• The political economy of the military conflict in Ukraine

    The geopolitical situation regarding the conflict in Ukraine has escalated considerably due to the downing of a passenger jet from the Netherlands to Malaysia. Given the visceral and gruesome nature of the events now unfolding, domestic political opinion throughout the West is now a major force in this conflict. However, given the political economy in Russia and the United States in particular, the potential for de-escalation is small. The potential for the conflict to now have wide-reaching economic impacts has grown. In the analysis below I explain how the political economy in the U.S. favours President Obama taking an increasingly hawkish position and how the political economy in Russia favours President Putin also maintaining an aggressive stance regarding Ukraine. In addition, the airline massacre also means that the EU will be galvanized into supporting tougher sanctions against Russia, with the potential of a tit-for-tat response.

    The political economy of the military conflict in Ukraine
  • Exogenous shocks

    As I write this, Twitter is going berserk with news of Malaysian Airlines Flight 17 from Amsterdam to Kuala Lumpur with 280 passengers and 15 crew having gone down in Ukrainian airspace. There is video and photo footage of the wreckage. And my heart goes out to friends and family of those onboard because they are learning about the tragedy […]

    Exogenous shocks
  • More on how loss socialization actually happens

    Michael Pettis has a good piece on debt and credit that I ran on the blog this morning. His thoughts on loss socialization are important not just in the context of China but also of other markets like Europe, the US, Canada and Australia where private debt levels have increased markedly. Some of this has resulted in phantom growth which […]

    More on how loss socialization actually happens
  • Bad debt cannot simply be ‘socialized’

    Burgeoning debt was not an unlucky accident. It is fundamental to the way the growth model works, and we have arrived at the stage, probably described most imaginatively by Hyman Minsky in his work on balance sheets, in which the system requires an acceleration in credit growth simply to maintain existing levels of economic activity. China’s debt problems, in other words, cannot be resolved administratively, by fixing the shadow banking system, by imposing discipline on borrowers, or indeed by eliminating financial repression (much of which, by the way, has already been squeezed out of the system by lower nominal GDP growth). Without a massive transfer of wealth from the state sector to the household sector it will be impossible, I would argue, for GDP growth rates of anything above 3-4% – and perhaps even less – to occur without a further unsustainable increase in debt, whether that increase occurs inside or outside the formal banking system and whether or not discipline has been imposed on borrowers.

    Bad debt cannot simply be ‘socialized’
  • Why the European sovereign debt crisis is not over

    Earlier today, I had an interesting back and forth on Twitter with Edward Hugh, Claus Vistesen and Matthew Lynn about Europe and the ECB. I think we all believe there is more pain to come for Europe and likely there will be writedowns. But I think a lot of the problem has to do with the flawed institutional architecture and […]

    Why the European sovereign debt crisis is not over
  • How economics deals with an overindebted private sector

    Happy post-World Cup to you all. I missed my Friday catch-all post because I was out sick. So I am going to play catch-up today with a few thoughts on various topics. The BIS Let’s start with the BIS. In general, I defend the BIS view because the BIS is rightly focused on the dangers of over-indebtedness. Gavyn Davies has […]

    How economics deals with an overindebted private sector
  • The Fed is already creating the next bubble

    Last week, I wrote a fairly comprehensive piece laying out some of the macro issues around the Fed and other central banks’ ultra-easy monetary policy. The gist of that piece was that, due to the political economy, monetary policy is now seen by policy makers as a good way to ‘steer’ the cyclical economy through peaks and troughs. Fiscal policy, […]

    The Fed is already creating the next bubble
  • Exaggerating the dollar’s demise as reserve currency

    By Marc Chandler The headline of the Financial Times today reads “Paris rails against the dollar’s dominance.”; It could have been written nearly any time in the past half century. After all it was a former French President Giscard d’Estaing, who as finance minister in the 1960s, complained about the “exorbitant privilege” that the US drew from the role of […]

    Exaggerating the dollar’s demise as reserve currency
  • Merkel goes to China to halt German economic slowdown

    By Sober Look The yield spread between US treasuries and German government bonds hit a new high last week (see chart). Was this divergence in rates simply a response to the ECB action last month (see post) in combination with stronger jobs data in the US or is there more to it? Part of the answer has been softer than […]

    Merkel goes to China to halt German economic slowdown
  • The euro crisis: Muddling through, or on the way to a more perfect euro union?

