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“Financial education.” This was my condensed response to a question in a recent Publishers Weekly interview: “What could have helped improved the lives of so many people during the Covid-19 crisis?” If more people had a deeper knowledge of finance, probably there would have been more planning and saving by the masses for this unforeseen emergency. But what are some of the most important lessons that someone (especially an entrepreneur) can learn from the science of finance?
JEROME POWELL does not want you to misunderstand him. The Chair of the Federal Reserve knows that communication is a big part of how monetary policy works. Mr Powell speaks plainly. He is not an economist, but that probably helps, because he is less likely to resort to confusing jargon. His messages at the Fed’s press conference on March 17th were admirably clear: no change in the main policy settings; no change in Fed guidance about future shifts in policy; and no real concerns about jumpy government bond markets.
WHEN BOND markets seized up in the spring of 2020 the problem was a shortage of cash. A global dash for dollars caused bond yields, which move inversely to prices, to spike. It sent the greenback soaring in currency markets. And it caused trading in Treasuries, usually the world’s most liquid market, almost to dry up. Today the opposite problem looms: a surfeit of money. It stems from the Federal Reserve’s response to last year’s crisis. The central bank calmed markets by buying vast quantities of bonds with newly created cash, and has continued its purchases,
MOST PEOPLE have little time for quants. They find the language of quantitative finance far from illuminating. Even fairly numerate people struggle to grasp what comes easily to pointy-headed number-crunchers. Take the idea of correlation, the co-movement of two or more variables. Such relationships vary with the period over which they are measured. The direction can shift. Things quickly become confusing.
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