All posts by fpires01

References for Global Currency Paradigm Changes

I saw a FT article last year about how the Euro seemed to be replacing the US Dollar as the global currency. Unfortunately, I seem to have lost it.

Nevertheless, I remember that it was a good enough that it has stuck with me all this time. I’ll probably try to find it again at some point and if I do, I’ll update this post with the link.

At the time, it occurred to me that it was one of these obvious things that should have come up on my radar. The article had this list of variables that it looked at, which worked as a yardtick of the status of USD as the global currency of the world.

Note that the issue is not trivial. It is not just a curiosity that tickels my mind. It is something that should be at the forefront of anyone even interested in the state of the world. For me, it is a yardstick of global economic and geopolitical paradigm stability/shift. Having the monopoly of the global currency of the world was one of the hallmarks of the Persian empire, of the Roman Empire, of the Abbasid Caliphate, of the Carolingian Empire, of Venice and Florence, Byzantium, the Spanish Empire, of the British Empire and now of the USA.

Unable to find that article, I am now left to figure it out on my own. So, now that I think about what they may have been, I am taken back to the definition of what a money is supposed to do in order to be successful:

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1.   A unit of Account – This means that currency is something which we use to measure value. The easier it is to measure that value, the better the currency is. This is why most currencies have switched to the metric system. Another way to think about it is as the St Louis Fed, currency is also as the item we use to enumerate how many of something else is worth. “You can think of money as a yardstick-the device we use to measure value in economic transactions. If you are shopping for a new computer, the price could be quoted in terms of t-shirts, bicycles, or corn. So, for instance, your new computer might cost you 100 to 150 bushels of corn at today’s prices, but you would find it most helpful if the price were set in terms of money because it is a common measure of value across the economy.” In this sense, the more people are willing to accept something as a means to count other things, then it is a good money.

2.    A store of Value – If the value of a good in a currency changes a lot, the currency is a less store of value, as the worth of the currency fluctuates wildly. This is why stable inflation and exchange
rates matter.

3.    A means of Exchange – If people are willing to count and hold on to a currency and then to use it to buy and
sell things, then that currency is good.

Looking at the above, should give you a good notion of the things wants to look at when deciding what the dominant currency of the world is. If most goods are quoted in a specific currency, if that currency is more stable than the rest and if it is used more for transactions than the rest, then that is the dominant currency of the world. In a sense, the best way to think of the above is to consider that money is flow and stock. The currency that flows the most and the currency that is most stocked is the global currency of the world.

As a general reference, data from the Bank of International Settlements (BIS) is probably a good reference. To simplify things and to be clearer, I’m going to use the aforementioned structure:

Money as a flow

Financial Transations

Primary markets: IPOs and Bond issuance

Secondary markets: OTC Trading and Exchange Trading – Equities, Bonds, Derivatives, Commodities.

Commerce: This data set from an IMF Article about global invoicing might also be interesting as a proxy for trading.

Monetary transfer: Data from Swift, which monitors global transactions.

Money as a stock

Savings: Global CB reserves per currency, is probably a good gauge of savings preferences. See for that the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER).

Market CapitalizationEquities (remember that every stock market is denominated in domestic currency)

Debt: This IMF Database is interesting, as is this WB Database, this BIS dataset and this OECD data. However, none seems to have currency distributions. For currency distributions of sovereign debt check here and here. There might also be something in this joint project here. In another note, here’s an interesting discussion of sovereign debt risk vis-à-vis currency denomination.

I think another things that might be useful to add on top of this, is the insights of Optimal Currency Area theory. Clearly, no one fulfils those criteria perfectly, but whichever does best, ought to be the preferred currency, when the aforementioned characteristics are fulfilled:

  1. Labor mobility across the members
  2. Openness with capital mobility and price and wage flexibility across the members
  3. Automatic fiscal stabilisers across the members
  4. Business cycles alignment across the members

This then can also send one on a rabbit hole of other variables, such as those associated with fiscal expenditure, i.e.: military expenditure (SIRPI is the go-to place for this).

