qnt
The fail rate for retail traders without the professional environment backing them would be >95%.
That is to say the best thing you could do to increase the probability of your success is to get in the door at a reputable place.
https://robotwealth.com/ is probably the only source of information for a retail trader that I'd recommend. It's still far inferior to actually getting a seat at a real shop.
There's plenty of work for programmers in trading companies too - much better job stability than for traders.
Parasites indeed
I know someone on a farm who had a few as pets. One somehow was taught to roll on its back and lift a fork/spoon like a barbell
All the best
you should take a backpacking holiday in a busy city somewhere (overseas?). If you have fun, try a working-holiday in a new city for a couple weeks. Maybe one you've been thinking of moving to?
just try it on. There's no downside.
The contradiction seems fundamental. You're suggesting existing deposits facilitate the creation of loans. The entire BoE article is a repeated attempt at showing how loans create deposits.
> Do you think that a bank which has NO MONEY is able to (in a practical sense) create infinite money out of thin air? Sure it can type "9999999999999 dollars" on a computer, but that wouldn't be "real money" in any practical sense, because you wouldn't be able to exchange it for goods and services.
That's ... exactly how it works. If the bank believes you are good for 9999999999999 dollars over the term of the loan, they put +x in your demand deposit account, and -x in your loan account (and from bank's view those are respectively the bank's own liabilities and assets).
You can then go and send that money (demand deposit) somewhere else to buy a house or whatever (goods and services). Bank A and bank B both have banking licences, which means they mutually trust using each other's customer demand deposit accounts as 'money'.
You mentioned you wouldn't be able to exchange that for goods and services - but that's exactly what happens. You then need to find those dollars and pay back the loan eventually from a job or whatever, or else you go bankrupt.
If you would like to turn that demand deposit into hard cash to keep under the mattress, your commercial bank will send your demand deposit to the commercial bank's account with the central bank, and the central bank will truck over some cash in return.
I know you get this since you write it as IOUs in the article. What I'm trying to get across is that nothing has to precede the creation of the IOU, whereas I think you say an initial deposit of government-issued central bank money (cash) is required.
> Follow-up question: if you genuinely believe this to be possible, then why isn't anybody doing that? Surely there are many people working at banks who would like to collude with their friends and family to create infinite money. If you believe that to be possible, why has it literally never happened?
Try it :) I think odds are you end up in jail.
And if a bank (or crypto exchange!) is in the business of writing crap to counterparties who can't pay them back, the bank probably goes out of business once everyone realizes the bank assets (loans) are garbage.
Trying to get a loan without intention of paying it back is bank fraud. It happens and occasionally for very large sums; https://www.afr.com/companies/financial-services/papas-mazco...
Further, regulators like to see banks hold capital against their assets to make sure they can fill the gap when some loans inevitably go bad. That capital could be retained earnings, shareholder capital, etc etc. It just doesn't have to come from an initial deposit.
- Bank starts with $0 capitalisation or deposits - Customer goes to bank and asks for $1 loan - Bank believes customer is creditworthy and says yep - Bank creates two accounts for customer, loan account and deposit account. Loan account is -$1 and deposit account is $1 - customer transfers $1 from their deposit account to someone else's account at a different bank in exchange for goods/services - customer account at the bank is now loan account -$1 and deposit account $0 - Customer eventually needs a way to get $1 back from somewhere else to pay the loan back, else face bankruptcy proceedings etc etc
Commercial banks all agree with each other that they accept each other's demand deposit accounts as a form of money.
https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
When you get a loan, the bank creates a liability and deposit out of thin air. The deposit is a "demand deposit", which is effectively equivalent and fungible to reserve-backed currency (hence the term "money" usually applies to both, though they are different things).
The bank needs no existing customer deposits to create a demand deposit and liability in your account.
You should run through your example again, except begin by creating a loan, rather than first beginning by a customer lending the bank a deposit.
The BoE article linked above is absolutely correct.
- Sunglass arms go over helmet straps, not under
- No half wheeling
An alternative approach to tracking CPI through scraping e-commerce. They get effectively the same result.
Japan lends to itself. The BoJ owns so much of the government bond market that there are days where the benchmark bond simply doesn't trade [1]. Under absolutely no circumstance will Japan have any issue repaying Yen denominated debt when they have a monopoly on the Yen. They're theoretically not far away from just retiring the whole bond market and just running an overdraft at the BoJ for all government borrowing requirements.
