Safe assets are the building blocks of modern financial markets. This column examines the sectoral dynamics of safe assets across advanced economies since the 1980s. It shows that foreign demand for these assets has steadily increased, with the financial sector playing a key role in meeting it. However, because financial institutions often back the safe assets they create with risky loans, this rising foreign demand can fuel domestic credit booms and contribute to macroeconomic instability. The results highlight the importance of carefully managing the creation of safe assets within the global financial system.
Stablecoins, Tokens, and Global Dominance
Technology is reshaping capital flows and currency dominance; data integrity is essential for financial stability
Les inégalités aux Etats-Unis (5/5) : une financiarisation prédatrice
traduction française du billet de blog "Predatory financialization. Understanding Inequality: Part V" de Paul Krugman
Lower-income country debt payments hit highest level in 30 years - Debt Justice
Lower-income country debt payments have trebled in the last decade, according to figures calculated by Debt Justice based on IMF and World Bank data
One shock after another: Why fragile economies are falling further behind?
Fragile and conflict-affected situations (FCS) never fully exited the pandemic recession and now face renewed stress from a major Middle East–driven energy shock. Nearly 60% of FCS economies still have lower real income per capita than in 2019 (vs 18% in other EMDEs), with poverty and food insecurity concentrated in non-recovered countries. The blog points to three main drags—high debt, conflict, and larger disaster losses—and calls for conflict prevention, macro stability, fiscal space, jobs, and sustained support.
The Co-Holding Puzzle: New Evidence from Transaction-Level Data
The tendency of consumers to hold low-yield liquid savings while simultaneously holding high-cost unsecured credit on revolving credit lines is a long standing
The Quiet Rewiring of American Finance
Stablecoins, Treasury markets, and the most significant shift in financial infrastructure that almost nobody is discussing.
The Credit Card Debt Puzzle: The Role of Preferences, Credit Access Risk, and Financial Literacy
Abstract. We use the 1979 National Longitudinal Survey of Youth to revisit what is termed the credit card debt puzzle: why consumers simultaneously co-hold high-interest credit card debt and low-interest assets that could be used to pay down this debt. Relative to individuals with no credit card debt but positive liquid assets, borrower-savers have very different perceptions of future credit access risk and use credit cards for precautionary motives. Moreover, changing perceptions about credit access risk are essential for predicting transitions among the two groups. Preferences and the composition of financial portfolios also play a role in these transitions.
Tax and the Law of Market Cycles
<p>The signature development in financial regulation over the past two decades has been the macroprudential turn: the recognition that healthy financial conditi
Structural adjustment: damages, reparations and pathways to non-recurrence
Beginning in the 1980s and 1990s, the International Monetary Fund (IMF) and the World Bank implemented neoliberal structural adjustment programmes (SAPs) across most countries in Asia, Africa and Latin America. SAPs imposed austerity, privatisation and economic deregulation and have been associated with severe negative impacts on human welfare, including (a) declining real wages and working-class consumption, (b) increased rates of poverty and basic-needs deprivation, (c) increased neonatal and maternal mortality and (d) reduced health system access. Structural adjustment also created conditions for increased financial outflows and drain from the global South through unequal exchange. This paper reviews evidence of these damages and proposes possible options for reparations and distributive justice. We argue that the IMF and the World Bank should be democratised and restructured—or otherwise replaced by alternative institutions—to prevent further harm.
THE 2028 GLOBAL INTELLIGENCE CRISIS
A Thought Exercise in Financial History, from the Future
The institutional politics of Carney’s defence bank - The Hill Times
Canada’s role in NATO finance risks locking in a defence-driven political economy that will be difficult to reverse.
Beyond Income: Dynamic Consumer Financial Vulnerability
This research challenges the entrenched belief that financial vulnerability affects only low-income consumers. Instead, most consumers across the socioeconomic spectrum experience varying degrees of financial vulnerability at different points during their lives, whether sporadically or chronically; vulnerability is dynamic and heterogeneous. The authors propose a novel, theory-driven definition of consumer financial vulnerability (CFV) as the risk of incurring future harm, given the consumer's current access to various financial resources. A new conceptual framework decouples “vulnerability” from “harm” to distinguish the state of CFV, its determinants (access to various interdependent financial resources), and the constructs it foreshadows (multiple interconnected forms of realized harm). Five research propositions follow: (1) financial resource volatility plays a vital role in CFV, (2) recovering from harm requires more financial resources than preventing harm, (3) a multiperiod lens is needed to assess CFV accurately, (4) greater financial resource access can increase CFV, and (5) generalized financial literacy is not a panacea for mitigating CFV. The propositions and their implications for marketing strategy, public policy, and consumer well-being offer a rich research agenda. The authors propose a measure of CFV—the probability that financial resources are insufficient to meet or exceed a harm threshold—for future empirical investigations.
The Shadow Dollar System
Iran built a parallel financial infrastructure on the same stablecoin rails the US just legitimized. That contradiction is not an accident.
Debt and the Response to Household Income Shocks: Validation and Application of Linked Financial Account Data
The increasing availability of data derived from linked consumer financial accounts has the potential to dramatically expand the potential for research. Examining the most comprehensive existing set of linked-account data, consisting of transaction and balance sheet data for millions of Americans, I demonstrate the power and versatility of such sources. I discuss advantages and concerns arising from this type of data and match a range of distributional moments to external sources. As one application, I test consumption elasticities across households with varying levels, and types, of debt. I find that heterogeneity in consumption elasticity can be explained entirely by credit and liquidity.
Consumption Response to Credit Expansions: Evidence from Experimental Assignment of 45,307 Credit Lines
In a field experiment that constructs a randomized credit limit shock, participants borrow to spend 11 cents on the dollar in the first quarter and 28 cents by the third year. Effects extend to those far from the limit, those who had the new limits as available credit, and those with a liquid asset buffer. In the short-run, flexible and installment contracts are used in tandem, with unconstrained using installments more. Long-run borrowing is predominantly using installments. Near limits, participants borrow when credit expands but save out of constraints when limits are tight. Findings support a buffer-stock interpretation emphasizing precautionary saving.