Anyway, as it stands, the USA is clearly the dominant currency. Also, the world using the US Dollar as its global currency is a very suboptimal state of affairs given the lack of integration between the USA and the rest of the world (although more so for 1 and 3 than 2 and 4). Also, the outclasses everyone militarily. So, for now, none of this looks to be changing anytime soon.

Another thing that would be interesting to check would be how the change occurred in the usage of dominant currencies in the past. How long did it take the world to go from Sterling to greenback, etc?

Here are some sources:

Global Financial Data discussion

Schenk 2009, The Retirement of Sterling as a Reserve Currency after 1945: Lessons for the US Dollar?

Eichengreen 2005, Sterling’s Past, Dollar’s Future: Historical Perspectives on Reserve Currency Competition

Eichengreen 2008, Globalizing Capital: A History of the International Monetary System (review)

This is abt debt:

Abbas et al 2014, Sovereign Debt Composition in Advanced
Economies: A Historical Perspective


Podcasts, Audiobooks & paternity leave

I recently went back to work after taking two and a half months off to be on paternity leave. It was wonderful to spend time with my child and bond. It was genuinely one of the most wonderful experiences I’ve had and one of the perks of living in Sweden.

During that time I also had a lot of time on my own, when the baby was asleep or out on a walk with his mother or just when I needed to fix around the house. To pass the time, I tried to keep up with the world and learn interesting things, in as passive a way as possible, given that I couldn’t just sit down and read. This would have required the use of my hands or eyes, which it turns out, as a dad, it’s something you lose. You must be able to track and catch a clumsy baby at all times… Podcasts and audiobooks are great for this. They’re also good for commuters and I still listen to the shows on my way to and from work.

The list below includes shows and books I’ve listened to during that time, which I thoroughly enjoyed and found fascinatingly, informative and eye-opening. Unsurprisingly, History, Economics and Politics figure prominently on this list. I thoroughly recommend it.


The History of Rome, by Mike Duncan – from its foundation in 753 BCE to the fall of the western empire in 476 CE. Probably one of the best podcasts out there. An inspiration for anyone interested in history and in writing/podcasting about it. Well researched and well delivered. Also, pay attention to the introductory and final comments in order to get a peak at what a rollercoaster making this podcast was for Mike.

The History of Byzantium, by Robin Pierson – from 476CE to its collapse in 1453CE. For me this is even more interesting than the history of Rome of which I knew a lot. My general ignorance about it and Robin’s extremely good research, nuanced synthesis and articulate and entertaining delivery of the material make this an enormously enjoyable listen.

Revolutions, by Mike Duncan – It’s supposed to cover them all from the 1640’s revolution that overthrew the Stuarts until the Iranian revolution in 1979 (expected). Presently, Mike is going through the revolutions of the first half that overthrew the post-Napoleon absolutist reactionary system known as the “Concert of Europe” orchestrated by Austria’s Metternich.

The History of Exploration, by Guillaume Lamothe – Maritime exploration plays a disproportionately large role in Portuguese history, culture and identity, not to mention the world and our species. Much like the others, this is a really great podcast. Unfortunately, there haven’t been updates in quite a while, which is a pity. The latest episode promised an upcoming exploration from an African perspective I’ve been looking forward to, but which Im starting to fear will never materialise. This really is a great show. I still recommend it even if there’s no further update,. The explorations of the Mediterranean world and its neighbouring regions before and around the time of Alexander the Great are fascinating and not well divulged enough. This is a place to acquaint yourself with them.

Planet Money, by NPR- little change of focus and style. This podcast and the next ones are more in line with the radio show format. The best way I can describe this podcast is that it basically discusses weirdly interesting case studies in economics. It’s mainly micro, although on occasion they’ll do an episode about what happened in Argentina or Venezuela. I’ve been hooked since I learned salmon sushi was invented as a way to create a market for Norwegian surplus fishing/farming as the country sought to unwind its subsidies. Just fascinating!

