The stress tests conducted on 19 large American banks by the US Treasury in 2009 were an amazingly effective exercise in salesmanship and sleight of hand. Banking industry experts, including Bill Black, Chris Whalen, and Josh Rosner, dismissed the process as mere theatrics: too little staffing and not enough “stress” in the economic forecasts and […]
Read more...We and other cynics were very skeptical of the pre-G20 announcement by China that it was moving to a more market-oriented currency regime at some unspecified point in the future (particularly since China had said pretty much the same thing in 2005, and actually had committed to some baby steps then). Now that it is […]
Read more...We’ve warned for some time that the eurozone’s sure-to-fail muddle-through approach to its structural challenges was rattling investor confidence. Worse, its insistence on wearing an austerity hairshirt was not only committing Europe to deflation, but had high odds of sucking the global economy down along with it. Given how fragile the recovery is in advanced […]
Read more...We noted a bit more than a week ago that we expect the European banks stress tests to backfire. The US version was a successful con game because the officialdom provided adequate disclosure about the process and stayed firmly on message, the banks were allowed to “manufacture” as analyst Meredith Whitney put it, impressive earnings, […]
Read more...The first section of this post is by Warren Mosler, the President of Valance Co. who writes for New Deal 2.0 Deficit doves are doing more harm than the hawks — here’s what they need to know. The deficit hawks are prevailing. The economy remains an economic and social disaster. Medicare has already been cut […]
Read more...It was hard to miss the Chinese central bank’s announcement last weekend that it was implementing a ore “flexible” policy toward managing its currency. Numerous Western officials and analysts declared the statement to be a major move, signaling China’s willingness to allow the renminbi to appreciate to a meaningful degree. We, by contrast, called it […]
Read more...The UK emergency budget, which will impose a £2billion tax on banks, both domestic and foreign bank operations domiciled there, along with the upcoming G20 meetings, is pushing a contentious issue to the fore: how and how much to tax banks. There are two motivations at work. First, with most advanced economies keen to narrow […]
Read more...George Magnus, senior economic advisor at UBS, provided a reading of the Chinese central bank’s announcement on its currency policy over the past weekend. He sees it as political, “symbolic rather than substantive.” He also contends that China needs to make significant policy changes. From the Financial Times: It would be churlish not to acknowledge […]
Read more...By Richard Alford, a former economist at the New York Fed. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side. Calls for global rebalancing are back in vogue, while the debate about the appropriate stance of domestic policy heats […]
Read more...The Chinese central bank made a vague announcement about its currency policy on its website today, which the officialdom, on cue, treated as a major move (to wit: “China vows increased currency flexibility” at the Financial Times, “Chinese say they intend to free up their currency,” Washington Post).) As we describe below, this “announcement” is […]
Read more...Martin Wolf, in today’s Financial Times, uses modern monetary theory (!), also known as the fiscal balances approach, to explain why calls for fiscal belt tightening are premature. Let’s provide a little background, courtesy Rob Parenteau of the Levy Institute: …if we divide the economy into three sectors – the domestic private (households and firms), […]
Read more...China posted a 48.5% increase in exports in May over its level the prior year, which led to much consternation and chest thumping in DC. Recall that Treasury Secretary Geithner was under considerable pressure from Congress to certify China a currency manipulator on April 15 (one of two semi-annual opportunities). China posted a rather surprising […]
Read more...By Satyajit Das, a risk consultant and author of Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2010, FT-Prentice Hall). A year of wishful thinking … The period from March 2009 was the year of wishful thinking. Central banks cut interest rates and governments opened their cheque […]
Read more...It is not a sign of intelligence to repeat a course of action and expect different results. Yet our officialdom is doing pretty much just that on the economic front. Treasury and the Fed in particular seem quite pleased with their success in patching up the financial system with duct tape and baling wire and […]
Read more...By Marshall Auerback, a fund manager and investment strategist who writes for New Deal 2.0 (and happens to be Canadian). For once, Canada is making the news for the wrong reasons: The government of the United Kingdom has braced the country for cuts in government spending of up to 20 per cent as the new […]
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