Category Archives: Economic fundamentals

European Optimism Fades

By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

I genuinely thought the Europeans were getting somewhere in the last few weeks as I detected (or maybe that should be optimistically hoped) a change of rhetoric from some of the more hardened camps and a growing realisation that the current approach to “solving” the crisis is failing. My optimism was helped by the fact that the OMT, like the LTRO before it, has driven down sovereign yields which has given the European leaders yet another opportunity to sit down away from the fire fighting and discuss outcomes beyond a short term market window.

But alas, this is Europe and I appear to have been wrong.

Michael Hudson: QE3 – Another Fed Giveaway to the Banks

In this Real News Network interview, Michael Hudson gives a high level discussion of why the Fed’s claim that QE3 will help employment needs to be taken with a fistful of salt.

Philip Pilkington: The 19th Century Long Depression: How it Fostered Oligopolistic Capitalism and Serves as a Model for Austerity

By Philip Pilkington, a writer and journalist who is in the process of moving to London. You can follow him on Twitter at @pilkingtonphil

You can live in this illusion
You can choose to believe
You keep looking but you can’t find the woods
While you’re hiding in the trees

– Nine Inch Nails ‘Right Where it Belongs”

Many people that I meet who are vaguely interested in economics – usually people in academia outside of the economics departments or working in lower tier sectors of banking and finance – are enamoured with libertarianism and its economic doctrines. Meanwhile the Republican Vice Presidential nominee – an Ayn Rand obsessive – has channelled such ideas into a truly otherworldly budget proposal.

Libertarianism-lite has become the last refuge for the ideological conservative.

Europe’s Economy Sinks from Sight

By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

Probably best if you spike your morning coffee before reading any further.

Another Bearish China Signal? Expats Starting to Decamp

Sober Look has an intriguing little post up on how expats are leaving China and why that is a bearish portent.

So How’s That QE3 Working?

Obviously, it’s a little early to reach a verdict on QE3, but market pundit love reading the tea leaves early and often, so we figured we’d join the fun and look at early reactions.

Michael Hudson on How Finance Capital Leads to Debt Servitude

This edited transcript is expanded from a live phone interview with Michael Hudson by Dimitris Yannopoulos for Athens News. It summarizes some of the major themes from Hudson’s new book, The Bubble and Beyond: Fictitious Capital, Debt Deflation and Global Crisis, which is available on Amazon.

Q: How has the financial system evolved into the form of economic servitude that you call “debt peonage” in your book, implying a negation of democracy as well as free-market capitalism as classically understood?

Yanis Varoufakis: The Game of the Two Marios

Yves here. Yanis called this post “Europe’s Modern Titanomachy: How Europe’s future is being shaped by large battles on seemingly small matters (Part C)” but that title obscures the point. His piece works though how the choices of ECB chief Mario Draghi and Italy’s prime minister Mario Monti interact with each other, and what that means for the future of the Eurozone: “Today’s Great Expectations (regarding the ECB’s intervention, banking union, Brussel’s federal moves etc.) are more likely to prive Dickensian than literal.”

Central Banks Versus the People

By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

As you are surely aware by now, the US Federal Reserve has announced a new round of quantitative easing which like the ECB’s outright monetary transactions (OMT) is a new program of large scale asset purchases by a central bank. I thought I’d spend a bit of time today talking about these programs because once again I have noticed some large misconceptions in the media about what these operations are, and more importantly, what the likely outcome of them is.

Is QE3 Yet Another Stealth Bank Bailout?

It’s difficult to puzzle out what Bernanke thinks he is accomplishing with QE3. The level of bond buying, as various commentators have pointed out, is much lower than in the earlier QE programs. And pulling out bigger guns in the past was not terribly productive. As we wrote in April 2011 in a post titled “Mirabile Dictu! Economists Agree All the Fed Has Done is Goose Financial Markets!“:

Eugene Linden: In a World of Underpriced Risk, What Could Possibly Go Wrong?

By Eugene Linden, a journalist and author of seven books who has written extensively about animal behavior, environmental issues, and markets

On a recent conference call, the strategist of a major international bank (it was an off-the-record call for clients only) laid out the bare bones of what he called the world’s “giant experiment” in debt and interest rates. Never before have so many countries maintained such low base rates for so long; never before in peacetime have so many countries had such huge deficits and debt burdens; never before in U.S. history had long term rates been so low; never before has the U.S. gone so many decades without deflation following inflation. Because we live in these unprecedented times, it’s easy to lose sight just our strange they are… and how dangerous.

The Poster Child of Austerity is Lost

By Delusional Economics. Cross posted from MacroBusiness.

While we wait for tonight’s announcement from the German constitutional court, there are some interesting developments in the Troika’s latest review of Portugal:

Markets Applaud Draghi’s New, Improved Kick the Can Down the Road Strategy

On Thursday, ECB chief Mario Draghi announced a bond-buying program that had been largely leaked the day prior, namely that of a new bond buying program, the Outright Monetary Transactions, or OMT. Bond yields in Italy and Spain had already come down on the rumor, and stock markets around the world rallied on the news.

The enthusiasm appears overdone when you look at the sketchy details.

Exchange Rates and Modern Trade Theory: An Interview with John Harvey

John Harvey is Professor of Economics at Texas Christian University. He blogs at Forbes and is the author of the book ‘Currencies, Capital Flows and Crises: A Post-Keynesian Analysis of Exchange Rate Determination’

Interview conducted by Philip Pilkington

Philip Pilkington: Your book seeks to outline an alternative theory of what determines exchange rates in our world today.