Where consensus did prevail, it proved to be misguided.
Economists of all ideological stripes cheered on the financial deregulation of the 1980s and 1990s. The work of thinkers like Hyman Minsky and Charles Kindleberger, whose writings on financial excess were rediscovered after the financial crisis, gathered dust.
In a speech in 2005 to central bankers, Raghuram Rajan, an academic who later ran India’s central bank, warned of the risks building within the financial system. He got a chilly reception.
The 10-year inflation break-even — the rate of inflation at which inflation-linked and fixed income bonds would pay the same, and hence the implicit forecast rate of inflation — is rising. It is the highest in four years, close to 2.2 per cent; low in historical terms, but above the Fed’s target. FT 21 April 2018
Under the current plan, certain creditors are designated in advance to absorb a failed bank’s losses once the equity is wiped out. Those creditors’ debts are thus riskier, and should be more expensive to the bank than the debt that is not designated to be turned into equity. Yet the Fed economists conclude that, in the market, this is not the case. Why? Mark Roe, professor at Harvard Law School, Project Syndicate 17 April
The policy – if you can call it that – puts the US on an untenable debt trajectory. It smacks of Latin American caudillo populism, a Peronist contagion that threatens to destroy the moral foundations of the Great Republic. Ambrose Evans-Pritchard Telegraph 18 April 2018
Ms Merkel endorsed the idea of turning the European Stability Mechanism, the eurozone’s financial rescue fund, into a regional version of the IMF. But she said it would have to be created through treaty change. FT 17 April 2018 Ms Merkel does not say “no” to eurozone bonds. She says: “Not without treaty change.” The German constitutional court in Karlsruhe would never allow Germany’s sovereign guarantee to be given to its eurozone partners without them submitting to effective and centrally budgeted discipline. Financial Times 31 May 2012 Read more here
It looks very simple, but looks can be deceiving. The lines on the graph are totally hypothetical! We can’t actually observe how much people would buy and sell at hypothetical prices. All we can see is how much people do buy and sell in the real world. According to the theory, that’s the point where the supply and demand curves meet. That’s very little information. Noah Smith Bloomberg 13 april 2018
World War I was coming to a close, millions of soldiers were still traveling across the globe, aiding the spread of the disease. While its exact origins are still debated, it’s understood that the “Spanish Flu” did not come from Spain. The Atlantic 10 April 2018
Enligt Riksbanken uppgick den 31 december 1991 svenska företags och hushålls utlandsskuld till totalt 693 miljarder kr. Om man därtill lägger att utlänningarna köpt svenska likvida SEK-obligationer för 98 miljarder blir den svenska utlandsskulden 791 miljarder kr (cirka 140 miljarder dollar, vilket är mer än Brasiliens utlandsskuld). Den totala svenska bruttoskulden var över 1 000 miljarder, inkl. stat och kommun. Det är mycket pengar. Som jämförelse kan nämnas att Marshall-hjälpen uppgick i dagens penningvärde till dryga 400 miljarder kr och att det totala börsvärdet av de svenska företagen nu är cirka 450 miljarder kr. "Stålbadet i skuldfällan" Rolf Englund på DN Debatt 26/8 1992 http://www.internetional.se/dn92.html
Han hymlar inte heller med fakta som sätter Marcus Wallenberg i sämre ljus, då han menar att Wallenberg låg bakom politikernas uppfattning att så hårt tro på fasta växelkurser. Kronförsvaret fungerade som en räddningsaktion för stora aktörer som SEB. Istället vältrades kostnaderna över på svenska skattebetalare. Stora banker hann lösa in sina utlandslån innan kronkursen föll. Författaren summerar om Lars Wohlin, ”Kampen mot euron är en insats som måste skrivas in i historieböckerna, detta trots att de medier vars agenda var att driva in oss i euron, av naturliga skäl, tystnade väldigt snabbt i ämnet efter september 2003.” Dick Erixon, Samtiden, 1 april 2018
They discuss his career as a writer, networks and hierarchies, how history gets written, the similarity between the 16th century and the 21st, the role of social media in the 2016 Presidential election, the influence of advertising on the public sphere, Trump, the Russian investigation, Islamic extremism, counterfactuals, what would have happened if Clinton had won the presidency, immigration in Europe, conspiracy theories, capitalism, globalization, communism, wealth inequality, universal basic income, Henry Kissinger, the prospect of a US war with China, cyberwar, and other topics 18 February 2018
