Category Archives: Economic fundamentals

Satyajit Das: Two Views of Japan’s Setting Sun

Das discusses two recent books on Japan, and both provide windows on how Japan is coping with its now lost two decades. One of them is by Tag Murphy, who I met in my days in Japan and has long been a very insightful commentator. As I said at the Atlantic Economy conference, rather than trying to “jump start the economy,” which would take more radical restructuring than they are willing to engage in, the top wealthy might be better served to worry about managing low growth better. And for its many flaws, egalitarian Japan has muddled through a far more severe bubble and bust with more grace than we have.

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Eurogroup Demands Varoufakis’ Ouster; Trajectory Toward Default Continues

In case you had any doubts that Greece is supposed to act like a good debt vassal, the Eurogroup’s hissy fit over Yanis Varoufakis at last Friday’s meeting, which stoked a raft of unflattering articles, has now led it to demand to that Greek government remove him.

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Pettifor Warns of GFC 2.0 Approach

Yves here. This is a short but important debate over how much to worry about the upcoming train wreck in emerging markets when the Fed finally gets around to tightening. Pettifor sees it as a potential global crisis event; Macrobusiness sees it as a typical emerging markets bust. The Pettifor viewpoint seems more on target. First, […]

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Greece Endgame Nears

Despite the market jitters of last Friday, which were triggered in part by the recognition that the odds of Greece reaching a deal with its creditors are far lower than had been widely assumed, Greek-related coverage has ratcheted down, even as Greece seems certain not to get any funds released in the April 24 Eurogroup meeting and is very likely to miss the end of April deadline for getting its reforms approved by the Troika and Eurogroup.

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Michael Pettis: Will China’s Asian Infrastructure Investment Bank Eventually Matter?

The financial media has attributed considerable importance to the fact that many of America’s close allies, including the UK, Australia, and Israel, have joined China’s new infrastructure bank against the clearly-stated desires of the US. While these moves seem to signal America’s declining influence, it does not necessarily follow that the infrastructure bank is destined to become a major international institution any time soon.

Michael Pettis deflates some of the hype surrounding this initiative, arguing that it is less significant from a geopolitical and practical perspective than virtually all commentators assume. China is simply not about to become the issuer of the reserve currency any time soon, and that limits how much financial clout it will have.

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Should We Be Spooked by Deflation? A Look at the Historical Record

Concerns about deflation – falling prices of goods and services – are rooted in the view that it is very costly. This column tests the historical link between output growth and deflation in a sample covering 140 years for up to 38 economies. The evidence suggests that this link is weak and derives largely from the Great Depression. The authors find a stronger link between output growth and asset price deflations, particularly during postwar property price deflations. There is no evidence that high debt has so far raised the cost of goods and services price deflations, in so-called debt deflations. The most damaging interaction appears to be between property price deflations and private debt.

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