RGE Monitor – Weekly Roundup
Check out all the great contributions that were published during the past week on RGE’s Nouriel Roubini’s Global EconoMonitor, RGE Analyst’s EconoMonitor, Finance & Markets Monitor, Peterson Institute for International Economics Monitor, Global Macro EconoMonitor, U.S. EconoMonitor, Emerging Markets Monitor, Asia EconoMonitor, Latin America EconoMonitor and Europe EconoMonitor.
This week on Nouriel Roubini’s Global EconoMonitor, Nouriel provides detailed analysis on the downside risks that he believes make a meaningful correction likely in a variety of risky assets. While we are closer now to the end of the crisis then we were, the road ahead will be very rough and bumpy. See The Road Ahead for the Global Economy.
And don’t miss the latest interviews with Nouriel on the outlook of the economy at:
On the RGE Analyst’s EconoMonitor, RGE Analyst Mikka Pineda discusses Japan’s economic and political outlook in “Can Japan Avoid Another Lost Decade?“, the full version of which is available in the recently updated RGE Global Economic Outlook report. She sees Japan extending its two decade-long stagnation in the face of timid growth in domestic and external demand. Radical political changes are increasingly likely at the national elections scheduled for August 30th, but will not suddenly resolve the structural problems facing the economy. Dollar watchers be advised: a DPJ win could bring about a turnaround in Japan’s FX reserve policy.
So far, U.S. data suggests that foreign investors, especially foreign central banks are still buying U.S. assets. However, Rachel Ziemba points to a vulnerability; foreign investors, like China are buying mostly short-term U.S. treasuries. See May TIC Data: Still Buying U.S. Assets, but Just the Liquid Ones.
On the Finance & Markets Monitor, Simon Johnson looks at the political concentration that is now in the hands of the large banks left standing, which is excessive and unsustainable, and he questions who will break that power? Read Who Nationalized Whom?
In There are Three, not Two, Kinds of Financial Institutions in the New Resolution Regime, Joseph Mason points to the inherent interconnectedness of politics and finance and suggests making distinctions between banking institutions not by systemic risk or too-big-to-fail, but by political connectedness.
In Understanding The OTC Derivatives Market, Charles Davi demystifies and de-demonizes the OTC derivatives market.
Also on the Finance & Markets Monitor:
Paul Krugman: The Joy of Sachs by Mark Thoma
More and Better by James Kwak
Ratings Agency Showdown: Treasury vs Barney Frank by Barry Ritholtz
About Goldman Sachs, the Exemplar of our Financial System by Fabius Maximus
Why Toxic Assets are so Hard to Clean Up by Mark Thoma
CEO Psychology by James Kwak
On the Peterson Institute for International Economics Monitor, Steve Weisman sits down with C. Randall Henning to discuss the important role of the IMF in this financial crisis.
In 2009 Estimates of Fundamental Equilibrium Exchange Rates, William R. Cline and John Williamson provide detailed analysis on how the global recession is causing potentially important changes in FEERs.
In The GCC Monetary Union: Choice of Exchange Rate Regime, Mohsin S. Khan considers the costs and benefits of alternative exchange rate regimes for the GCC.
On the Global Macro EconoMonitor, Ousmene Jacques Mandeng, who attended the Cusco Conference (Cusco Peru, July 13-14, 2009) sponsored by Nouriel Roubini and Marc Uzan on the future of global finance, provides his reaction and thoughts on the need for an international monetary system response, which he believes is an essential element for achieving a sustainable resolution of the current crisis. See What Could be Next on International Monetary System Reform?
In Depressionary Bust in Ireland is Echoed in California, Edward Harrison provides a fascinating and harrowing comparison of Ireland and California, which are suffering from similar challenges and lacking effective policy tools.
In Endgame for the Global Supercycle: Another View of the Crisis, Arun Motianey presents the Global Supercycle phenomenon, which he argues is the dominant force of modern capitalism’s 125 year history and helps explain the financial crisis and the symptomatic global imbalances.
Also on the Global Macro EconoMonitor:
Big Spenders by Rebecca Wilder
More on Spotting Bubbles by James Kwak
An Answer for the Roadblock to an International Climate Change Agreement by Jeffrey Frankel
Didn’t We Try that in 1938? Why Technical Poverty Fixes Fall Short by William Easterly
The Failure of Macroeconomics? by Menzie Chinn
In Obamacare Is At War With Itself Over Future Costs, Robert Reich looks at where the Obama administration is with their health care plan, as the August recess quickly approaches, and offers his thoughts on how to push things forward.
Past data on recessions is limited, but Jeffrey Miller believes that patterns from 2001 are not instructive for this recession. See The 2001 Recession is a Bad Example.
Also on the U.S. EconoMonitor:
CNBC Denies Culpability in Roubini as Bull Saga by Edward Harrison
House Price Indices: Not Necessarily the Same Story by Rebecca Wilder
Total Bailout Cost = $23.7 Trillion Dollars by Barry Ritholtz
Shape of the Recovery: Pathetic by Rebecca Wilder
Ben Bernanke: The Fed’s Exit Strategy by Mark Thoma
Fed Independence by Mark Thoma
Obama and Health Care: Wasting Political Capital by Edward Harrison
Foreclosures Are Highly Regional by Barry Ritholtz
On the Emerging Markets Monitor, Michael Pettis offers his thoughts on what the real estate market is revealing about the health of the Chinese economy and whether a collapse is in store. See Notes on a Real Estate Trip in China.
In CDS Derivatives Cannot Mitigate Financial Risks, Syed Zahid Ahmad looks for better practices in mitigating financial risks and suggests ways to “share” risk as opposed to “shifting” it on others.
On the Asia EconoMonitor, China Economist answers Is China Spawning Systematic Financial Risks? in the affirmative and argues that the economic data disagrees with most scholars who believe that China’s recovery is solid and strong.
In SAFE, State Capitalist? Brad Setser looks at China’s explicit desire to use its reserves to support Chinese state firms and considers the consequences of the state’s relatively large role in its economy.
On the Europe EconoMonitor, Edward Harrison follows the intertwined global financial trail, which leads him to big problems for the Spanish banking system going forward. Read Hypo Real Estate Need for 10 Billion Also Reveals Huge Problems in Spain. Harrison also reports on the Swedish banking system, which appears to be doing fine except for its Baltic exposure, which he takes as an encouraging sign. See Earnings Results at Swedish Banks Show Large Writedowns in Baltics.
In Britain’s Banks May be Too Weak to Support the Recovery, David Smith reports that banking in Britain will be impaired for some time, but all the news is not bad. Smith also looks at the delayed decision of quantitative easing in No Clear Signal on Quantatative Easing.
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