Bloomberg and the Telegraph report on a speech made by Warren Buffett in Toronto. He sees the dollar falling over the next decade unless policies change, has harsh words for the financial services industry, and says there is plenty of credit available. The last bit sounds troublingly at odds with facts, until you realize he […]
Read more...Long term, the dollar is not a good bet unless the US increases its savings rate and reduces its current account deficit considerably. Monetary easing and fiscal stimulus only exacerbate the problem. But never forget the Wall Street saying, “Don’t fight the tape.” From Bloomberg: Ben S. Bernanke’s decision to lower interest rates 1.25 percentage […]
Read more...Brad Setser has been concerned of late about the implications of China’s (and other central banks) exchange losses on their large and ever-growing holdings of US Treasuries which they buy to fund our current account deficit. Setser, a keen watcher of official data, has also noted that private foreign demand for US securities has virtually […]
Read more...Brad Setser has an excellent post, “The PBoC’s dilemmas,” which he later admits is really China’s dilemmas. He focuses on two issues. First is that due to the loosening of the yuan peg against the dollar, the central bank is losing $4 billion a month, mainly on its Treasury holdings (note this is due to […]
Read more...George Magnus, the UBS economist who popularized the concept of a Minsky Moment and has been prescient in his bearish calls on the credit markets, veered today and, in a Financial Times comment, “More is needed to unblock credit arteries,” gave unqualified support for aggressive monetary easing. Put it another way, when mere New York […]
Read more...Sentiment has gotten so bad even among CEOs that there is reason to expect a bounce in equities in the not-so-distant future once frayed nerves have calmed a bit, particularly given the report in Bloomberg that Bernanke & Co. are much more sanguine about inflation and therefore are perceived to be ready to make further […]
Read more...Brad Setser and Tony Jackson both comment today on the seemingly inexorable rise of foreigner investors in the US, particularly to shore up foundering financial institutions. Setser’s piece is much broader and also synthesizes and comments on recent hand-wringing in the media, so it gets pride of place. However, Jackson’s observation about the maybe-not-so-hot prospects […]
Read more...The yen is up again, and superficially, it looks like a repeat of a predictable sequence: risk perceptions rise, investors start to shed risk, carry trades unwind, yen rallies, everyone calms down, the yen falls and the carry trade resumes. Since the Japanese love a cheap yen and domestic investors are well conditioned to buy […]
Read more...Forgive us, we are going to be a bit terse tonight. Turns out we got a wee case of food poisoning (likely culprit: shellfish). On the mend, but also behind schedule on various fronts. Bloomberg reports that China’s trade deficit has hit an all time high of $262.7 billion. So much for the idea that […]
Read more...Ray Dalio, founder and chief investment officer of Bridgewater Associates, is no doubt far from alone in being someone whose opinion is solicited by the Fed. Nevertheless, in an interview in today’s Financial Times, he takes a position diametrically opposed to conventional wisdom. He argues that the remedy for our current economic, particularly credit, woes, […]
Read more...Many commentators see the euro as the logical successor to the dollar as the reserve currency. Yet the Financial Times’ Lex column points out that most currency unions fail. However, the dollar is the product of of that very type of arrangement. Nevertheless, the piece serves as an important reminder against blindly assuming current trends […]
Read more...I’m a bit late to the somewhat sensationalistic piece, “Fatwa Against the Dollar” by Ambrose Evans-Pritchard at the Telegraph. The reason I say “somewhat” is that the underlying issue that Evans-Pritchard points to, namely, dollar-peg-induced inflation in our trading partners, is real and becoming more acute. And Evans-Pritchard emphasizes an aspect that gets insufficient play […]
Read more...Brad Setser does his usual thorough job of parsing the latest (October) Treasury International Capital report. On a quick reading, the release is quite a relief. Capital inflows in the last few months had been insufficient to offset our ongoing current account deficits (worse, in August, capital inflows were negative, a real stunner). That’s reversed […]
Read more...MarketWatch, among others, tells us today that the current account deficit fell in the third quarter to 5.1% of GDP, down from 5.5% in the second quarter. That’s unquestionable progress. However, as the article also points out in a rather anodyne fashion, “Few economists believe a current account deficit of 5% of GDP is sustainable.” […]
Read more...Menzie Chinn has an intriguing post on Econbrowser that I hope I can do justice. Chinn is a serious analyst of currency price formation and continues to look at the question of the prospects for the dollar. In looking at the value of a currency, there is quite a lot of artwork in deciding how […]
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