Archive for May, 2011
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A Tale of Titans: The Too Important to Fail Conundrum
Folklore is riddled with tales of a lone actor undoing a titan: David and Goliath; Heracles and Atlas; Jack and the Beanstalk, to name a few. Financial institutions seen as too important to fail have become even larger and more complex since the global crisis. We need look no further than the example of investment [...]
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Consumer Income & Spending Rise In April, But Warning Signs Persist
Disposable personal income and personal consumption spending rose last month, the U.S. Bureau of Economic Analysis reports. But after adjusting for inflation, the nominal rise fades to zero for income and posts only the smallest of increases for consumption. As such, today’s income and spending report is likely to give bears and bulls something to [...]
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GDP – A Disappointing Report
Yesterday I addressed the weak high-frequency indicators, specifically with respect to leading indicators of investment spending on equipment and software (durable goods). I argued that Q2 has not started off well, given that the real core orders for capital goods are down compared to the January to March average. The BEA reported that Q1 2011 [...]
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The Republican Death Wish
Forty Senate Republicans have now joined their colleagues in the House to support Paul Ryan’s plan that would turn Medicare into vouchers that funnel money to private health insurers. They thumbed their nose at the special election in upstate New York earlier this week that delivered a victory to Democrat Kathy Hochul, who made the [...]
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Oil Price Manipulation
The Commodity Futures Trading Commission on Tuesday filed a civil enforcement action alleging that Nicholas Wildgoose and James Dyer, who worked as traders for Arcadia Petroleum Ltd. and its affiliates, profited by manipulating the price of oil and oil futures in early 2008. I was interested to take a look at the details of the [...]
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Good Reads, 5/26/11
First, on behalf of all my former Balkan War cohorts, and the many murdered people in Bosnia on all sides whom the world has largely forgotten by now, I’ll say this about today’s news: it’s a shame Ratko Mladic wasn’t ‘apprehended’ by Navy Seals. My friend Stewart Patrick on the G8′s surprising afterlife as the [...]
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LIA Portfolio Snapshot
A leaked statement of the Libyan investment authority (LIA)’s portfolio from mid last year gives a rare glimpse into its US$53 billion asset portfolio, much of which has been frozen in early 2011 due to sanctions. While only one data point, it provides more details on how Libya was diversifying its assets. Although described as [...]
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Forecasts: What and How Do Business Economists Think?
The WSJ and Philadelphia Fed surveys of economists were released last week. It’s of interest to consider what they imply for the macro outlook, and additionally, how they believe inflation will evolve as a function of other variables. The Macro Outlook Because the WSJ and SPF forecast mean are essentially the same for GDP, I’ll [...]
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Concentration, Manipulation and Margin Calls
Over the past 25 years the financial markets of the world have become highly concentrated in the intermediation of a handful of firms, and regulation has been harmonised in the interests of these few firms. As Adam Smith – that great proponent of free markets – cogently observed: “People of the same trade seldom meet [...]
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Failure of Austerity in Europe? What Does the Latvian Exception Prove?
Writing in The New York Times this week, Paul Krugman argues that austerity has failed in Europe. Budget cuts and tax increases were supposed to provide the confidence needed to get troubled EU economies back on track, but the “confidence fairy” hasn’t shown up. Austerity has not just failed to work, says Krugman—it has made [...]