Hidden Brain, by Shankar Vedantam at NPR – behavioural economics podcast covering the usual suspects of psychology, sociology, neuroscience and economics. Fascinating, short and the presenter just sounds like the kindest guy ever.

Invisibilia, by Alix Spiegel, Hanna Rosin and Lulu Miller at NPR – a show about the invisible things that shape our life. Mostly interesting case studies in psychology, neuroscience and anthropology. A lot of sad and heavy stories, but the presenters tend to find a way to spin them in a heartwarming hopeful way. Each season has relatively few but long episodes. Without doing it the justice it deserves, past topics have covered real world Matt Murdock (minus the ninjas part of course, but bat-vision is still pretty awesome) and the Belgian town of Geel where people welcome mental illness patients into their homes. A lovely listen 🙂

538 – intelligent, informed, quantitative and no-nonsense political analysis of what’s going on across the pond from Nate Silver, one of the few people to warn us against our optimism regarding the post-2016 election world.

Control Risks – world geopolitics from the leading political risk consultancy. For when you need a little bit more insight than cable news and the haystack of non-contextualised facts of the print media. Because it’s easy to lose yourself in the waves and lose sight of where the current is taking you.

Pop-culture happy hour, by NPR- for your daily dose of film reviews. Some times I wish it’d focus more on books and music but still very good, particularly the episodes about independent film festivals where they go through and recommend films I’d otherwise never hear about. Light, funny, generally kind and interesting! Because all the other entries are kind of heavy


The Vikings, by The Great Courses, lectured by Professor Kenneth W. Harl, from Tulane University – he offers a very comprehensive overview of the history of the Scandinavia from the Stone Age up to and including the creation of Sweden, Norway and Denmark. I never realised the debt that western culture owed to Icelandic poets…

1177 BC: The year civilisation collapsed, by Eric H. Cline of George Washington university – I remember learning about the Egyptians, the Minoans, the Mycenaeans, the Assyrians and the Hittites in history class when I was around 12-13 years old, but it seems I remembered relatively little and that that curriculum was either over-simplified or is now outdated. This book offers a comprehensive and authoritative overview of the evidence and the picture it paints about that distant but not so different time. The focus is on the trade between these civilisations and on the thriving international relations we are now able to witness in recovered historical records. But there’s plenty of fascinating snippets of econfomics and social insights. Also: the Iliad, Troy and complexity theory! Boom

Find these on iTunes or, like myself, on Overcast. Enjoy!

Returning to blogging

It appears that I have not written anything anywhere since September 2016. Prior to that my blogging output had shrank from a decent flo,w, about 4 years ago to a mere trickle due to the fact that my professional life required more and more attention and time. However, something else happened shortly after my latest post which required my undivided attention and care: together with my wife we had the great fortune to welcome our first child into the world. Understandably, that became a priority that took over everything else. 🙂

However, now that it’s been a year and that he is starting kindergarten, I’m going to start having a little bit more time on my hands. Not too much. Just a little bit. Particularly in the mornings, so I’ll be able to post again a bit more now and then. Sometimes it’ll be short and about whatever I’ve been doing or thinking about. Other times, I’ll take several days to put down more complete ideas. The tone is not going to be purely academic, historic, economic, political or finance-y, because those are not the only things I think about, but I suspect they’ll make up a nice chunk of what I’ll be writing about as those are things that do tend to occupy my mind most of the time. Nevertheless, this website will become more of a daily life blog than the sort of exploration of my intellectual preoccupations I had initially intended because that’s just a little bit pretentious and time-consuming, both of which are things I’ve recently realised and am trying to address.

Moreover,  I should mention is that I will do most of this posting here. I have plans to automate quarterly posts about the ECB and the Euro-zone and to publish those at Place du Luxembourg because they’d be relevant there. But until that automation is done, I’ll focus on doing things here.

