A reader pointed me to Willem Buiter’s blog, and it is a real find. For those who haven’t heard about him, he (along with Anne Siber) has proposed a rethinking of central bankers’ roles in times of crisis, arguing that they should serve as market makers of the last resort. One reason to read Buiter, […]
Read more...Jim Grant, a Wall Street fixture via his “Grant’s Interest Rate Observer,” a newsletter that provides probing, skeptical, and literate commentary on the credit markets, has a very good op-ed piece in today’s New York Times. Grant takes a big swipe at the US regulatory policy, depicting it as privatizing the profits of banking and […]
Read more...We’ve noticed a new theme among economics writers: Extreme Measures. Commentators have suddenly looked into the abyss, either of the depth of the US subprime/housing problem or the progressing credit crunch that has already caused a seize up in the money markets, and are proposing radical courses of action. Our first sighting was Paul Krugman, […]
Read more...Earlier this week, I sought to frame the prevailing views of what the supervising adults, namely central bankers, should do about the turmoil in the financial markets. They break down into four groups (names of representative spokesmen included): The keep the party going types (Jim Cramer and his less histrionic brethren) who argue that markets […]
Read more...An update from Bloomberg tells us that commercial paper outstandings fell 4.2% in a week, which suggests the efforts of central bankers to restore confidence in that market, and particularly in asset backed commercial paper, may not be adequate. 4.2% may not sound like much of a drop until you do some quick and dirty […]
Read more...Part of the hangover that followed the dot-com bubble was rampant accounting fraud. Before then, accounting chicanery was virtually unheard of in Fortune 500 companies. It instead cropped up at high fliers with loose controls and/or overly aggressive cultures (remember Zzzz Best? Miniscribe?). But in 2002, it seemed endemic, and for the first time, involved […]
Read more...George Magnus, senior economics adviser at UBS and the person responsible for bringing economist Hyman Minsky to the public’s attention, invokes him again in a good piece in the Financial Times. In keeping with his affinity for the world view of the dour economist, Magnus depicts our current credit crunch as a Minsky moment and […]
Read more...We may be having a housing, as opposed to a market news, day. That would be progress of a sort. More evidence that the US in entering a housing recession, as opposed to suffering a mere subprime problem. From the Wall Street Journal: Mortgage defaults were roiling the thrift industry even before the recent turmoil […]
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...A gut-wrenching two weeks in the credit markets have been capped by unprecedented moves by central bankers. The ECB’s offer of an unlimited infusion to member banks the week before last was followed last Friday’ by the Fed’s discount rate cut, which included stern warnings that those who needed it better use it and a […]
Read more...It’s summer rerun time. By happenstance, I came across a May post, which referred to a Federal Reserve study that had found that risks of hedge funds pursuing highly correlated strategies appeared, by some measures, as high as before the LTCM crisis. We had thought the Fed might be making a mistake in dismissing its […]
Read more...I was planning to go on long form about what the Fed should do, and now they have gone ahead and done it. That means I now have to write something very substantive. More on that later, but here is a roundup of some good posts: Cassandra depicts the credit crunch as a horror movie, […]
Read more...Paul Krugman, in this morning’s New York Times, tells us (subscription required) that mortgage borrowers in the US are feeling a world of hurt. The pain is moving up the food chain beyond stressed subprime borrowers into the Alt-A pool (which truth be told, never was much better than subprime, so this development was widely […]
Read more...I am late to this good comment in the Financial Times, “Hold tight: a bumpy credit ride is only just beginning,” by Avinash Persaud. Between the bumpy markets of the day and arcane workings of Conde Nast’s blog entry system, I’ve been a bit distracted. Admittedly, one of the reasons I view Persaud’s piece favorably […]
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...