Krugman, in his New York Times op-ed today, “Betting the Bank,” reminds us that the Fed is much like the Wizard of Oz: the perception of its power vastly exceeds reality. In normal times, the limited tools central bankers have at their disposal can be used to great effect, but extreme conditions reveal their impotence. […]
Read more...Asian markets opened lower, then took a nosedive after the release of a report that troubled mortgage bond hedge fund to Carlyle Capital failed to reach a standstill with creditors (hat tip reader cb). The Nikkei fell 3.5% to 12,400. The dollar dropped to 100 to the yen. I bought yen at around 111 in […]
Read more...The yen has had a major spike up in the last few days, going from 107 to just over 103 in Tokyo trading today. Note that moves of the yen are both the result of and the cause of market turmoil. When markets get nervous, traders cut back on yen-funded positions. They must buy yen […]
Read more...A number of commentators (see here and here) have taken note Warren Buffett’s favorable remarks in his much-anticipated annual letter to Berkshire Hathaway shareholders on sovereign wealth fund investment in the US. What I found far more significant was his somewhat-longer-form observations about how we had gotten ourselves in the situation where SWF-type capital inflows […]
Read more...The repeated rounds of Fed rate cuts have led the dollar to fall against most currencies save those maintaining currency pegs. While the yuan has appreciated somewhat, it hasn’t been sufficient to have much impact on Chinese trade surplus with the US (2007 was a record year). And because China and its peers are having […]
Read more...Brad Setser, in one of his thorough and informative posts, parses the December Treasury International Capital report and finds strengthening of a trend he noted in the August TIC report: that the dollar purchases that fund our current account deficit come almost entirely from central banks and other government purses, and not private sector buyers: […]
Read more...Brad Setser comes as close to sounding cheerful as I’ve recalled him being in quite some time in today’s post, “The worse the dollar does, the more dollars central banks want …“ I hate to take issue with the good doctor, particularly in his area of expertise, but this may be the lull before a […]
Read more...Today’s Telegraph has a good piece, “Japan is the next sub-prime flashpoint,” by Ambrose Evans-Pritchard. And before I get to the piece, I want to say a few things about the author. A number of readers detest Evans-Pritchard, and I am at a loss to understand why. He wears his biggest fault on his sleeve, […]
Read more...Bloomberg and the Telegraph report on a speech made by Warren Buffett in Toronto. He sees the dollar falling over the next decade unless policies change, has harsh words for the financial services industry, and says there is plenty of credit available. The last bit sounds troublingly at odds with facts, until you realize he […]
Read more...Long term, the dollar is not a good bet unless the US increases its savings rate and reduces its current account deficit considerably. Monetary easing and fiscal stimulus only exacerbate the problem. But never forget the Wall Street saying, “Don’t fight the tape.” From Bloomberg: Ben S. Bernanke’s decision to lower interest rates 1.25 percentage […]
Read more...Brad Setser has been concerned of late about the implications of China’s (and other central banks) exchange losses on their large and ever-growing holdings of US Treasuries which they buy to fund our current account deficit. Setser, a keen watcher of official data, has also noted that private foreign demand for US securities has virtually […]
Read more...Brad Setser has an excellent post, “The PBoC’s dilemmas,” which he later admits is really China’s dilemmas. He focuses on two issues. First is that due to the loosening of the yuan peg against the dollar, the central bank is losing $4 billion a month, mainly on its Treasury holdings (note this is due to […]
Read more...George Magnus, the UBS economist who popularized the concept of a Minsky Moment and has been prescient in his bearish calls on the credit markets, veered today and, in a Financial Times comment, “More is needed to unblock credit arteries,” gave unqualified support for aggressive monetary easing. Put it another way, when mere New York […]
Read more...Sentiment has gotten so bad even among CEOs that there is reason to expect a bounce in equities in the not-so-distant future once frayed nerves have calmed a bit, particularly given the report in Bloomberg that Bernanke & Co. are much more sanguine about inflation and therefore are perceived to be ready to make further […]
Read more...Brad Setser and Tony Jackson both comment today on the seemingly inexorable rise of foreigner investors in the US, particularly to shore up foundering financial institutions. Setser’s piece is much broader and also synthesizes and comments on recent hand-wringing in the media, so it gets pride of place. However, Jackson’s observation about the maybe-not-so-hot prospects […]
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