Finally, I should mention that my motivation for blogging remains the same. I’ve been writing for a living for several years. I enjoy it and to an extent I’ve realised that writing things down helps me sort out my thought about whatever it is I’m thinking about. Putting the characters on the screen forces me to be a little bit clearer and more honest about my thoughts and re-reading myself forces me to be a little bit more critical about what I might have originally thought was just obviously true. Ultimately, I blog for my own sake to just get this stuff off my chest and out of my system without becoming an enormous bore to those around me. The internet being what it is, hopefully others might come across this and enjoy it. Others might not. That’s fine. I’ve long stopped chasing clicks. 🙂

Bearing this in mind, have a good day and see you around.


Rise to Power and the Distribution of Rule Duration of Roman Emperors

Having gotten stuck in the project that I am working on at the moment, I decided to pass the time and heal my frustrations by playing a little bit with Roman Empire Data.

What I did was to match data for the duration of the Roman Empire with a few dummy variables on how each emperor rose to power. The data being what it is, what I found is purely descriptive. It does not really add anything that is particularly new, but at least it does not contradict common sense. Moreover, it is possible that by narrowing things down a little, it may hint at those things that matter most among those things we think matter.

It turns out that a lobbying mother, inheritance and practice make for longer rules while getting to power through the support of some general makes for shorter rules.

Continue reading Rise to Power and the Distribution of Rule Duration of Roman Emperors

Smile, the world is not as bad as you think! :)

Here’s a positive note on which to end 2015:

Having recently moved to Sweden, I have inevitably become more exposed to “Made in Sweden” products, be it consumer goods or ideas.

Today, I’d like to highlight some of the recent work of Hans Rosling, which can briefly be summarised as

The world is not as bad as the majority of us think. But is not really our fault for being wrong.  We are wrong about the world because we are biased, misinformed and our education is outdated

Aside from an accomplished Medical Doctor at the top Scandinavian medical institution, Karolinska Institutet, Hans Rosling is also the CEO of Gapminder, a fascinating non-profit organisation that organises (publicly available) statistics showing how the world has improved in so many different ways, be it from an education, health or income distribution perspective. This is the video that caught my eye and it uses the tools created by that organisation.

If you like this sort of thing, I recommend that you also check out the IMF DataMapper tool, which is also quite insightful, even if it lacks the very appealing time lapse feature.

In what follows, I go through some of things I thought about while watching this video. If you are interested in cognitive biases, prejudices, alienation income distribution and economic growth, you may want to have a look at this post. It says nothing new really and mainly praises the work and ethic of Gapminder. The point, some part of which I combed through in some detail to make sure there was no mistake, is that we are fortunate and should be happy to be alive at this moment in the history of our planet and that where exactly we were lucky to be born in exactly has never mattered as little as it does now. And that’s not nothing given recent developments across Europe and the middle east.

Continue reading Smile, the world is not as bad as you think! 🙂

Correcting the Probability of Roman Emperors – Data, Empirical CDF, Exponentional Functions, Kolmogorov-Smirnov Test, Confidence Levels and Critical Values

The idea that we can use distributions to describe political systems really stuck with me. Sure, it’s not the only one way to do so, but it seems to offer a particularly interesting and unbiased approach to measuring the survival of political systems. Unfortunately, when I discussed this fact with an example of the Roman Empire, I got it wrong. Not the general conclusion. Just the detail. The way I did it was wrong… which is embarrassing. But there you go, now there’s going to be a record of how I did it wrong and how you do it right, which was kind of what I wanted to do with this blog in the first place.

The rest of this post is organised under the following headings:

  • How did I figure I was wrong?
  • I counted duration in approximate (integer) years not in days
  • I made a mistake calculating the Kolmogorov-Smirnov Test
  • Getting accurate data
  • My Final Say – Data, Procedure and Results

 If you are just interested on how it gets done, scroll through to the end, where I’ve actually posted the excel file with the correct solution to the problem.  I hope this helps and somewhat redeems my mistake.

