From Humble Student of the Markets December 24, 2012 - 3:15am
In these pages, I have tried to make sense of the world from a financial and quantitative viewpoint, so let me try to focus on a framework that is appropriate for the season. Sometimes this form of analysis can provide an economic framework for analysis showing the incentives for different actors that is different from conventional wisdom.
'Tis the season to wish "Peace on earth and goodwill towards men." Indeed, when I examine some of the literature, there are strong financial incentives for peace. In a recent article, Geoffrey Kemp and John Allen Gay wrote that there are strong disincentives for the United States to go to war with Iran. They mainly cite the economic costs of an oil spike on the global economy and the resources needed to open the Straits of Hormuz and keep them open. The article is well worth reading in its entirety, the conclusion was:
Living with a nuclear Iran wou...
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