#BreakingNews MT @indecision: Obama went to prom instead of working to secure the embassy in Benghazi.
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Archive for May, 2011
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The Original QE Program: A Smashing Success
I made the case in an exchange last year with Paul Krugman that QE2 was not the first time quantitative easing had been tried in the United States. Moreover, I noted that the original QE was a smashing success with nominal spending experiencing a robust recovery despite the zero bound problem. So when was this original QE program? The answer is from 1933-1936.
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Shale Gas Environmental Concerns
Technological breakthroughs in methods for drilling for natural gas have opened up the possibility of vast new supplies. However, environmental concerns may turn out to be significant.
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Irrationally Rational
It is interesting to talk to colleagues and find them scratching their heads on why commodities fell so sharply last week and why the rumour on Greece exiting the Eurozone was floated. I used to do that too and perhaps, still do on some maters. On these two, I have come to the conclusion that searching for rational clues is irrational. Commodity collapse was engineered just to slow down the pace of appreciation. It is a substitute for meaningful action to end the commodities boom and that is to raise interest rates. The Fed won’t do that. Check out my piece in MINT. -
A Loan and a Prayer
From Project Syndicate:By Nouriel Roubini and Stephen Mihm
The countries known collectively as the PIIGS – Portugal, Ireland, Italy, Greece, and Spain – are burdened with increasingly unsustainable levels of public and private debt. Several of the worst-hit – Portugal, Ireland, and Greece – have seen their borrowing costs soar to record highs in recent weeks, even after their loss of market access led to bailouts financed by the European Union and the International Monetary Fund. Spanish borrowing costs are also rising.
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Identifying Vulnerabilities in Systemically-Important Financial Institutions in a Macro-Financial Linkages Framework
During the subprime crisis, governments intervened to stabilize the financial condition of some troubled systemically important financial institutions. Two questions naturally arise: Why do some institutions receive intervention while others not? What are the macro-financial driving forces of the vulnerabilities in the systemically important SIFIs? This column summarizes the results of some recent studies about identifying vulnerabilities in SIFIs. Overall, the existing research suggests that leverage is the most reliable indicator, while several widely used indicators are not very useful in identifying the differences in SIFIs.
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China: Rebalancing Through Wage Increases
Is China currently rebalancing? The currency has been appreciating, the PBoC has hiked interest rates four times, and wages have been surging. Because of all of this I am often asked if China has finally begun the long-waited rebalancing process and whether we have yet seen an improvement in the underlying economy caused by a rising consumption share.Those who were hoping the answer was yes will have been disappointed by the release Thursday of the World Bank’s China Quarterly Update – April 2011. Here is their summary:
China’s economic growth has remained resilient as the macro stance moved towards normalization. Both fiscal and monetary policy contributed to the normalization. Consumption growth slowed in early 2011. But overall domestic demand held up well, supported by still strong investment growth. Real estate investment has so far remained robust to measures to contain housing prices—a policy focus. Reducing inflation is the other policy priority, after inflation rose to 5.4%, largely on higher food prices.
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The Euro Area Is ‘Miserable’
For all of our economic problems here in the US, a simple measure of ‘misery’ illustrates that US households are less miserable in March 2011 than those in the Euro area.
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Pakistan’s Obsession
Pakistan is in an uproar over U.S. violations of Pakistani sovereignty. They are furious over the flight of the SEALs to Abbotabad for the Bin Laden raid and the continued U.S. missile attacks against militants in North Waziristan with inevitable civilian casualties. The U.S. is in an uproar over Pakistan’s shielding Bin Laden and other militants. U.S. Pakistan relations are at their lowest level ever. The U.S. has threatened to end more than $3 billion per year of military aid. The Pakistanis have threatened to end U.S. transit routes from Karachi through Pakistan to supply international forces in Afghanistan.
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Greece: Last Exit To Nowhere?
“Some economists, myself included, look at Europe’s woes and have the feeling that we’ve seen this movie before, a decade ago on another continent — specifically, in Argentina” – Paul Krugman: Can Europe Be Saved “Think of it this way: the Greek government cannot announce a policy of leaving the euro — and I’m sure [...]
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The Great Greek and Spanish GDP Mystery – One Hypothesis
Many an economic eyebrow must have been raised last Friday when Europe’s first quarter GDP data was released, and people discovered that the Greek economy had suddenly surged forward, rising by 0.8% over the level it had attained in the last three months of 2010 (or at a 3.2% annual rate, or faster than the [...]
