A few important conceptual milestones on the macro front over the past weeks.
First, it’s pretty clear the real economy is now collapsing both due to tight credit as all financial actors deleverage and as a result of a revision in growth expectations such as Keynes wrote so clearly about. Forced liquidity was not enough. An [...]
Kedrosky has a chart of major currencies showing only the Yen is holding it’s own, indeed rising, against the USD over the past two months.
Update, an even better chart:
Brad Setser also notes that this dollar strength was not global investors fleeing to a “safe” currency.
Net TIC flows in August (line 30) were essentially [...]
Could this economic data be the reason for the urgency in bailing out the Wall Street banks?
Initial filings for state jobless benefits increased by a seasonally adjusted 32,000 to 493,000 in the third week of September… the highest number of weekly claims since Sept. 29, 2001, when unemployment soared in the wake of [...]
The FT reports that the emerging market theme is getting a bit stale among foreigners; outflows from emerging markets bond and equity funds reached $29.5bn over the past three months, the highest level since at least 1995. This was the Asia investment trigger I was personally looking for since August 2007, but jumped the gun [...]
Some simple logic on the US economy from Some Assembly Required:
The current slowdown in the US will last until the American consumer is able to start buying again. That means taking on more debt, for American wages, adjusted for inflation, haven’t risen in 30 years. But debt requires the extension of credit, and [...]
A few interesting pieces on the China-US financial scene have popped up. Setser points out that foreign central banks, esp. China, are abandoning the MaeMacs in favour of Treasuries, and that this presents a problem.
If these trends continue for much longer, US Treasury Secretary Paulson will be forced to show his hand. The [...]
Joe Stiglitz - The Guardian
When Stiglitz talks, I listen.
America’s economy was blessed in the 1990s with low energy prices, a high pace of innovation, and a China increasingly offering high-quality goods at decreasing prices, all of which combined to produce low inflation and rapid growth… Growth is not just a matter of increasing [...]
Brad Setser thinks that China is back to holding the RMB down to maintain export volume in the face of softening global demand. From the comments:
China prefers subsidizing US consumption of Chinese goods to subsidizing Chinese consumption of Chinese goods… if China’s foreign asset accumulation continues at $800b a year, it will add [...]
The housing-rescue legislation passed by the House and Senate offers emergency funding to Fannie Mae and Freddie Mac along with establishing a $300 billion fund to help struggling homeowners… and now bond investors are again snapping the portfolio up because of the combination of high yields with a government guarantee,
“We like it,” said [...]
Weird week. The SEC chairman Cox makes a big deal before Congress of a new order banning naked short selling of F&F and 16 other finance institutions although naked short selling has always been illegal and the SEC could have busted naked short-sellers at any time… I’m not sure how different this is from the [...]