Category Archives: Economic fundamentals

“Trade Imbalances Lead to Debt Imbalances” or Why Mercantilist Nations Shouldn’t Beef About Their “Profligate” Customers

Michael Pettis, a respected economist and commentator on China, provides an important contribution on the global imbalances theme. Many observers have pointed fingers at debtor nations like Greece, Portugal, Spain, and the US and argue that they need to start consuming less. While narrowly there is some merit to that argument, Pettis points out that the trade deficit countries (the debtors) are not the ones in the driver’s seat and it it the trade surplus countries that must take the lead in making adjustments.

Marshall Auerback: The European Monetary Union is the Titanic

By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Deal 2.0

The Iceberg Cometh: An economic and financial crisis will soon be brought about by the collapse of the European Monetary Union. And everyone goes down with the ship!

Satyajit Das: Europe’s Debt Crisis Refuses to Die

By Satyajit Das, the author of Extreme Money: The Masters of the Universe and the Cult of Risk (forthcoming August 2011) and Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)
overwhelm attempts to contain and solve the European sovereign debt crisis.

Recent frantic efforts that secured release of Euro 12 billion to Greece avoided immediate default but have not solved the fundamental problems. Greece is unlikely to meet targets for tax revenues, spending cuts and sales of public assets.

Why Matt Yglesias and Felix Salmon are Wrong About A Legal Way to Circumvent the Debt Ceiling Impasse

Well, the debt limit crisis is upon us. Treasury Secretary Geithner says the US Government will not be able to meet all its obligations on August 3, unless the debt ceiling is increased by Congress. The Secretary says he is out of moves to extend this date. I don’t think that’s true. I think he can use proof platinum coin seigniorage to supply all the money needed to spend Congressional Appropriations.

Marshall Auerback: There is No Progressive Case for Deficit Cutting – The Myth of the “Virtuous” Clinton Surpluses

By Marshall Auerback, a portfolio strategist and hedge fund manager

For once, President Obama has sought to address his progressive critics, without caricaturing them as a bunch of out of touch, irresponsible radicals. At his press conference on Friday, the President made the following argument:

Summer Rerun: Why we shouldn’t use monetary policy to stimulate aggregate demand

Hi all. Here’s another summer re-run I wanted to post at NC, but this time from Marshall Auerback. As you know, there has been a heated debate amongst economists as to what policy makers should do if anything about the loss of jobs and the attendant fall in demand and output in the wake of […]

Shades of 2007: Funding Stresses Hit European Banks

Can you smell the napalm?

The tone of the market is beginning to feel like 2007: serious signs of danger, like interbank funding stresses, combined complacency and denial.

Eurozone Song

The lyrics are clever and it’s peppier than most parody/humor songs. Enjoy!

From the Guardian, hat tip reader Carol B:

Tom Ferguson on How Banks’ Refusal to Take Haircuts Stokes the Euro Crisis

Tom Ferguson gives a crisp overview of some of the recent events in Eurozone crisis and how the desire to save banks from losses is making matters worse.

The Fed is on hold

I have consistently warned for the past few months that the Fed would pause before rushing into QE3. I reiterated this yesterday. Yet, somehow people came away from Ben Bernanke’s testimony before Congress yesterday thinking the Fed was going to crank up the QE3 keyboard strokes. It’s not going to happen. Look at Bernanke’s prepared […]

Satyajit Das: European Debt – Wrong Diagnosis, Wrong Treatment!

By Satyajit Das, the author of Extreme Money: The Masters of the Universe and the Cult of Risk (forthcoming August 2011) and Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

Executed with Northern European creativity, charm, flexibility and humility and Mediterranean organisation, leadership diligence and appetite for hard work, the European rescue plan – “the grand compact” – is failing.

The politics of Fed policy

Cross-posted from Credit Writedowns Federal Reserve Chairman Ben Bernanke is due to speak before Congress. Let me say a few words about what’s going to happen with the Fed. Here’s the thing: The Federal Reserve Board is located in Washington, DC and Washington is a political town. As such, the Fed must mind its manners […]

Satyajit Das: “Progress” of the European Debt Crisis

By Satyajit Das, the author of Extreme Money: The Masters of the Universe and the Cult of Risk (forthcoming August 2011) and Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

In Oscar Wilde’s Importance of Being Earnest, Lady Bracknell memorably remarks that: “To lose one parent… may be regarded as a misfortune; to lose both looks like carelessness.” The Euro-zone’s need to rescue three of its members (Greece, Ireland and Portugal) with three others increasingly eyed with varying degrees of concern (Spain, Belgium and Italy) smacks of institutionalised incompetence.

Doug Smith: The Maximum Wage

By Douglas K. Smith, author of On Value and Values: Thinking Differently About We In An Age Of Me

We face severe and growing income inequality with negative effects on people and the economy. Yet, no surprise, the ‘can’t do’ right wing continues a scorched earth campaign against the minimum wage. These self-promoting haters actually prefer no wages and indentured servitude – for example using prisoners to replace employees and cheerfully promoting ‘internships’ for the unemployed.

They glory in income inequality and wish it to expand instead of contract. Enough of that. They are destroyers of the American Dream.

But people who seek to shrink income inequality — to insure life, liberty and the pursuit of happiness for all and not just some — must now focus as much on the maximum wage as the minimum wage.

So, be it proposed:

“That any enterprise receiving taxpayer funds shall not compensate that enterprise’s highest paid person in an amount greater than twenty-five times what the lowest compensated person receives.”

Eurozone Leaders Fiddling as Rome Starts to Burn? (Updated)

Worries about the Eurozone have heretofore been depicted as afflicting the periphery. But even though Italy is geographically on the margin, if the crisis engulfs it, it irreparably damages the core. And that time seems to be upon us.