From the Shop. http://t.co/Z88ZsSQBha
25 minutes ago
Category Archive: Finance & Markets
-
NOW Are We In A Recession?
Is the United States in recession? If one looked solely at the adverse shocks that have hit the economy over the last year, one would infer an unusually high probability of a recession. If one consulted some of the most import economic measures over the last year, one would say we clearly entered a recession last January. If one gauged the popular mood, one would hear, “Of course we are in recession !” -
The best recipe for avoiding a global recession
Before our political leaders get too fancy remaking capitalism next month at the Bretton Woods II summit in Washington, they should attend to urgent business. Since the closure of Lehman Brothers triggered a global banking panic, political leaders in the US and Europe have successfully thrown a cordon round their banks to prevent financial meltdown. What they have not done yet is to co-ordinate macroeconomic policies to stop a steep global downturn. This is the urgent agenda.
-
More Pet Projects vs. Recovery
This week Volvo, the world’s second largest truck maker, announced that third quarter net order bookings for new trucks in Europe totaled just 115, down from 41,970 a year earlier, for a decline of 99.7%. Year-on-year orders at Volvo crashed 55% in the third quarter. In Europe it had almost as many cancellations as new orders. The company said that the slowdown appeared to be spreading to emerging markets.
-
Escaping from a Combined Liquidity Trap and Credit Crunch
The dizzying falls in equity prices seem to have stopped. If they restart, it may be time for radical measures. This column suggests one motivated by bubble theory. The Fed could temporarily guarantee a lower bound for the S&P 500 through targeted purchases of market portfolios via open-market operations and financed by injecting cash.
-
Pocketful of Multipliers (II): Options for Stimulus Packages
As the debate over the nature and size of a stimulus package wends its way through the Congress [0], [1], [2], I thought it would be useful to bring numbers into the debate, especially as we are considering fiscal stimulus in a time when the Bush Administration has constrained, by dint of previous profligacy, our options. In particular, I want to return to the issue of multipliers, discussed in nearly a year ago. Here, I want to provide a little more specificity, regarding the impact depending upon the type of outlays.
-
Financial crisis management: Lessons from Japan’s failure
Japan’s banking crisis of the late 1990s and early 2000s offer critical lessons on how to deal with the current financial crisis. This column warns against relying on fiscal stimulus, stresses the importance of recapitalising viable bank but letting the ‘zombie banks’ go bust to boost certainty about financial firms’ solvency. In order to avoid a vicious cycle of steady economic decline as in Japan, the G8 and emerging economies should create a “Financial System Stabilisation Fund”.
-
Further rate cuts needed
The Fed will probably vote for another 50-basis-point cut in the fed funds rate this week, bringing its target down to 1%. Here’s why I think that would be a good idea.
-
Arbitrage in the foreign exchange market: Turning on the microscope
If markets are efficient, then there are no exploitable arbitrage opportunities. But if no one engages in arbitrage, then what eliminates such exploitable opportunities? This column puts international financial markets under the microscope and shows that arbitrage opportunities exist, but they are usually eliminated in less than five minutes. Such micro-arbitrage makes the assumption of no arbitrage safe for those looking at the bigger picture.
-
Financial Stability and the Fed
Stephen Roach says the Fed needs to broaden its mandate:
Add ‘financial stability’ to the Fed’s mandate, by Stephen Roach, Commentary, NY Times: A regulatory backlash is under way as the US body politic comes to grips with the financial crisis. … As Washington creates a new system, it must also redefine the role of the Federal Reserve.
-
Schroedinger’s cat revisited
“I do not know which makes a man more conservative – to know nothing but the present, or nothing but the past.” – John Maynard Keynes, ‘The End of Laissez-faire’.
It is sometimes useful and always amusing to look back at one’s earlier thoughts. The following piece was originally published two years ago (June 2, 2006 to be precise) – an altogether more innocent age, and from the vantage point of Autumn 2008, seemingly aeons ago. I have made no alterations (other than omissions for the sake of brevity) to the original and current, languidly ironic, commentary is added in parentheses in a jaunty orange.
