I must confess a certain fondness for the apocalyptic sort of financial writer, provided they don’t lose anchoring with reality and fall into the tinfoil hat category. Nouriel Roubini is the case example of an economist who favors a baroque, melodramatic style, and despite sounding more than a tad unhinged at points, he has proven […]
Read more...Hypo Real Estate, Germany’s second largest real estate lender, teeters on the verge of collapse. The bank has a €400 billion balance sheet, which would make for a failure of a similar scale to Lehman’s (Hypo’s footings are roughly $550 billion, while Lehman’s were $660 billion as of its last balance sheet date). Even though […]
Read more...It has been conventional wisdom that China, Japan, and other countries that run trade surpluses with the US, which means they fund our overconsumption by buying assets like US Treauries, would never restrict the flow of credit to us because it would lower their exports and hurt their growth. We’ve long been leery of the […]
Read more...Our mantra of late has been that the serial bailout plans from the Treasury and Fed will undermine the US’s AAA rating and exact a considerable toll on the dollar. Indeed, Liam Halligan tells us in the Telegraph today that “Default by the US government is no longer unthinkable.” Bloomberg reports that this view is […]
Read more...Note the not-pretty pattern. The flow of funds out of emerging markets has reached the high-water mark of the period leading into the Asian, then Russian financial crises of 1997-1998. However, after recovering from the damage of this period, emerging markets as a whole enjoyed a period of strong growth. In theory, their economies are […]
Read more...The news of a possible investment by the Korean Development Bank in Lehman is overshadowing far more important developments, at least as far as most Koreans are concerned. The won is on a rapid slide, in a worrying parallel to the Asian currency crisis of 1997, and some other currencies in the region are under […]
Read more...You can tell a long weekend in approaching in the US. Most of the interesting news tonight is from Asia, although in this case, via the Financial Times. Reader Matt D waxed eloquent in comments yesterday about FT reporter Krishna Guha, who provided insight into the Fed staff’s reading of the tealeaves, which was more […]
Read more...Although one robin does not make a spring, the increased reluctance of Japanese retail and institutional investors to hold GSE debt is worrisome. Bloomberg reports that Japanese retail and institutional investors are unloading foreign debt due to currency volatility and are particularly leery of Fannie and Freddie securities. Admittedly, as Brad Setser has pointed out […]
Read more...A very useful post comes from Robert Dekle, Jonathan Eaton, and Samuel S. Kortum at VoxEU. The authors steer clear of the “when will global imbalances end” question (as in when will China, Japan, Taiwan, and the Gulf States tire of funding our current account deficit) to focus on one at least as important: “what […]
Read more...We have been skeptical of the idea that a weak dollar would be the boon for US manufacturing that many thought it would. The reason? The best possible outcome would be to see a resurgence in manufacturing, since manufacturing has higher potential for productivity gains than does the service industry (although getting back some of […]
Read more...Despite the resurgence of the dollar, Ambrose Evans-Pritchard remains unconvinced that things in the US are now as rosy as the new found (albeit guarded) optimism suggests. He comes by his view without disputing the view that the dollar rally has legs. I’m not very optimistic about that. Why? A drinking buddy with amazing connections […]
Read more...This topic is and yet isn’t a bit afield from the normal beat of this blog. A reader sent links to some recent posts at Bronte Capital, a blog by John Hempton, which is reportedly read by top financial executives in Sweden and has a following among some of the more savvy analysts in London. […]
Read more...We’ve cribbed the title of a provocative post by Satyajit Das at Eurointelligence. He argues that the US’s days of continuing to borrow abroad with little worry as to the consequences may be nearing an end. A good companion piece is Menzie Chinn’s Implications of adjustment to riskier dollar assets in a portfolio balance framework, […]
Read more...Nouriel Roubini and Brad Setser appear to have called this one correctly. Simply staggering amounts of hot money have been flowing into China, betting on faster appreciation of the yuan. or better yet, a significant revaluation. In fact, this level of weight of money would normally be a self-fulfilling prophecy. Hot money is highly stimulative, […]
Read more...As he is often wont to do, Ambrose Evans-Pritchard worries, in dire terms, about the poor prospects for growth and stability, It would be easy to dismiss him as histrionic were it not for the fact that some commentators who have been right so far about the progress of the credit crunch, are also hyperventilating. […]
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