Can you provide evidence to your point on hyperinflation happening all of a sudden too? I think all instances in history (except maybe Zimbabwe, but I've lost the details) involve external obligations that are unable to be met (War repatriations payable in gold for Germany, extreme dependance on imports for Venezuela since the economy was so misbalanced, high USD denominated debt burdens for Argentina ... etc). I
[1]: https://www.wsj.com/articles/nobodys-trading-10-year-japanes...
If nothing else, please takeaway that MMT is a _framework for economic analysis_. You can apply it to any economy, you can use it to look at any policy decision, and you can work with this tool if you're a conservative or progressive. I find a lot of value in using it to understand China, Japan, emerging markets, economic history, etc.
With relation to the original topic, the answer through an MMT lens is very simple. Nominally, there's no limit.
A cornerstone idea of MMT is that a currency issuer can always purchase anything for sale in the currency that it has a monopoly over. Examples of these monetary sovereigns include the US, the UK, Japan, Australia, China. It does not include the EU, or most emerging markets (who effectively use another government's currency).
The implication of this is that a monetary sovereign government has no binding constraints on the amount of debt it can issue (it can of course issue debt to itself if no-one else is around to buy it, i.e. Treasury -> Central Bank).
Now that's not to say that government borrowing has no real limits. The most useful constraints to look at are real resource constraints (possible supply of goods and services), and external constraints (do you need to pay something in a currency you can't control?). If the government is purchasing more goods or services than the resource constraints are available to supply, you'll see an appreciation of prices (inflation).
Simply creating more dollars doesn't lead to inflation. Fiat currencies are just units of account (think score points), not some kind of commodity. Japan's money supply has quintupled since 1990 to 2020 (from memory), while the consumer price index has been roughly flat, and the USD/JPY exchange rate has been roughly rangebound (wide range, but not a monotonic increase like one would expect if using intuition )
Rushed for time, but happy to discuss/debate points of contention.
As far as I'm aware, I think the most glaring problems (tragedy of the commons, dealing with negative externalities) are very well known & have relatively well understood policy solutions (e.g. Pigovian tax).
When there is wide enough social buy-in that these policy solutions can be implemented without expending/risking too much political capital, the "problem" ends up resolved.
A good example might be smoking in Australia. Very highly taxed, forced grotesque health warning images plastered all over the cigarette packets, etc. The comparison travelling through Italy vs Australia with respect to number of smokers is pretty amazing. The population understands & accepts the negative externalities of smoking well enough to accept the forced hand of policymakers intervening in their lives, and won't vote anybody out because of it.
So to me, the more appropriate question is, how do we incentivise enough social buy-in that people will accept the personal disadvantages of e.g. a carbon tax, and still lend their support (vote) to the party who choses to implement it? Didn't work well for France last time they tried to hike taxes on fuel.
Again I think there’s a misunderstanding of monetary operations that lead to these conclusions. Banks absolutely do just sit on these reserves [1]. Banks do not lend reserves, nor do they need reserves or deposits in order to make new loans. Bank lending is constrained by the demand from creditworthy borrowers, and regulatory requirements. This [2] is a useful primer on modern lending mechanics
[1]: https://fred.stlouisfed.org/series/TOTRESNS
[2]: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
Look at US private home starts [1] for example. All the misallocation was done well before QE started, and no-one was building new homes for years following the Fed MBS purchases.
I take what you say as ‘losing buying power’ to mean that a lower quantity of real goods and services can be purchased for the same amount of currency. There isn’t any evidence that this has happened following the Fed’s QE programmes, despite most mainstream economists freaking out about the same point at the time.
The creation or destruction of dollars has no bearing on the purchasing power of the dollars held by anyone else. It is only when new dollars are used to make purchases in excess of existing supply constraints that you create inflation and erode the purchasing power of the currency. That is not to say it is a useless metric, but you need to look at what is being done with the money rather than just looking at the amount outstanding.
Japan is an interesting example of this with 30 years of history to look at. Money supply has expanded by multiples, while consumer prices have remained constant since the mid 1990s.
