Category Archives: Economic fundamentals

Eugene Linden: In a World of Underpriced Risk, What Could Possibly Go Wrong?

By Eugene Linden, a journalist and author of seven books who has written extensively about animal behavior, environmental issues, and markets

On a recent conference call, the strategist of a major international bank (it was an off-the-record call for clients only) laid out the bare bones of what he called the world’s “giant experiment” in debt and interest rates. Never before have so many countries maintained such low base rates for so long; never before in peacetime have so many countries had such huge deficits and debt burdens; never before in U.S. history had long term rates been so low; never before has the U.S. gone so many decades without deflation following inflation. Because we live in these unprecedented times, it’s easy to lose sight just our strange they are… and how dangerous.

The Poster Child of Austerity is Lost

By Delusional Economics. Cross posted from MacroBusiness.

While we wait for tonight’s announcement from the German constitutional court, there are some interesting developments in the Troika’s latest review of Portugal:

Markets Applaud Draghi’s New, Improved Kick the Can Down the Road Strategy

On Thursday, ECB chief Mario Draghi announced a bond-buying program that had been largely leaked the day prior, namely that of a new bond buying program, the Outright Monetary Transactions, or OMT. Bond yields in Italy and Spain had already come down on the rumor, and stock markets around the world rallied on the news.

The enthusiasm appears overdone when you look at the sketchy details.

Exchange Rates and Modern Trade Theory: An Interview with John Harvey

John Harvey is Professor of Economics at Texas Christian University. He blogs at Forbes and is the author of the book ‘Currencies, Capital Flows and Crises: A Post-Keynesian Analysis of Exchange Rate Determination’

Interview conducted by Philip Pilkington

Philip Pilkington: Your book seeks to outline an alternative theory of what determines exchange rates in our world today.

How Was Your Vacation Economy?

Given that various seers have become less keen about the recovery thesis, and the Fed is sufficiently concerned that Bernanke has all but promised another round of QE is imminent (as if the last two did much to help people outside the speculative classes), I thought it would make sense to get reader input on what they’ve seen in the last few weeks, particularly if they either live in or visit vacation areas at this time of year.

“Nonsense Economics” and the Deepening Greek Crisis

Real News Network has a sobering interview with Costas Lapavitsas,a professor at the University of London School of Oriental and African Studies, who gives an update on the political and economic situation in Greece.

Greece’s Great Depression: “Everyone is Going into a Black Hole”

RT interviews University of Athens economics professor Yanis Varoufakis on the latest round of Greek bailout negotiations.

Draghi Does His Best

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness

Two weeks ago I wrote a post about Mario Draghi and what appeared to be ECB’s step across the Rubicon into the arena of politics and fiscal policy in order to force Europe’s politicians to break the ‘chicken and egg’ stand-off that has plagued Europe for over a year. In that post I described his actions as a bluff called of both sides of the divide:

Political Trouble Bubbles in Italy and Spain

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness

As you may have noticed the news is a bit slow out of Europe recently. It is the holiday season in which the Euro-elite pack-up and head to the beaches for some R&R. Angela Merkel returned from her break yesterday so over the next week or so we should start to see some clarity around exactly what her government has to say about Mario Draghi’s master plan.

In the meantime the focus is back on Greece where the Troika has been visiting once again.

Michael Pettis: The Chinese Rebound Will be Short

Cross posted from MacroBusiness

Exclusively from Michael Pettis’ newsletter:

While analysts are still arguing over whether or not growth in the first half of 2012 was lower than the already-low reported numbers (I think it was, and for reasons see Kate Mackenzie’s quick summary in the Financial Times), I expect, as I discussed in the previous issue of this newsletter, that over the next three months we will see a rebound in Chinese GDP growth as investment expands. The leadership transition, after all, is in October, and no one in power wants to see the ten-year period under the leadership of President Hu and Premier Wen end with an economic whimper, especially after the very distressing political scandals we have lived through this year.

I don’t think, however, that any rebound or recovery will last more than one or two quarters, and even then it is going to be a very tedious and lop-sided recovery.
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More on the Economics of Single Payer Insurance

The proposed Maryland Health Security Act has put the idea of single payer healthcare back on the table. The Maryland chapter of Physicians for a National Health Care Program has summarized its main features and provides a link to the bill. It proposes to lower health care costs by broadening the pool of the insured, lowering administrative costs, and negotiating for better prices on drugs and medical devices (anyone who has purchased pharmaceuticals outside the US will attest that this make a large difference).

Real News Network has run a series of interviews on this plan. You can view Part 1 for an overview. I thought the second and third segments, on the economics, would be of particular interest to readers.

Robert Shiller Questions Whether Housing Has Bottomed, Sees Possible Bubbles

Robert Shiller of the Case Shiller Index, spoke to Fox Business earlier this week (hat tip Ed Harrison). In this short chat, he stresses that the rise in housing prices so far this year look very encouraging, but could prove to be seasonal. He also points out that he is seeing what may be early bubble behavior in San Francisco and Phoenix, and even in Chicago and Atlanta.

If that is indeed happening, it’s not a bug but a feature.

Germans Getting Even More Opposed to Being in the Eurozone

Over the weekend, the newspaper Bild released the results of a new poll on German sentiment on the Euro. It found that 51% thought Germany would do better by leaving the Eurozone with 29% saying Germany would fare worse. In addition, 71% of the respondents said Greece should be expelled from the Eurozone if it could not live up to its austerity commitments.

These results aren’t particularly novel; a large cohort of Germans have been vocally opposed to Eurorescues for some time. What is new about this poll is how low the percentage is that sees being in the Euro as good for Germany.