Yves here. Warren Mosler, who is one of the leading writers on Modern Monetary Theory, circulated an e-mail with his assessment of the state of the economy and the impact of quantitative easing and agreed to letting me publish it.
Read more...The Chinese central bank is playing very high stakes poker. China’s interbank markets have been highly stressed for the last two days. An effort by the central bank to tighten in order to put a crimp on shadow banking activities looks to be spiraling out of control as one-week repo rates hit nearly 8.3% up 144 basis points in a day, and one-week Shibor has risen from its June 5 level of 4.8% to just shy of 8.1% today.
Read more...Jefferson County’s sewer system train wreck is now looking an awful lot like the periphery country in Europe mess.
Read more...Yves here. Steve Keen sent this note along with his post:
The journalist David Hirst was both one of the few to warn of the crisis, and someone who became a good friend. He died last week, as a long term consequence of internal injuries sustained about ten years ago in the USA, when he tried to stop a woman being bashed.
His spouse asked me to see if I could get the attached published on NC, which was one of his favourite sites.
If you know David’s writing, you’ll understand what a loss this is. And if you missed his prescient and incisive commentary before and during the crisis, I hope you’ll sample his work below and get a sense of what a talent he was. Either way, I trust you’ll join me in sending condolences to David’s widow and his family, as well as to Steve.
Read more...We’ve suggested that the Fed has drunken a bit too much of its own confidence Kool-Aid to be talking about tapering QE. The problem now, as we’ve stressed, is that the effect of QE may prove to be asymmetrical.
Read more...The big shortcoming being exposed by the Fed’s talk of tapering QE isn’t just that it’s premature. The central bank could have had its cake and eaten it too by using the “T” word and then in case of overreaction, sending minions out to reassure investors that it didn’t mean it, really, they just had to say it to appease the hawks (not in that formula, mind you, the mere fact of running around and looking concerned about markets having a bit of a swoon is more important than content). It’s that any QE exit subjects the Fed to conflicting objectives and Mr. Market may have finally awoken to that fact.
Read more...Does anybody have a clear vision of the desirable financial system of the future?
Read more...Lordie, the market upset we’ve had over the past week plus over Bernanke using the T, as in “tapering” word, is escalating into a full-blown hissy fit. We now have the Wall Street Journal and other finance-oriented venues telling us how unbelievably important today’s job report is. Huh? One jobs report is just another in a long series of data points.
So why has this one been assigned earth-shaking importance?
Read more...Bloomberg reports that that staple of mortgage funding, the 30 year fixed rate mortgage, has seen its interest rate increase from 3.48% a month ago to 4.16% as of yesterday. By contrast, the highest rate the 30 year mortgage reached in the previous year as of mid-March had been 3.85%.
One analyst, Mark Hanson, sees evidence that the dropoff in refinancings has been impressive
Read more...Warning: mortgage modifications can be yet another exercise in bank predation.
Read more...Yesterday, bonds fell sharply due to stronger-than-expected housing price and consumer confidence reports. That reflects the belief that the economy is mending, and as a result, the Fed will deliver on its promise to dial back and then end QE. Ten year Treasury yields rose to the 2.10%-2.11% level. Various commentators claim that rates will zoom higher either right over that point or at 2.25%. How worried should we be?
Read more...Yves here. While it may seem a bit unfair to make an example of Mark Thoma, since the statement he makes about bank reserves is conventional, Kervick’s post is a useful reminder of why this sort of thinking is misleading.
Read more...Greece’s Prime Minister recently flew to China, to woo Chinese investors. In his bid to be persuasive, he adopted a radical narrative: Greece is a Success Story. A country that almost perished in 2012 is now on the mend; on the road to stabilisation and growth; a wonderful opportunity, currently, for investors to pick up ultra cheap investments and to benefit from the forthcoming growth. How much of this is true, however?
Read more...With Jack Lew now installed at Treasury, I decided to take a look at the annual report of the Financial Stability Oversight Council (FSOC), the Dodd-Frank creation that’s supposed to monitor systemic risk. We already know the leanings of the not-so-new regime at Treasury: they think Dodd-Frank worked to secure a more stable financial system, an opinion reiterated Tuesday at a Senate Banking Committee hearing.
Read more...A few months ago, I wrote a story for The American Prospect about the credit rating agencies, and their thus-far successful effort to ward off any change to their business model, despite their wretched performance during the crisis. This is true even though Dodd-Frank contained a measure, written by Al Franken, to alter the issuer-pays model that incentivizes higher ratings in the pursuit of future profits. The Franken-Wicker rule (the “Wicker” is Republican Senator Roger Wicker) would create a self-regulating organization to randomly assign securities to accredited rating agencies, with more securities over time going to the agencies that rated the most accurately.
Read more...