The Fed’s unexpectedly large cut to the discount rate said loud and clear that its priority is domestic growth, not preserving the value of the depreciating dollar. Yet as we have pointed out, the dollar’s status is a tremendous asset for the US, not to be squandered. It gives us the ability to borrow in […]
Read more...Do you remember “Whip Inflation Now,” Gerald Forf’s program to reduce inflation by exhorting consumers to spend less? WIN buttons, part of a public awareness campaign, quickly came to symbolize the cluelessness of the Ford Administration. The Chinese are about to learn Ford’s lesson the hard way. Rampaging domestic inflation has led the government to […]
Read more...The Treasury department has been struggling to persuade China to let the yuan appreciate (the Chinese now engage in a dirty float in place of their former hard peg). Congress has threatened to impose trade sanctions if the Chinese do not let their currency float. However, the Chinese do not take kindly to threats, and […]
Read more...Bloomberg reports that Goldman’s big hedge fund, Global Alpha, which took a beating along with other quantitatively oriented traders, was down 22.5% in August. Even among quant funds, this was lackluster performance. James Simons’ Renaissance Technologies recouped the 8.7% loss it suffered at the beginning of the month. But here comes the juicy bit: of […]
Read more...Martin Wolf, the Financial Times’ highly regarded chief economics editor, has a particularly sobering article today, “Challenge of rescuing world economy,” and Wolf is a serious sort to begin with. Wolf uses a couple of less widely discussed presentations from the Fed’s conference at Jackson Hole as his point of departure. He contrasts one by […]
Read more...Economist Thomas Palley has a very interesting post today on our current economic conundrum, and he traces the problems to blind faith in globalization rather than permissive monetary policy or out of control financial innovation. Palley starts from an earlier point than most do, noting that our recent expansion has been unbalanced. He sees the […]
Read more...The rally in Treasuries, due primarily to a flight to quality by US investors, has masked a troubling trend: a retreat from Treasuries by foreign investors. Today’s Bloomberg story quotes investors openly discussing their disenchantment with the dollar. This is more significant than it might appear. First, this selling of Treasuries is almost certain to […]
Read more...One of the Treasury Department’s big campaigns has been to put pressure on the Chinese to allow the yuan to float more freely (the Chinese now engage in a dirty float in place of their former hard peg). Most analyses of the value of the yuan show it to be undervalued, some by as much […]
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...This has been an all-round bad news sort of day. And of the bad news, the most troubling is that the carry trade is unwinding. For those of you not familiar with this phenomenon, it consists of borrowing in currencies that have low interest rates and then investing the proceeds in countries and assets that […]
Read more...Santayana was right. Humans seem to be hard wired to make the same mistakes over and over again. Consider the financial turmoil afflicting Second Life. Mirroring our time, the online game/virtual community is commercially oriented. Property and services have a price. (If you think virtual worlds must operate that way, I suggest you read a […]
Read more...The UK’s Times, in “The Kimono Traders,” gives a detailed portrayal of the activities of Japan’s army of retail currency traders, who are overwhelmingly female. They also happen to be aggressive and confident speculators, and control enough in the way of financial assets so as to dominate the activities of foreign institutional investors who are […]
Read more...At junctures like this, when markets have come a bit unglued and may be undergoing a sea change, making forecasts is as scientific a process as reading tea leaves. And since I am (literally) at sea with pricey satellite access, I’m limiting myself to checking the usual suspect media sources rather than being as comprehensive […]
Read more...Iran has asked Japanese buyers of oil to pay in yen, not dollars. It has always been the convention to denominate oil sales in dollars (the Scotsman in March 2007 reported that China’s Zhuhai Zhenrong Corp, the biggest buyer of Iranian crude worldwide, had started paying for Iranian oil in dollars last year). If other […]
Read more...For those who have somehow missed it, Econbrowser does a consistent job of presenting economic data and trends in a thoughtful yet accessible fashion. And they usually have tons of charts. Menzie Chinn, an economist who has written about currencies, in “A Tipping Point for the Dollar?” gives an update in light of the continued […]
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