Never mind global warming. Human observation of the universe may have accelerated its demise. An article in New Scientist discusses the theory developed by cosmologists Lawrence Krauss of Case Western Reserve University and James Dent of Vanderbilt University. They believe that the observation of dark energy made in 1998 may have caused the universe to […]
Read more...Nouriel Roubini, in his latest post, “With the Recession Becoming Inevitable the Consensus Shifts Towards the Hard Landing View. And the Rising Risk of a Systemic Financial Meltdown,” takes his somber views one step further and discusses the possibility of a crisis in some detail. Even by Roubini standards this is grim reading. I have […]
Read more...Nothing like a sobering forecast to focus the mind on a Monday morning. As readers may recall, I was deeply concerned early this year about excessive leverage, asset bubbles in many different markets, and complacency about risk. But it is one thing to know that things are likely to turn out badly, quite another to […]
Read more...This blog is not for the fainthearted, but even I found this item sobering. Mark Thoma at Economist’s View featured an interview with Jared Diamond, author of Collapse: How Societies Choose to Fail or Succeed. Note that one commentator at Thoma’s site disputed Diamond’s argument that the genocide in Rwanda was caused by competition for […]
Read more...Three thousand banks recently participated in trying to assess the impact of a pandemic on their operations and determine what they could do to cope. The results make for sobering reading, yet is it doubtful that organizations that were not involved in this program will take heed. While the financial services industry is making contingency […]
Read more...John Plender in the Financial Times wrote a very solid piece, “Credit squeeze could be harbinger of a Chinese crash,” which looks at the major financial train wrecks of the past century and finds a common element: immature but rapidly growing economies acting as major global creditors. The efforts to manage the resultant imbalances lead […]
Read more...The recent record highs in stock market were presupposed on the notion that the credit crisis of the summer was now history and that growth would resume its former course. Investors chose to regard large writeoffs at UBS, Citigroup, Merrill, and Deutsche Bank as signs that they were all putting the problems behind them. That […]
Read more...Yale Professor Jeffrey Garten has long argued that letting the dollar fall will do little to remedy America’s chronic balance of payments deficit. In a recent Newsweek article that picks up on themes he presented in a 2004 New York Times op-ed, namely, that America is so addicted to imports that a big fall in […]
Read more...It’s revealing that Robert Kuttner’s hard hitting, cogent testimony before the House Committee on Financial Services (hat tip Culture of Life News) has gotten very little attention in the media and the blogsphere. Perhaps it’s because Kuttner, an economist and former investigator for the Senate Banking Committee, argues persuasively that the strong ideological bias against […]
Read more...In an amazing instance of collateral damage, the new bankruptcy law that took effect in October 2005, designed to enable banks to wrestle more money from overextending credit card users, hascaught hedge funds in its net. The old law exempted many types of bank securities lending, such as repo agreements, to be included in a […]
Read more...Bloomberg and the Financial Times both have reports on the fact that British customers have been queuing up to pull their funds out of Northern Rock, ironically as a result as the emergency cash infusion by the Bank of England announced yesterday. There’s a potent message here; the information conveyed by regulatory action can counteract […]
Read more...James Hamilton provides a nice, succinct explanation of why the crisis in the credit markets is not a bank run (the afflicted organizations are not banks) yet has the characteristics of a bank run. It’s a useful piece for explaining, as he did at Jackson Hole, why the problem isn’t remedied by interest rate cuts. […]
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...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...As readers doubtless know, a nasty day in the markets yesterday was followed by distress overnight as the Japanese central bank injected funds into the marketplace and the European Central Bank added liquidity a second day, following an unprecedented, unlimited injection Thursday. The Dow opened down over 100 points, and due to a spike up […]
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