Innovations in the real economy thrive on modern financial markets

Size counts in capital markets, but so do finesse and skill. The capital markets team at Bank of Nova scored on all three points with a couple of mega-deals in 2012 around the financing of two acquisitions, Colombian lender Banco Colpatria and the internet bank ING Direct. In total, they raised $3.2-billion through the sale of common shares — a landmark in itself for Canada’s third largest bank by assets.

Is modern finance more like electricity or junk food?  This is, of course, the big question of the day. If most of finance as currently organized is a form of electricity, then we obviously cannot run our globalized economy without it.  We may worry about adverse consequences and potential network disruptions from operating this technology, but this is the cost of living in the modern world.

Submitted by Charles Hugh Smith from Of Two Minds Why The Innovation Premium Is Diminishing   The acceleration of competition as high-tech tools and skills have dispersed throughout the global economy is an under-appreciated trend.

It’s been around longer than any official, state sanctioned economy. Call it, if you like, the “original” economy. It is resilient. It is adaptive. And it will continue to exist and thrive regardless of whatever financial crisis slams the rest of the world in the future. The French even have a word for the kinds of people who operate within it: débrouillards.

Ann Harrison, Leslie Martin, Shanthi Nataraj, 22 March 2011It is broadly agreed that trade liberalisation can increase productivity. The question is how. Earlier literature emphasises the role of firms “learning” to be more productive, whereas recent studies suggest that more productive firms are “stealing” market share from less productive ones, thus raising overall productivity.

Ard den Reijer, Marga Peeters, 3 January 2012While EU leaders are drafting a fiscal compact, the problem of intra-European real exchange-rate misalignments remains. This column argues that reducing imbalances implies a focus on competitiveness, and hence on the alignment of nominal-wage growth with labour-productivity growth. Full Article: Wages and productivity in the Eurozone

Martín Gonzalez-Eiras, Dirk Niepelt, 24 June 2011Should developed countries raise their retirement ages to combat the economic effects of their ageing populations? This column presents a model suggesting that, viewed in isolation, putting off retirement will actually reduce growth. It is only when viewed along with other policies that the benefits for growth arise.Full Article: Does population ageing reduce productivity growth?