Currently, new money creation by the European Central Bank has been deployed, inter alia, to purchase periphery country government bonds on the secondary market as a purely defensive measure to keep bond interest rates from rising above 6 or 7 per cent. The question must be asked whether this is the best way to deploy … Read more
From Project Syndicate: Dark, lowering financial and economic clouds are, it seems, rolling in from every direction: the eurozone, the United States, China, and elsewhere. Indeed, the global economy in 2013 could be a very difficult environment in which to find shelter. For starters, the eurozone crisis is worsening, as the euro remains too strong, … Read more
Euro area consumer prices increased at a 2.4% annual pace in May, down 0.2 ppt from the 2.6% pace in April. Core inflation fell to 1.8% in May from 1.9% in April. Headline and core inflation peaked in the fourth quarter of 2011, and disinflation is underway. Euro area price inflation is burning out but at a … Read more
Click to enlarge: Kudos to Bloomberg’s Dave Wilson for spotting this study last week by Duke University Professor Campbell R. Harvey and his collaborator, Claude B. Erb. They discovered that “Gold’s prospects are less dependent on inflation than on demand from emerging markets.” As the chart above shows, “The relationship between gold and the U.S. … Read more
Euro area industrial production (ex construction) declined 0.8% in the month of April. Across the major sectors, the largest decline occurred in capital goods; however, the trend in consumer and intermediate goods is worse than that of capital goods. The regional divergence is clear, as the two-month trend in industrial production – I use the … Read more
Rarely in history has the cause of a major economic problem been so clear yet have so few been willing to see it. The major reason this recovery has been so anemic is not Europe’s debt crisis. It’s not Japan’s tsumami. It’s not Wall Street’s continuing excesses. It’s not, as right-wing economists tell us, because … Read more
chart courtesy of Bianco Research The initial market enthusiasm for the bailout of Spain’s banks seems to have faded, as reality sets in. What will be done with Portugal, Ireland and Greece is secondary to what happens with Spain and perhaps more importantly Italy, the 4th largest economy on the continent. Here is Bloomberg: “The … Read more
Today I.Stat released the breakdown of Q1 2012 real GDP for the Italian economy. Weak external demand plus a precipitous drop in private sector spending dragged the headline real gross domestic product (GDP) 0.8% over the quarter (3.2% at an annualized rate). The highlights are the following: Gross fixed capital formation (investment net of inventory … Read more
About ten years ago I published an article in Foreign Policy that I just recently re-read. In the article I extended one of the arguments I made in my book, The Volatility Machine, that the globalization process is driven primarily by monetary expansion and the consequent increase in risk appetite. What was new in this … Read more
If two things happen at the same time, it is natural to think that one may cause the other. A case in point is the much-discussed linkage between the growth of global trade and the increased inequality of income distribution. The following charts show one way of representing these two trends for the United States. … Read more