The British origins of the US endowment model
David Chambers, Elroy Dimson 20 October 2014
Yale University has generated annual returns of 13.9% over the last 20 years on its endowment – well in excess of the 9.2% average return on US university endowments. Keynes’ writings were a considerable influence on the investment philosophy of David Swensen, Yale’s CIO. This column traces how Keynes’ experiences managing his Cambridge college endowment influenced his ideas, and sheds light on how some of the lessons he learnt are still relevant to endowments and foundations today.
In recent years much attention has been given to the so-called ‘Yale model’, an approach to investing practised by the Yale University Investments Office in managing its $24 billion endowment. The core of this model is an emphasis on diversification and on active management of equity-orientated, illiquid assets (Yale 2014). Yale has generated returns of 13.9% per annum over the last 20 years – well in excess of the 9.2% average return on US college and university endowments. Other leading US university endowments have followed this model (Lerner et al. 2008).
investment, endowments, university endowments, college endowments, Universities, Keynes, asset management, diversification, Great Depression, Great Recession, buy-and-hold, equity investing, portfolio management, Yale, Cambridge
The halo of victory: What Americans learned from World War I
Hugh Rockoff 04 October 2014
World War I profoundly altered the structure of the US economy and its role in the world economy. However, this column argues that the US learnt the wrong lessons from the war, partly because a halo of victory surrounded wartime policies and personalities. The methods used for dealing with shortages during the war were simply inappropriate for dealing with the Great Depression, and American isolationism in the 1930s had devastating consequences for world peace.
World War I had important consequences for the structure of the US economy and its role in the world economy. This was especially true in the world of finance. The US transitioned from being a debtor nation to a creditor nation, and financial leadership moved from London to New York. But equally important were the lessons that Americans drew from the war. Although the war had much to teach, Americans tended, I will argue below, to learn too much from the war, drawing strong conclusions from a war in which the US was actively engaged for only 19 months.
Competition policy Economic history
World War I, WWI, planning, rationing, New Deal, Great Depression, fiscal policy, monetary policy, stimulus, financial crisis, conscription, inflation, unemployment, price controls, Competition policy, antitrust, National Industrial Recovery Act
TARGET balances, Bretton Woods, and the Great Depression
Michael Bordo 21 March 2014
Since 2007, there has been a buildup of TARGET imbalances within the Eurosystem – growing liabilities of national central banks in the periphery matched by growing claims of central banks in the core. This column argues that, rather than signalling the collapse of the monetary system – as was the case for Bretton Woods between 1968 and 1971 – these TARGET imbalances represent a successful institutional innovation that prevented a repeat of the US payments crisis of 1933.
During the Eurozone crisis, an analogy was made between the events in Europe between 2007 and 2012 and the collapse of the Bretton Woods System between 1968 and 1971. There has been a build-up of TARGET liabilities since 2007 by some central banks (notably Greece, Ireland, Portugal, and Spain, or the ‘GIPS’), and of TARGET assets by Germany and others.
Economic history International finance
ECB, eurozone, euro, global imbalances, Central Banks, financial crisis, Great Depression, Eurosystem, Eurozone crisis, Bretton Woods, TARGET
Monetary alchemy, fiscal science
Jeffrey Frankel 29 January 2013
2013 marks the 100th anniversary of US federal income tax and the establishment of the Federal Reserve. What lessons have we learnt about macroeconomic policy since then? This column assesses the postwar lessons and argues that fiscal expansion is much more likely to be effective in the short term than any monetary expansion stimulus. Indeed, compared with fiscal policy, monetary policy seems more alchemy than science.
The year 2013 marks the 100th anniversary of two major institutional innovations in US economic policy:
Global crisis Macroeconomic policy
monetary policy, Federal Reserve, fiscal policy, Great Depression, Keynes
Jobless recoveries and the disappearance of routine occupations
Henry Siu, Nir Jaimovich 06 November 2012
The US economy is recovering. But what explains the stubborn malaise in its labour market? This column argues that future recovery from recession will likely be jobless because technological advances and mechanisation now enable troubled firms to shed middle-income jobs in favour of machines and automation. If these jobs are not recouped during subsequent economic recovery, future recoveries may well remain jobless.
Economic recoveries aren’t what they used to be. Since the end of the Great Recession in June 2009:
Global crisis Labour markets Poverty and income inequality
unemployment, Great Depression, jobs, Great Recession, labour
New preface to Charles Kindleberger, The World in Depression 1929-1939
J. Bradford DeLong, Barry Eichengreen 12 June 2012
Charles Kindleberger’s classic book on the Great Depression was originally published 40 years ago. In the preface to a new edition, two leading economists argue that the lessons are as relevant as ever.
The parallels between Europe in the 1930s and Europe today are stark, striking, and increasingly frightening. We see unemployment, youth unemployment especially, soaring to unprecedented heights. Financial instability and distress are widespread. There is growing political support for extremist parties of the far left and right.
Economic history Global crisis Global economy
Great Depression, Eurozone crisis, Kindleberger
How did US and EU trade policy withstand the Great Recession?
Chad P Bown, Meredith Crowley 28 April 2012
As the global economy entered a crisis not seen since the Great Depression, many feared a return of 1930s-style protectionism. This column asks why many countries avoided this fate, focusing on trade policy in the US and EU.
During the Great Recession, import protection increased around the world (Evenett, 2011). Popular policies included antidumping tariffs, safeguards, and other temporary trade barriers (Bown 2011a,b). Despite this, for high-income economies such as the US and EU, such trade barriers increased much less than initially feared. In this column, we ask how and why.
trade policy, Great Depression, protectionism
A tale of two depressions redux
Barry Eichengreen, Kevin Hjortshøj O’Rourke 06 March 2012
The debate over stimulus versus austerity continues unabated. This column shows that, while industrial production and trade recovered much more quickly than during the Great Depression, both series now appear to be slowing down. It suggests that, as St Augustine would have said had he been managing director of the IMF, there is a case for additional fiscal consolidation and monetary normalisation, but not yet.
Global crisis Macroeconomic policy
fiscal policy, Great Depression, Great Recession
Right-wing political extremism in the Great Depression
Alan de Bromhead, Barry Eichengreen, Kevin Hjortshøj O’Rourke 27 February 2012
The enduring global crisis is giving rise to fears that economic hard times will feed political extremism, as it did in the 1930s. This column suggests that the danger of political polarisation and extremism is greatest in countries with relatively recent histories of democracy, with existing right-wing extremist parties, and with electoral systems that create low hurdles to parliamentary representation of new parties. But above all, it is greatest where depressed economic conditions are allowed to persist.
The impact of the global crisis has been more than just economic.
- In both parliamentary and presidential democracies, governments have been ousted.
- Hard economic times have bred support for nationalist and right-wing political parties, including some that are actively hostile to the prevailing political system.
All this gives rise to fears that economic hard times will feed political extremism, as it did in the 1930s.
Politics and economics
elections, Great Depression, Fascism
When markets freeze: Tobin’s q and QE
Marcus Miller, John Driffill 27 September 2011
Just what on earth is going on in the global economy? Rather than get caught up in the hysteria, this column says the answers are best found by looking through the pages of history and dusting down some old textbooks.
The economies of the North Atlantic look in poor shape. But it could be worse. Central banks have been doing their best to save capitalism from its own self-fulfilling fears, using the policy of quantitative easing to take frozen assets onto their balance sheets until confidence returns. Why they are doing this – and why it matters – can best be seen in the light of history.
Global crisis Monetary policy
monetary policy, Central Banks, Great Depression, global crisis, quantitative easing