The third depression. Paul Krugman, NYT.
Ben Bernanke needs fresh monetary blitz as US recovery falters. Ambrose Evans-Pritchard. Telegraph.
this is interesting excerpt:
though I agree with Plosser and the hawks that the Fed's QE has made monetary policy cross into the realm of fiscal policy --- and that Congress should be the party responsible for fiscal policy --- I agree with the doves that conventional monetary policy is not sufficiently stimulative (pushing on a string).Mr Bernanke is so worried about the chemistry of the Fed's voting body – the Federal Open Market Committee (FOMC) – that he has persuaded vice-chairman Don Kohn to delay retirement until Janet Yellen has been confirmed by the Senate to take over his post.
another from Evans-Pritchard:
RBS tells clients to prepare for 'monster' money-printing by the Federal Reserve
Andrew Roberts, credit chief at RBS: "we cannot stress enough how strongly we believe that a cliff-edge may be around the corner, for the global banking system (particularly in Europe) and for the global economy. Think the unthinkable"so RBS is thinking the same as Albert Edwards at SocGen
What might history tell us about the Greek crisis? China Financial Markets.
Michael Pettis makes 5 predictions:
1. The euro will not survive in its current form
Ernest Hemingway once described the process of going broke as “Slowly. Then all at once.”
That is not a very precise description, I know, but I would guess that support for the euro will erode very slowly until suddenly it seems inevitable and then the process will happen breathtakingly quickly.
2. This is the big one
In my opinion the current set of crises, beginning with the sub-prime crisis in the US and spreading throughout the world, is not a short-term liquidity crisis like LTCM, the Asian Crisis, or the Mexican crisis of 1994. I think this is likely to be one of those big events, one that represents a major re-adjustment in the world during which time the massive imbalances that had been built up during the long globalization cycle that started around the late 1980s and early 1990s are finally worked out.
Not only will Greece, in other words, get worse, but it is by no means the end of the crisis. A lot more countries in Southern Europe, Latin America and Asia are going to be caught up in this before it ends.
3. The European crisis will be accompanied by a trade shock.
The deficit countries of Europe, whose combined trade deficits are nearly two-thirds the size of the US trade deficit, will also be forced into a rapid contraction in their trade deficits for the very same reasons – they are going to find it hard enough simply to refinance themselves, let alone receive net capital inflows. Without a capital account surplus, however, they simply cannot run current account deficits. This contraction must, one way or another, be absorbed by the very unwilling rest of the world.
4. The economic recovery in the countries hit by crisis will not begin until they are recognized as insolvent and receive debt forgiveness from their creditors.
Historical precedence makes it clear that as long as the sovereign borrower is forced to struggle with an unrepayable debt burden, it will not grow. Eventually, as has happened in nearly every previous case, creditors and borrowers will acknowledge reality and will work out a debt forgiveness plan that will allow the economy to return to growth. Until then, expect weak growth, high unemployment, and constant battles over debt.
5. Greece’s insolvency will not be recognized for many years.
[European sovereign debt is] heavily concentrated within the banking system, and the banks cannot recognize the losses without themselves collapsing into insolvency. That cannot be allowed to happen....
The banks will need first to rebuild their capital bases before they can admit the obvious, and this could take several years. So we are condemned to spend much of the next decade postponing a resolution of the crisis while banks rebuild their capital base. Until they do, we will all pretend that Greece isn’t insolvent and that other European countries will not face a crisis. Meanwhile none of these countries will be able to grow.
and, of course, its not just a Greek thing:
Spain's Debt Maturity Wave Hits Next Month And It's Already Obvious They Don't Have Enough Cash. businessinsider.
Presenting The Key H2 Milestones To Observe As The Economy Begins Its Next Pre-Stimulus Contraction Cycle. Goldman's Andrew Tilton, via zerohedge.
The First Great Depression: Blow By Blow, From The BIS, And How It Mirrors Our Ongoing Second Great Depression. BIS, via zerohedge.
courtesy of the recent release of the BIS's full annual reports, history buffs can now replay, year by year, the events in world capital markets from 1931 onward
Income Gaps Between Very Rich and Everyone Else More Than Tripled In Last Three Decades, New Data Show. Center on Budget and Policy Priorities.
Fed economist: bloggers are stupid. Bruce Krasting.
other fare:
all the attention on this report is how bad the U.S. ranks, but that's not surprising; what IS surprising is how bad Canada ranks:
Mirror, Mirror on the Wall: How the Performance of the U.S. Health Care System Compares Internationally, 2010 Update. The Commonwealth Fund.
BP link of the day:
BP Alaska a ticking time bomb. CNN.
so the next potential oil spill disaster could be in the Beaufort Sea, just 250 km along the coastline from the Yukon ---- wonderful!
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