Hartar Blog

Prior to the Global Financial Crisis the world economy experienced a period of increasing global imbalances where a group of countries saw their surpluses increase rapidly while, on the other side, a group of countries increased their deficits. These patterns were partly related to the "saving glut" hypothesis put forward by Ben Bernanke to explain the decline in global long-term real interest rates. It was also the case that some of the deficit countries (in particular in the Euro periphery) found themselves in a large crisis after 2008. This post is an update of the last ten years. Today the world displays smaller imbalances than at the peak of 2008 but what it was more interesting is the extent to which rebalancing had happened between different country groups. Let's start with the global view. The Figure below shows current account balances as % of world GDP for some regions or groups of countries. Data goes all the way back to 1980 although data is missing for some c...

New technologies in the financial sector are opening the door for potential disruptions: cryptocurrencies, M-Pesa, WeChat,... Many of them are seen as alternatives to either traditional currencies issued by central banks or to the intermediation role played by commercial banks. In this discussions, there is often the assumption that "money" and "payments" are features that always come together, they cannot be separated. The confusion originates in the standard definition of money: It is the asset that allows us to purchase goods and services, the "medium of exchange". The ultimate example is physical currency where a piece of paper that says €50 or $100 is both the asset (where the value is being held) and the medium of exchange (the payment vehicle of the payment technology). Transfer of the asset cannot be separated from the "technology" used to make the payment. By giving the note to a seller, you get in return goods and services for exactly t...