Economists may warn that the combination of Trump’s protectionism, big tax cuts, and uncontrolled government borrowing, coming at a time when the US economy is already near full employment, will ultimately fuel inflationary pressure. This rule of thumb implies 30-year rates in the 4-5% range. But financial markets simply do not believe this message. Anatole Kaletskys Project Syndicate 27 March 2018
The overall command was held by the senior leader, the King of Poland, John III Sobieski, who led the relief forces. Historians suggest the battle marked the turning point in the Ottoman–Habsburg wars, a 300-year struggle between the Holy Roman and Ottoman Empires. Man bör även komma ihåg att det var den polske generalen Pilsudski som stoppade Röda armén utanför Warzawa 1920. Read more here
Analysis of macroeconomic theory suggests substantial ignorance of how economies work Socrates might say that awareness of one’s ignorance is far better than the illusion of knowledge. If so, macroeconomics is in good shape. Martin Wolf FT 20 March 2018
For many investors, the regret of missing out on what may well be a once-in-a-generation bull market overshadows any anxiety about the next crash. Animal spirits are all too evident. Amin Rajan FT 16 March 2018
Once-silent intellectuals are starting to challenge the core assumption of EU ideology, indicting the project for moral vandalism and a reckless attack on the democratic nation state.
Theorists and professors are proclaiming the virtues of the nation – the precious liberal nation, inspired by the universal and redemptive values of the French and American revolutions – in a way we have hardly heard in recent times.
They defend it as the only real vehicle of democracy known to man.
No empire in history has ever been democratic. And the problem with soft empires is that they remain soft only until they meet resistance.
At that point they must persist with a despotic logic – and we saw flashes of that in the eurozone crisis
When lenders make credit more available or more affordable, households respond by taking on debt, which drives up aggregate demand – that is, until the music stops.
Amir Sufi, Atif Mian, Project Syndicate 5 March 2018
Amir Sufi, Professor of Economics and Public Policy at the University of Chicago Booth School of Business, is the co-author of House of Debt.
Atif Mian is Professor of Economics, Public Policy, and Finance at Princeton University, Director of the Julis-Rabinowitz Center for Public Policy and Finance at the Woodrow Wilson School, and co-author of House of Debt.
US experienced its last annual trade (goods) surplus in 1975.
In all, it cumulates to about $15 trillion more of stuff America bought versus what it sold to the rest of the world since 1975
Even when you throw in the $4 trillion surplus on the services account ( tourism, transportation, insurance, royalties and business services) during the same 43-year period, the deficit on current account with the rest of the world is still $11 trillion, and that's in then-year dollars.
Inflated to 2017 purchasing power, the balance with the rest of the world since 1975 is well larger than the current GDP of the US.
"flush with cash from the tax cut", US companies are heading for a "stock buyback binge of historic proportions". Corporate stock buying is now cranking at a $1 trillion annual rate or nearly double the rate of the last several years.
We had a close encounter yesterday during an appearance on CNBC. The thirty-something anchors were shocked to hear that Washington's upcoming $1.8 trillion 2019 Treasury borrowing might generate a resounding "yield shock", thereby upending the current huge stock market bubble where 4%+ bond yields are most definitely not priced in. The younger of the anchors (age 32) thought the $1.8 trillion was not a problem... Likewise, the senior anchor further averred that we've been there before and that "awhile back" $1 trillion dollar deficits were absorbed with ease. To little avail, of course, we pointed out that "awhile back" came at the bottom the Great Recession when private investment had collapsed and the Fed and other central banks had been running their printing presses red hot. David Stockman 28 February 2018
In normal times it’s reasonable to believe clients are concerned about how well a manager can handle a downturn. “But in a bubble, forget it,” he says. “Clients care much, much more about underperforming all their friends on the golf course.” Institutional Investor 28 Fabruary 2018
It is also the case for the US Federal Reserve, which has turned to unconventional monetary policies to support the real economy via so-called wealth effects. Over the past 35 years, America has /been/ running balance-of-payments deficits every year since 1982 (with a minor exception in 1991, reflecting foreign contributions for US military expenses in the Gulf War).
