Where has the money gone: the state of Canadian household debt in a stumbling economy. The Certified General Accountants Association of Canada.
*** Liquidity drowning the meaning of inflation? Leo Kolivakis, Pension Pulse, with plenty of excerpts from other sources. must read.
We cannot inflate our way out of this crisis. Wolfgang Munchau, FT.
Government Motors is born. Karl Denninger, The Market Ticker. reflections on what the government's handling of the priority of auto-makers' creditors may imply for govt debt.
Consumer confidence, or consumer hope? MarketWatch.
David Rosenberg: "600-840 on the S&P". Tyler Durden, ZeroHedge.
Has the U.S. recovery begun? Martin Feldstein, Project Syndicate.
conclusion:
The positive effect of the stimulus package is simply not large enough to offset the negative impact of dramatically lower household wealth, declines in residential construction, a dysfunctional banking system that does not increase credit creation, and the downward spiral of house prices. The Obama administration has developed policies to counter these negative effects, but, in my judgment, they are not adequate to turn the economy around and produce a sustained recovery. Having said that, these policies are still works in progress. If they are strengthened in the months ahead – to increase demand, fix the banking system, and stop the fall in house prices – we can hope to see a sustained recovery start in 2010. If not, we will just have to keep waiting and hoping.
A recovery without credit: possible, but... Stijn Claessens, M. Ayhan Kose, Marco E. Terrones, voxeu.
update: the authors look at past recessions in OECD countries that are associated with either a credit crunch, house price bust or equity price bust and conclude that a recession can end before the credit crunch; frankly, while i find this topic/issue interesting to think about, I find this kind of analysis to be a good example of crappy economics; in particular, what the authors fail to even note, much less study, is (a) what happens in recessions associated not with any one of the three other phenomenon, but with all three at once, (b) what happens when the recession is not isolated (in a single country or region) but is global, or (c) the level of debt at the time of recession, which could be crucial given their assessment that consumption growth is usually the key driver of recoveries, and therefore, (d) what are the drivers of consumption growth in recoveries (if not credit growth, presumably income growth? but where is that coming from?)
The new global balance: financial de-globalization, savings drain, and the U.S. dollar. Christian Broda, Piero Ghezzi, Eduardo Levy-Yeyati, voxeu.
update: the authors of this post note that cross-border flows have dwindled; they then focus soley on the implications of the declining flows from foreigners into the U.S. (i.e. less foreign buying of U.S. assets means, in their view, a weaker dollar and higher interest rates); but they do not discuss the implications of the fact that American investors have also recently shown a home-bias, or of the change in composition of those American investors' portfolios, particularly in a period of increased savings (if foreigners are buying less U.S. bonds, isn't it because Americans are buying less foreign goods?)
*** The crisis and how to deal with it. Bill Bradley, Niall Ferguson, Paul Krugman, Nouriel Roubini, George Soros, Robin Wells et al, The New York Review of Books.
update: essential reading; read the Ferguson section, which is a great summary of what the consensus wisdom is right now (i.e. the combination of fiscal and monetary policy is terrible for bonds and terrible for the $); then read the Krugman rebuttal, which is a fantastic exposition of why I think domestic (U.S.) savings in excess of profitable investment opportunities implies a domestic savings glut, which should do now what Bernanke said the foreign savings glut did a few years ago (i.e. bond conundrum of low long-term yields even as the Fed was hiking); Roubini, Soros and Wells all follow up with great points too, mostly concurring with Krugman; mind you, its hard to disagree with Ferguson's last points; its a shame this debate ended prematurely
Global imbalanceds and future crises. Barry Eichengreen, via Mark Thoma's Economist's View.
China stuck in 'dollar trap'. FT.
similarly,
Asia will author its own destruction if it triggers a crisis over U.S. bonds. Ambrose Evans-Pritchard, Telegraph.
The dollar crisis. Sahm Adrangi, via Clusterstock.
Do be wary of green shoots. Randall Forsyth, Up and Down Wall Street, Barron's. see esp. pg. 2 with stock market parallels from Louise Yamada to 1938 and discussion of earnings as key to stock prices.
Electrical consumption sees first outage since WWII. Paul Kedrosky, Infectious Greed.
Here comes the OptionARM mortgage explosion. Joe Weisenthal, Clusterstock.
And a personal reminder from Doug Kass, via Kedrosky:
The perma-bear cult in markets.
The perma-bear cult, of which I have often been accused of being a member, is an especially strange clique that often sees the clandestine plunge protection teams saving the U.S. stock market at critical points. They have never met a government statistic they like but instead see the U.S. government as "massaging" and revising employment, inflation and many other economic statistics in order to paint a positive picture. They express contempt for second derivative economic improvement and never or rarely ever see prosperity. They view seeds of recovery as Superman saw Kryptonite and extrapolate economic/stock market weakness to the extreme.
And they never ever or rarely make money.
Can we inflate our way out of this mess? Jake, EconompicData.
The greatest swindle ever sold. Andy Kroll, The Nation. worth reading if just for the numbered bullet points.
Why Britain has to curb finance. Martin Wolf, FT.
two old ones:
Why the U.S. has really gone broke. Chalmers Johnson, via Jesse's Cafe Americain, and
The incontrovertible truth about debt, deleveraging, devaluation and recovery. Jesse.
As always, Willem Buiter calling it as he sees it:
Obushma-Biney in the home of the frightened. Willem Buiter, Maverecon.
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