By Cullen Roche
January 24, 2012
There’s been a raging debate among mainstream economists over the last few weeks regarding government debt and whether it matters or not. The issue was highlighted in today’s NY Times in an article by Steve Rattner. He writes:
“WITH little fanfare, a dangerous notion has taken hold in progressive policy circles: that the amount of money borrowed by the federal government from Americans to finance its mammoth deficits doesn’t matter. Continue reading
Despite the recent turbulence in the markets during the last half of the year, largely attributable to sovereign debt problems in the Euro area, we are becoming much more optimistic as the previously weak recovery continues to gain strength. Many of the economic indicators that people of my ilk religiously follow are becoming much stronger. For example, consumer spending is in a solid recovery, unemployment is finally in a solid downward trend, non-farm payrolls are rising, first time unemployment claims are at a four year low, housing prices have stopped falling and are relatively flat, inflation is low and stable, interest rates remain at historic lows, and possibly most importantly, the money supply has begun to expand again at a growth rate that is highly amenable to strong growth and low inflation.
We anticipate adding to our Continue reading
by Simone Foxman
December 16, 2011
Yields on short-term peripheral sovereign bonds are plunging, despite the fact that EU leaders appeared to make little progress at their highly-anticipated summit last week.
Pundits continue to expound on the flaws of the eurozone but markets are telling a different tale. That’s because the European Central Bank may have already introduced roundabout measures that will solve some of Europe’s big problems—it’s making investing in peripheral sovereign debt a huge profit opportunity for banks.
Theoretically, financial institutions will be able coin money by borrowing ultra-cheap from the ECB and buying higher yielding sovereign debt. Essentially, it appears the ECB might allow European banks to pledge everything but the kitchen sink in return for funds. First, the new policy allows Continue reading
By Ambrose Evans-Pritchard
The Telegraph -International Business Editor
23 Oct 2011
The American phoenix is slowly rising again. Within five years or so, the US will be well on its way to self-sufficiency in fuel and energy. Manufacturing will have closed the labour gap with China in a clutch of key industries. The current account might even be in surplus.
Assumptions that the Great Republic must inevitably spiral into economic and strategic decline – so like the chatter of the late 1980s, when Japan was in vogue – will seem wildly off the mark by then.
Telegraph readers already know about the “shale gas revolution” that has turned America into the world’s number one producer of natural gas, ahead of Russia.
Less known is Continue reading
The markets have recently been quite volatile due in large part to several factors previously mentioned, the weak economy, threatened sovereign bond defaults in Europe, and severe political partisanship in US Federal financial affairs. Consequently, our accounts are down significantly this year but, in spite of our sizeable cash balances, have performed largely in line with the broad indices which closed out the quarter down. The first few days of October have shown a significant rebound.
While there remain significant risks to the economy, such as Continue reading
by Ambrose Evans-Pritchard
October 3, 2011
The world savings rate has surpassed its modern-era high of 24pc. This is the killer in the global system. It is why we are at imminent risk of tipping into a second, deeper leg of intractable depression.
In Europe, policy is still on deflationary settings, with protestors in Athens fighting back against austerity measures. The International Monetary Fund (IMF) expects the savings mountain to rise yet further next year as the governments of Europe, Britain, and the US tighten belts, in unison, by up to 2pc of GDP.
This is double the intensity of the last big synchronized squeeze in 1980.
They will do so before the private sector is ready to grasp the baton, and without stimulus from the trade surplus states (Germany, China, Japan) to offset the contraction in demand.
Put another way, there is a chronic lack of consumption in the world. “This probably comes as a surprise to most people, gorged on propaganda about excessive debt and Continue reading
by Satyajit Das
September 12, 2011
Financial TV is pornography—sleazy, intrusive, seeking to titillate, and shock. During a crisis, these programs can be compulsive. Once, pornographic scripts had a passing interest in improbable plot and implausible dialogue. In the Coen brothers’ film The Big Lebowski, Jackie Treehorn bemoans falling standards in adult entertainment. Competition from cheap amateur pornographic films means that professionals can no longer afford the extra investment in story, production value, and feeling. Financial TV never bothered with plot, dialogue, or production values, focusing only on the action.
The 24/7 Joycean stream-of-consciousness financial noise machine calls for successive, rolling segments—pre-market, market, post-market, recapping today’s market and, finally, looking forward to tomorrow’s market. The formula requires Continue reading
The EMU Has Always Fallen Short…
The EMU has never fully satisfied the conditions for an optimal currency area: Synchronized economic activity and growth rates; a high level of labor and capital mobility; fiscal federalism allowing the fiscal risk-sharing of idiosyncratic national shocks; and a significant degree of political union.