Continue reading Correcting the Probability of Roman Emperors – Data, Empirical CDF, Exponentional Functions, Kolmogorov-Smirnov Test, Confidence Levels and Critical Values

Economists, Quants and Traders

When I started working in finance as a fixed income analyst I realised I had some insight about the macro and the political drivers of financial markets, but I knew very little about finance, formally at least, in the sense I had never really studied it. More importantly, as I came to realised reading financial markets-trader oriented media, I knew nothing about what or how the market itself thought about how it worked. Having been trained in New Keynesian economics, I was accustomed to rational agents, micro-founded models and what I would otherwise describe as the rational  choice approach to social sciences. What I eventually realised was that quants and traders couldn’t really care less about those things. Quants looked at probabilities mainly and traders used technical analysis for the most part. So what are their relationships?

Continue reading Economists, Quants and Traders

Roman Empire Roads, New Trade Theory and the history of Europe’s Economic Core

In preparing some tutorial notes on trade and geography, I was trying to convey some of the interesting agglomeration insights of New Trade Theory and got stuck on whether I should mention the Roman Empire and its network of roads and the effect it may have had on establishing Europe’s economic core. Ultimately, I decided against it because I thought it would confuse students and because I didn’t find any reference that said that is a cause of Europe’s core. Also, this is a group of people of whom I cannot assume any prior knowledge of the Roman Empire and I might just end up confusing them. So for practicality’s sake I’ll stick to the typical examples about financial services in the City and in Wall Street and about Silicon Valley.

However, and mostly for my own sake I wanted to highlight the following two maps:

The first is a map of the EU with shades of GDP/capita by subnational economic (NUTS) regions. Notice the axis running from Flanders to northern Italy.

The second is a map of Roman Empire Roads.Notice how the darker region in the EU NUTS map coincides with the region in the northern European part of the Roman Empire that had a lot of roads, mainly connection border garrisons protecting the Rhine frontier.


Clearly, the relationship is not linear. If roads were all there was to it, Italy would have been the most developed region in Europe. I am not suggesting we ignore the remaining and very substantial developments of European economic history that took place in the intervening 15 centuries after the fall of the Western Roman Empire. Clearly, the trade integration of northern Europe, human capital development, the right policies and industrialisation conspired to make that axis even richer.

But I like to think about the Roman Empire and I would venture the guess that the overlap described above is not without its merits, tiny though they might be. One interesting thing would be to test the pervasiveness of that Flanders to Northern Italy axis throughout history. May be Angus Madison has relevant data.. ?

Oh and if you are unhappy with the amateurish nature of the map of Roman roads, or if you are just interested in such things, I would point you to the “ORBIS” project of Stanford University which has very detailed road data for the Roman Empire.

Latent factors of the term structure of yield curve

This post is a brief summary of how I found myself trying to learn how to model the term structure of the yield curve and the struggles that I faced.

If google brought you to this page in the late moments of your despair and agonising confusion with this model, I recommend you scroll straight to the bottom. The last six paragraphs might shed some light on the problems you are facing.

Continue reading Latent factors of the term structure of yield curve

The Probability of Roman Emperors

In my previous post I discussed how I came to be interested in probabilities, after having spent about a decade (which refers to a period of time of 10 years, and is not in any way associated with decadence… O_O (12’20”) ) making use of tools that assumed or did some calculations with probabilities. I mentioned it because it was interesting for me to realise what had made me care about it and seek out to learn more and because it might be interesting for other people. Who knows, may be you are struggling to find the motivation or interest in the topic necessary to really dig down into it, like I did. In that case may be going through those same things will help you find the focus you need.

If you’ve been one of the 150 or so people who make daily visits to my other website, Place du Luxembourg, you’ll also  have heard me go on about the Roman Empire. You’ll have noticed that I posted something about the evolution of the Roman Republic towards the Empire. You may have also read in other posts that I have not been writing because I’m trying to figure out some things about the fall of the Roman Empire. I’m still working (sporadically) on a final draft of that post, which after this much time cannot possibly measure up to my expectations, but anyway, I digress…

Nevertheless, I came across some interesting facts about autocrats and their regime. As it turns out it’s a pretty accidental lifestyle, characterised by an exponential distribution. But more importantly: Why and to what effect?

Continue reading The Probability of Roman Emperors