Category Archives: Economic fundamentals

Guest Post: Investor Psychology … Fear Turns People Into Sheep

By George Washington of Washington’s Blog. Investors are basically rational, right? In fact, as many studies have demonstrated, the answer is no. But instead of wading through all of the investment psychology research, let’s look at research into people’s basic reasoning abilities. Bear with me for a minute. A study in an area unrelated to […]

More Signs of Consumer Retrenchment

It was curious to see the immediate complacent stock market reaction to the FOMC remarks that the Fed is going to keep rates low for an extended period (although it did crumble right before the close of trading). Yes, the central bank will have a tricky balancing act when it has to mop up liquidity, […]

Guest Post: Wall Street Journal Admits Economists Were Wrong, But Fails to Discuss their INCENTIVE for Being Wrong

By George Washington of Washington’s Blog. The Wall Street Journal admits this week that economists blew it: The pain of the financial crisis has economists striving to understand precisely why it happened and how to prevent a repeat… The crisis exposed the inadequacy of economists’ traditional tool kit, forcing them to revisit questions many had […]

Trouble looms in Ireland after debt cut two notches and deficits soar

Submitted by Edward Harrison of Credit Writedowns I am posting this in the interest of widening the discussion at Naked Capitalism to include some topics in Europe. Fitch, the credit rating agency, has just downgraded the sovereign debt ratings for the Republic of Ireland from AA+ to AA-. That is two notches and is proof-positive […]

Wood warns of correction, says “key variable in the West is government policy”

By Edward Harrison of Credit Writedowns Christopher Wood, the well-noted market strategist at CLSA and writer of the classic Japan crash warning book “The Bubble Economy,” is now warning of a market correction in the West. According to CNBC India, Wood believes that the markets’ extreme upward move is increasing the chances of a major […]

Bullish data, recoveries, crashes and the psychology of forecasting redux

By Edward Harrison of Credit Writedowns If you have been wondering whether a statistical recovery is at hand, today’s ISM manufacturing report should be the clincher. The report was definitely bullish with the ISM index rising to 55.7 and sub-components supporting the understanding that the manufacturing sector is expanding. This is quite a contrast to […]

Guest Post: Aggressive Fiscal Stimulus Spending Only Shortens Recessions by Two Quarters

By George Washington of Washington’s Blog. Keynesians argue that we must increase fiscal stimulus to prevent a full-scale depression. They argue that “deficit hawks” are wrong when they say that we can’t afford any more stimulus, and that worrying about debt in a crisis of this size is penny wise and pound foolish, given the […]

Roubini Predicts “Mother of All Carry Trade Unwinds”

Nouriel Roubini has officially left the “hedging your bets on the economy” camp. He has declared the markets to be frothy because super low dollar borrowing rates have turned the greenback into the funding currency for the carry trade. Far more important than the peppy rally in the stock market is the resumption of early […]

The choice is between increasing or decreasing aggregate demand

By Edward Harrison of Credit Writedowns. DoctoRx, Rob Parenteau and Marshall Auerback have each written articles here to bring clarity to some issues I first raised at the beginning of the month in my post, “The recession is over but the depression has just begun.” As I see it, the issue we are debating has […]

Guest Post: Big Banks Are NOT More Efficient

By George Washington of Washington’s Blog. I have repeatedly pointed out that big banks are not more efficient than smaller banks. For example, I previously noted that an article in Fortune concluded: The largest banks often don’t show the greatest efficiency. This now seems unsurprising given the deep problems that the biggest institutions have faced […]

Debate on Deficits: A Reply from Rob Parenteau

Rob Parenteau, CFA, sole proprietor of MacroStrategy Edge, editor of the Richebacher Letter, and a research associate with the Levy Economics Institute, responds to DoctoRx’s post, “Debate on Deficits.” DoctoRx raises a wide swath of excellent questions regarding the correct approach to financial crises, the economic contractions they can induce, and the best way forward. […]

Inflation in China at 15%?

This tidbit, from a report on impressions of conditions in China, via a steel buyer who has been making the rounds in Asia (hat tip reader Michael) is more significant than it appears. High inflation levels in China (and the powers that be seem to get worried when it goes over 11%-12%) is consistent with […]

Guest Post: Debate on Deficits

We are going to feature a series of posts this week on the merits of the idea of using Federal deficits to stimulate an economy in severe recession or depression. The first offering is from DoctoRx, who writes at EconBlog Review: Part I. INTRODUCTION Robert Rubin’s home town of Miami Beach contains any number of […]

Guest Post: Global Rebalancing: The G20 and Bernanke Versions

By Richard Alford, a former economist at the New York Fed. Since them, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side. The need to address and prevent future large global economic and financial imbalances is back on center stage, but […]