I also think this fundamentally misrepresents the mechanical operations taking place when the federal reserve “prints money” (guessing to mean QE). They are simply creating dollars to purchase bonds from the private sector - it is essentially an asset swap. The financial institutions give up their bonds, and gain dollars in return. No new money is injected into the private sector by doing this. The dollars that the banks receive usually just sit in their account at the federal reserve, not doing anything in the real world. Your examples would be more valid if discussing government fiscal stimulus programmes, for example spending $2T on infrastructure, since that is a direct injection of nominal wealth to the private sector.
So I think to say that he simply affirmed that aggregate demand exists is underselling his contribution - he managed to convince all the important policymakers of the time that it was important enough to overturn their prior thinking about how to use fiscal (not monetary) policy in a countercyclical manner.
The scare quotes around money printing don't help progress the dialogue around the mechanics and consequences of government spending either. Today with a fiat currency system, the government can enact countercyclical fiscal policy by simply crediting private sector accounts, and increasing a balancing government liability electronically (note there are _no taxes involved in doing this_). No money is 'printed' (the term conveys unrealistic connotations), private sector demand deposits are simply increased electronically.
The increase of these demand deposits is not inflationary unless they are used to purchase goods and services in excess of what can be supplied at a constant price level. So when we find ourselves in a situation where 20% of the workforce is suddenly unemployed due to a shutdown of economic output, the government can spend to help stabilise aggregate incomes without risking inflation, because no-one is buying stuff otherwise (and as a result, no-one would be making any income).
It is certainly true that a number of economic schools of thought have tried to use his name to legitimise their ideas, and he'd likely be disappointed with a few of them.
They sell a software terminal at about $20k/yr subscription, and there are > 325,000 paying subscribers. It's nearly an essential tool in finance. https://en.wikipedia.org/wiki/Bloomberg_Terminal.
It's pretty neat, there's some really interesting tech and history involved but it's all hidden away in a very insulated industry.
The overlap of the two businesses is likely counted in single digit percentages of revenue.
1) Quant Developer: Trading infrastructure, working on research platforms, taking algorithms created by researchers & deploying into production. Wouldn't want to do this at a bank, but at a hedge fund or proprietary trading firm it'd be fun. Compensation is good, lower variability, but somewhat more limited upside. DE Shaw, 2 sigma, Jane Street, etc.
2) Quant Researcher: A high quality quant masters degree at a minimum (think Baruch MFE), but often a PhD. Working on systematic trading research, market making algorithms, optimal hedging for large books of derivatives, etc. Usually a decent salary, but total compensation varies wildly based on performance.
3) Trader: More and more similar to #2 these days, but more focus on execution of strategies and real-time action rather than research, and more directly responsible for PnL. Optiver, IMC, SIG, etc. A quant masters degree probably isn't required to get a foot in the door, but I think it would help in the long term (e.g. helps build more rigorous understandings of why what you're doing might be working).
Things that might help pique your interest:
- For both academic and practical problems: http://quant.stackexchange.com/
- For keeping tabs on new ideas in the blogosphere (generally average, occasionally something useful): https://quantocracy.com/
- Useful information on getting started in the field: http://quantstart.com/articles
Outside of the academic literature, it is quite an insular field, so you have to work to find interesting ideas. If you can make money, you probably won’t be sharing much with anyone. A notable exception might be Rob Carver’s blog (https://qoppac.blogspot.com/).
From a CS background, a simple path to see if you might enjoy “quant investing” is to read some old papers from e.g. AQR about factor investing (Momentum, Value) and try to implement it with Interactive Brokers or similar. You should be able to roll something together with very little capital.
On the “quant trading” side of things, try the Avellaneda paper for statistical arbitrage, do some digging about RenTech, read the LTCM book, etc etc. Not something you can do without a lot of infrastructure behind you, but there’s enough information around to work out if it’s interesting.
Unemployment peaked at around 25% in the 1930s depression. Rough calcs suggest that could be surpassed: https://www.stlouisfed.org/on-the-economy/2020/march/back-en...
The language is quite accessible and it describes how various kinds of business cycles have played out through history. The highlight for me is an elaborate, punch-by-punch retelling of how the 3 major financial crises played out (1930s Germany, Great Depression and 2008). Rather than looking backward with the benefit of hindsight as most textbooks do, this gives you a real impression of how the events played out in real-time. There are even newspaper headline clippings in the margins from every week or so, just to show how the popular narrative was evolving as it happened.