Hartar Blog

Libra, the cryptocurrency backed by Facebook (and the other members of the Libra association) was announced yesterday. The web site  and the white paper  refer to the new currency as a stable currency: "Libra is designed to be a currency where any user will know that the value of a Libra today will be close to its value tomorrow and in the future."  The stability is guaranteed by the intrinsic value of the coin, a result of the assets that back the value of the currency. These assets are called the "Library Reserve".  The white paper refers to the similarities of this mechanism and the currency board that some currencies with fixed exchange rates use: "...the mechanics of interfacing with our reserve make our approach very similar to the way in which currency boards (e.g., of Hong Kong) have operated. Whereas central banks can print money at their own discretion, currency boards typically only print local currency when there are sufficient foreign exchange asse...

Estimating the probability of a recession over a short horizon has so far proven to be a challenging task for economists. Each cycle looks slightly different from the previous one and trying to come up with precise indicators of crises leads to either overpredicting them or missing their timing as some risks are underestimated. As the US enters its longest expansion ever, we are back to a discussion on whether there are any reliable indicators that can help us forecast the next turning point.  Without providing an exhaustive list of all candidates, let me highlight the interaction between three statistical patterns and how they inform us (or not) about the risks ahead:  Three (related) statistical patterns 1. The Yield Curve tends to invert before a recession. 2. The US does not seem to be able to sustain a low unemployment rate. Once we reach "full employment" (or even before), unemployment bounces back as we hit a turning point. I have written about this pattern in my previ...