Jim Grant, a Wall Street fixture via his “Grant’s Interest Rate Observer,” a newsletter that provides probing, skeptical, and literate commentary on the credit markets, has a very good op-ed piece in today’s New York Times. Grant takes a big swipe at the US regulatory policy, depicting it as privatizing the profits of banking and […]
Read more...We’ve noticed a new theme among economics writers: Extreme Measures. Commentators have suddenly looked into the abyss, either of the depth of the US subprime/housing problem or the progressing credit crunch that has already caused a seize up in the money markets, and are proposing radical courses of action. Our first sighting was Paul Krugman, […]
Read more...This credit contraction is still young, yet we already have the spectacle of a full blown seize up in the money markets which has central bankers flummoxed. Normally, you expect this sort of panic after a few major financial train wrecks and weakness in the real economy. One can cheerily assume that all is for […]
Read more...For those of you who have been following the turmoil in the money markets, the problem stems from a near-complete repudiation of asset-backed commercial paper, which constitutes roughly half of commercial paper outstandings. The reason for the concern is most asset-backed CP has mortgages as collateral, and some of those mortgages may be (hold your […]
Read more...Earlier this week, I sought to frame the prevailing views of what the supervising adults, namely central bankers, should do about the turmoil in the financial markets. They break down into four groups (names of representative spokesmen included): The keep the party going types (Jim Cramer and his less histrionic brethren) who argue that markets […]
Read more...Bloomberg tells us that sales of £2 million ($4 million) homes and flats in London are on hold as buyers pull back, expecting subprime woes to put a damper on City bonuses this year. Note that that price level is considered mere “mid level luxury,” and still won’t get you very far in uber pricey […]
Read more...An update from Bloomberg tells us that commercial paper outstandings fell 4.2% in a week, which suggests the efforts of central bankers to restore confidence in that market, and particularly in asset backed commercial paper, may not be adequate. 4.2% may not sound like much of a drop until you do some quick and dirty […]
Read more...George Magnus, senior economics adviser at UBS and the person responsible for bringing economist Hyman Minsky to the public’s attention, invokes him again in a good piece in the Financial Times. In keeping with his affinity for the world view of the dour economist, Magnus depicts our current credit crunch as a Minsky moment and […]
Read more...Normally, I have the highest regard for Martin Wolf, the Financial Times’ lead economics writer. He is forthright, data-driven, articulate, sober, and insightful. However, I take issue with his current article, “The Federal Reserve must prolong the party,” and see its failings as symptomatic of the state of economics. In brief, Wolf argues that the […]
Read more...The Bush Administration, which resisted proposals to have Fannie Mae and Freddie Mac buy more mortgages to alleviate stress in the housing markets, is instead looking to the Federal Home Administration, which traditionally has provided insurance to low and middle income mortgages, to help troubled borrowers. But if you believe the data in the Wall […]
Read more...Upon occasion, we’ve quoted John Dizard of the Financial Times, who seems terribly plugged in and is unfailingly interesting. His latest piece included a succinct summation of the Fed’s situation and his take on what it will do: The real issue has been the excess liquidity created by the central banks through a decade of […]
Read more...In an inspired bit of stagecraft, Senate Banking Committee Chairman Christopher Dodd reported today on a meeting with Fed chairman Ben Bernanke and Treasury secretary Henry Paulson that the Fed stood ready to use “all of the tools at his disposal” to address the current money market liquidity meltdown and general credit market distress. This […]
Read more...The Fed’s move on Friday to lower discount rates and its policy shift towards addressing risks to growth has not brought relief to the sector that was in the most distress, the money markets. Panicked action continued Monday, begging the question of what, if anything, the authorities can do. Institutional are fleeing from counterparty risk […]
Read more...A gut-wrenching two weeks in the credit markets have been capped by unprecedented moves by central bankers. The ECB’s offer of an unlimited infusion to member banks the week before last was followed last Friday’ by the Fed’s discount rate cut, which included stern warnings that those who needed it better use it and a […]
Read more...Nouriel Roubini and Marc Faber are well known bears, but that fact has not prevented them from being largely right of late. And since the events of the last few weeks have been particularly nerve-wracking, the US media has taken to focusing on the more soothing aspects of news developments, to the extent they can […]
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