The hope was that the EMU’s Continue reading
Aug. 16, 2011
Stanford (CBS 5)
Google has changed the way people search on the internet, now it’s changing the way some people surf the web.
Hundreds of lucky Bay Area residents are now accessing what is being touted as the fastest internet speeds in the world.
CBS 5’s Kiet Do tested the Google Fiber internet service, which is being offered for free in a neighborhood just south of the Stanford University campus. A 95-megabyte high-definition movie trailer downloaded in about nine seconds. CBSSF.com showed up in a blink.
Download speeds on the network were up to 300 Mbps, with an upload speed of 150 Mbps. Compare those speeds to Comcast, where Continue reading
by Warren Mosler
August 3, 2011
With the debt ceiling extended the risk of an catastrophic automatic pro cyclical Treasury response, as previously discussed, has been removed.
What’s left is the muddling through with modest topline growth scenario we’ve had all year.
With a 9% budget deficit humming along, much like a year ago when markets began to discount a double dip recession, I see little chance of a serious collapse in aggregate demand from current levels.
It still looks to me like Continue reading
Three and a half years since the Great Recession began, the U.S. economy remains $56 billion, or 0.4%, below its pre-recession peak. Revised data show that the U.S. economy ground to a halt in the first quarter of 2011, growing by just 0.4%, while new data from the second quarter show the economy barely moved forward, growing by only 1.3%. Read MarketWatch’s story on “GDP grows slender 1.3% in second quarter.”
This pace of growth is too slow to generate significant job creation, and on this path we are more than one-third of the way to a lost decade.
Just plain miserable.
The U.S. economy slowed in the first half of 2011. The fundamental problem facing the U.S. economy is a gaping hole of more than $1 trillion in aggregate demand left by the Great Recession. That hole, caused by collapse of the housing bubble, the ensuing financial crisis, and mass unemployment, has left a serious gap Continue reading
The economic recovery, if you can call it that, remains very weak with high unemployment. The markets have been volatile due to a number of recent risks and uncertainties. This volatility has been exacerbated somewhat by the sovereign debt crises of some of the southern European members of the Euro. It is becoming increasingly clear that the structure of the Euro is flawed as it has no central fiscal or monetary authority to alleviate the debt pressures of these individual member countries. Each is more like a U.S. State that must borrow on it’s own credit. In the U.S. we have our Congress with flexible fiscal power and the Federal Reserve with very flexible lending power to back them up. The European countries have no such powerful counterparts. These member countries surrendered their monetary sovereignty but did not create a central taxing and expenditure authority (a parliament) nor a fully empowered central bank. Look for these changes to be made soon, or the Euro as a strong trading currency will Continue reading
Money Isn’t Changing Hands Fast Enough (Velocity)
by Charles Rotblut, CFA
June 26, 2011
Federal Reserve Chairman Ben Bernanke continues to be the enemy of savers. On Wednesday, the Boston Red Sox fan reiterated his belief that interest rates should be kept at rock-bottom levels for an extended period of time. He views this as necessary in order to keep the economy growing.
Part of Bernanke’s problem has been his inability to accelerate the pace of money movement, or velocity. Velocity is an economic measure of how many times a dollar is used to purchase goods and services. For instance, if I give you a $100 bill and you put it into your dresser, there is no real velocity. However, if you use it to make a repair on your car and then your mechanic spends the cash on buying a replacement part, velocity accelerates. Thus, there are advantages to sustaining a certain level of velocity.
An example more applicable to the current environment is Continue reading
Where is the ECB Printing Press?
by John Mauldin
November 10, 2011
Where Can I Find €3 Trillion?
When Leverage Comes Back to Haunt You
The German Dilemma
So How Do We Solve the Eurozone Problem?
Where Is the ECB Printing Press?
Europe remains the focus of markets, and rightly so. But the picture is not as clear as one would like. Different analysts point to different problems – if only this one problem could be solved, then all this would go away, they tend to say. Sadly, it is not one problem but three that must be solved, and none of them is easy. In today’s letter I try and offer a basic primer on the problems facing Europe. My challenge to myself is to do it in a short piece rather than the book-length tome it could easily become. Thus, in the pursuit of brevity, we will not be as in-depth as usual, but I think it helps us to step back a few feet and look at the larger picture before we focus on minutiae.
Where Can I Find €3 Trillion?
First, for the record, the European issue is not a crisis of confidence, as Merkel and Sarkozy, et al., keep telling us. It is Continue reading →