Joe's Blog

What Is Arbitrage? Hedge Funds Are Picking Up Pennies In Front Of A Steamroller

Hedge funds, especially “Relative Value” hedge funds, engage in something called financial arbitrage. Due to the sheer size of their exposure to currencies and bond markets, they put the entire financial system at risk. In normal market conditions, everything is fine. But rare events aren’t all that rare, and “risk-free” trades usually have the capacity […]

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Why Deregulation Breaks Things

Introduction There is a very suspect trend in this country over the last few decades. Every time there is an administration that pushes to deregulate – especially the financial industry – it seems to be followed quickly by a crisis. The next administration is seen as “cleaning up the mess” by clamping down on regulations […]

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The Second Repo Crisis Just Days Away – And This Time It Will Be Worse

September 16th marked the beginning of the recent repo crisis. If you are unfamiliar with the repo market, I highly suggest watching this video before you read this post. Since then, the Fed has been in emergency mode, effectively “bailing out” the overnight cash repo markets continuously. These efforts were supposed to allow banks some […]

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Maturity Transformation: Transferring Risk from the Elites to the Public

Maturity transformation should be illegal. Maturity transformation is the process by which short-term deposits at banks are lent out as long-term obligations. Deposits, which are redeemable at any time, are not actually available. They are tied up in loans that are not redeemable. This makes fractional reserve banking even worse than it would be by […]

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