and Urban Flight

Karthick Arunachalam

Devan Bhumralkar, Stanford University -- In early 2023, the office vacancy rate in San Francisco climbed to a record 34.6%. The compounded effects of the remote work movement, massive layoffs in the tech industry, and the general economic downturn have left the city’s once-thriving financial district seemingly empty. Although one of the worst examples, San Francisco is not unique: High office vacancies have been the story nationwide, with cities like New York and Chicago seeing vacancy rates of 16% and 19%, respectively. 

Commentary

LONG-FORM COMMENTARY: The True Cause of Silicon Valley Bank’s Collapse

Karthick Arunachalam

Andrew Zeng, Stanford University -- On March 10th, 2023, Silicon Valley Bank, a premier financial institution in the startup world, suddenly collapsed. The federal government soon seized its assets, and as its clients tried, increasingly in vain, to withdraw their deposits, panic soon set in. Wealthy, platformed individuals began demanding that the government bail out the bank and compensate them, while news anchors and financial analysts predicted a ripple effect that would irreversibly end the dominance of Silicon Valley.

Commentary, Macroeconomics

LONG-FORM COMMENTARY: Meeting the Fed’s Mandate: The Recent Past and a Look Into the Future

Karthick Arunachalam

Rutvij Thakkar, Claremont McKenna -- The Federal Reserve’s dual mandate is as simple as holding unemployment below 4% and inflation below 2%. Unemployment should ideally be at the “natural rate” or the lowest unemployment rate possible without creating inflation. According to the Federal Reserve Economic Database, it’s the rate of unemployment arising from all sources except fluctuations in aggregate demand. Since the Baby Boomer generation has chosen to leave the workforce and retire, the Natural Rate—now called the Noncyclical Rate—of unemployment has consistently declined since 1980 to approximately 4%.