Typography

Facebook recently announced a new cryptocurrency, Libra. I had earlier speculated about what a Facebook cryptocurrency might look like here for Breakermag. I think this is great news. MasterCard, Visa, and the various national banking systems (many of which are oligopolies) need more competition. With a big player like Facebook entering the market, prices should fall and service improve, making consumers better off. The most interesting thing to me about Facebook's move into payments is that rather than indexing Libras to an existing unit of account, the system will be based on an entirely new unit of account. When you owe your friend 5 Libras, or ≋5, that will be different from owing her $5 or ¥5 or £5.  Here is what the white paper has to say: "As the value of Libra is effectively linked to a basket of fiat currencies, from the point of view of any specific currency, there will be fluctuations in the value of Libra." So Libra will not just be a new way to pay, but al...

Sticky prices illustrated, from Eichenbaum, Jaimovich, and Rebelo ( link ) What makes ride sharing firm Uber interesting is not just its use of new technology to mobilize unused car space, but the method it uses to price its services. Uber's surge pricing algorithm varies cab fares dynamically. To get from A to B, the car that you hired this morning for $10 could end up costing $100 this afternoon. How unlike the traditional taxi fare it is displacing! In their 2004 paper on sticky prices, economists Bils and Klenow found that taxi fares tended to remain at the same level for 19.7 months before being adjusted. Getting from A to B pretty much costs you the same price day-in-day-out for almost two years. In our internet age, are prices getting less sticky?  At first glance no. Alberto Cavallo , who along with Roberto Rigobon created the Billion Prices Index (the bane of all inflationistas ), has analyzed scraped data from the websites of retailers who continue to sell mostly thr...

The price of 52 Samsung TVs gathered by the BPP, April 2008 - November 2009 ( Cavallo ) In a previous post , I mentioned that the Billion Prices Project (BPP) contradicts the claims of those who believe that the government understates inflation data. The BPP crawls major US retailers' websites and scrapes them for price data, compiling an overall US Daily Index that is available on its website. The deviation between this index and the official CPI is minimal, as the above link shows. The BPP isn't your father's price index—it shouldn't be viewed as a perfect substitute for the CPI. So use it wisely. What follows are a few details that I've gleaned from several papers on the topic of online price indexes as well my correspondence with Roberto Rigobon , one of the project's founders. The most obvious difference between it and the CPI is in the datasets: 1) Online vs offline : The price data to generate the CPI is harvested by Bureau of Labour Statistics (BLS) ...

This blog wouldn't be around if it wasn't for gold bugs. Many moons ago my former-employer (and friend), the truest gold bug you'd ever meet, would lecture everyone in the office for hours about imminent hyperinflation, the wonders of the gold standard, and why gold should be worth $10,000. Fascinated, but unsure what to make of his diatribes, I started to read about the history of monetary systems, all of which would eventually provide grist for this blog. A gold bug will typically have the following characteristics. 1) An abnormally-sized portion of their investing portfolio will be allocated to the yellow metal; 2) they believe in an eventual 'day of reckoning' when gold's price rises into the stratosphere, the mirror image of which is hyperinflation; 3) their investing case for gold is twinned with strong moral view on the decrepitude of the current monetary system and/or society in general; and 4) they are 100% sure that the monetary system's collapse ...