In the past, I used the name “MDuh” for bank-created money, the measure Friedman and Schwartz studied, not the measures they popularized For this article, though, I’ll use “M63,” referring to the year they published their work. Read more here
The problem is that those making that argument are implicitly asserting that they know that the “natural rate of unemployment” – the lowest rate consistent with stable inflation – is roughly equal to the current unemployment rate. That is, they believe we’re at full employment. But the truth is they have no way of knowing that, and one key indicator – inflation – suggests they may be wrong. Jared Bernstein, chief economist for Vice President Joe Biden, at John Mauldin 18 February 2018
US twin deficits As the dollar weakened last week, Martin Feldstein’s catchphrase from the 1980swas on the lips of most macro traders. This is what happened to the “twin deficits” during the Reagan and Bush fiscal injections Gavyn Davies.FT 18 February 2018
You start off by taking the two most toxic financial instruments of the past 20 years, and then merge them. The first is the collateralised debt obligation, the complex instrument at the heart of the US subprime crisis a decade ago. Next, you take a much more innocent-looking instrument: a sovereign bond from a eurozone country.
With a common currency all have the same nominal interest rate. Therefore the country with the highest inflation get the lowest real rate.
The country with perhaps deflation will get the highest real rate. Obvious? Stefan de Vylder wrote that in 2002. Did anyone write it before?
Som mina Fb-vänner redan vet så åt jag i dag lunch på Foresta. Jag föll därvid i tankar och erinrade mig när jag var på middag där, som ledarskribent på NWT inbjuden av Lennart Bodström, då chef för TCO som arbetade för införande av fondsocialism och som en förberedelse för maktövertagandet inköpt Foresta som ett ståndsmässigt palats. Om detta har jag tidigare berättat med länk till Mats Johanssons berättelse om kvällen. Kjell-Åke Bredenberg (KÅB) en annan av fondernas motståndare var också med. Jag Googlade lite och fann att Björn Rosengren var den som på uppdrag av Lennart Bodström, pappa till advokaten med samman namn, hade förhandlat om köpet av Foresta.
The Dodd-Frank Act, rushed through in a pageant of self-congratulation in 2010, prevents the Fed from rescuing individual companies in trouble (there must be at least five, and they must be solvent) or lending to non-banks in a panic. It can lend only to "insured depository institutions" Ambrose Evans-Pritchard 14 February 2018
A triple squeeze will drain global excess savings: the U.S. will become the world’s largest oil producer, Germany will abandon its policy of budget surpluses, and India’s economic growth will outstrip China’s.
The three gluts arose together, and together they will vanish.
Who will supply the world’s capital after the retirement of these massive hoarders?
Markets tend to bounce back after sharp declines as participants (human and digital) who have been trained to "buy the dips" once again buy the decline, and the financial media rushes to reassure everyone that nothing has actually changed, everything is still peachy-keen wonderfulness. Charles Hugh Smith, 6 February 2018
Whereas wage and salary incomes rose by $4.2 trillion or 2.9X, household liabilities soared by nearly $12 trillion or 5.2X. Over the two decades, therefore, household leverage ratios (liabilities to earned income) nearly doubled from 124% to 224%. David Stockman 5 February 2018
The CDU and SPD accept the principle of a fiscal union for macroeconomic stabilisation, and transforming the European Stability Mechanism (ESM), the rescue fund, into an institution of the EU. Otmar Issing, a former member of the European Central Bank’s executive committee, rightly recognised the importance of the EU section in the agreement. As an economic conservative he was appalled by the ease with which Germany raised the white flag in the eurozone debate. Banking union, fiscal union, transfer systems — it could all happen very soon. It is what the conservative, ordo-liberal German establishment always fought against. Wolfgang Münchau, FT 4 February 2018
Even though they told us, and most of us believe, that QE was responsible for the inflation of asset prices across the board,somehow quantitative tightening (QT) is not supposed to have the opposite effect. John Mauldin, 3 February 2018 There is a time to be in stocks… and a time to be out of them. Without knowing the future, you can still know when something is not normal. And when something is not normal… it is just biding its time until it becomes normal again. Bill Bonner February 2018