    After a promising first decade, the Eurozone faced a severe crisis. This column looks at the Eurozone’s short history through the lens of an evolutionary approach to forming new institutions. German dominance has allowed the euro to achieve a number of design objectives, and this may continue if Germany does not shirk its responsibilities. Germany’s resilience and dominant size within the EU may explain its ‘muddling through’ approach to the Eurozone crisis. Greater mobility of labour and lower mobility of under-regulated capital may be the costly ‘second best’ adjustment until the arrival of more mature Eurozone institutions.

    The euro crisis: Muddling through, or on the way to a more perfect euro union?

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The political economy of the military conflict in Ukraine

The political economy of the military conflict in Ukraine

21 July 2014 at 09:10

The geopolitical situation regarding the conflict in Ukraine has escalated considerably due to the downing of a passenger jet from the Netherlands to Malaysia. Given the visceral...

Commentary »

Apple’s shift into China shows the company’s masterful execution

23 July 2014 at 09:06

Apple’s Q3 2014 earnings report yesterday was a mixed bag in terms of actual results. But from my perspective the results show a company that continues to execute its strategy...

Daily »

Links: 2014-07-23

23 July 2014 at 07:42

Split Obamacare Court Rulings Revive Health-Care Debate – Bloomberg EUobserver / Leaked paper: EU options on ‘stage three’ Russia sanctions Europe Toughens...

  • Links: 2014-07-22

    The unravelling of the global financial system — Crooked Timber Putin says other countries must not meddle in...

    22 July 2014 at 09:14
  • Links: 2014-07-21
    Links: 2014-07-21

    Today’s links have a double allotment of 40.   First twenty: Russia Trade Halt to Deepen Ukrainian Recession,...

    21 July 2014 at 09:00
  • Links: 2014-07-17
    Links: 2014-07-17

    How Russian Hackers Stole the Nasdaq – Businessweek Here’s why your Comcast rep is yelling at you | The...

    17 July 2014 at 12:00
  • Links: 2014-07-15
    Links: 2014-07-15

    Miami, the great world city, is drowning while the powers that be look away | World news | The Observer UK wages...

    15 July 2014 at 12:00

All Content

Apple’s shift into China shows the company’s masterful execution

Apple’s Q3 2014 earnings report yesterday was a mixed bag in terms of actual results. But from my perspective the results show a company that continues to execute its strategy well given the onslaught from cheaper handsets using the Android operating system. Apple posted a smaller-than-expected 6% gain in quarterly revenue due to sluggish growth in saturated markets in Europe and North America. But revenue in China surged 28% despite Apple’s premium pricing. Apple’s growth days are over in developed markets. But I have been upbeat about Apple’s results because of the China strategy and this report shows that Apple’s growth has some momentum, mainly because of that market. Some figures and comments below.

Read more ›

Links: 2014-07-23

News links for 23 Jul 2014

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Ukraine, US subprime and the erosion of US financial hegemony

Ukraine, US subprime and the erosion of US financial hegemony

Ukraine will have global impact
More sanctions are coming but will be somewhat limited
The global financial system is moving away from the US
US auto subprime is going to blow up

Read more ›

Links: 2014-07-22

News links for 22 Jul 2014

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Some brief thoughts on framing the war in Ukraine

As the war in Ukraine moves to the center of global consciousness, I think it is important to remember the various actors’ positioning, constraints and likely agendas. As much as we would like to know ‘the truth’, the reality is always that beyond a core set of known facts, any situation is subject to interpretation based on positioning, constraints and agendas. And to the degree these factors make for focus on very different sets of data points, it makes it hard to reach common ground in a negotiated agreement.

Read more ›
The political economy of the military conflict in Ukraine

The political economy of the military conflict in Ukraine

The geopolitical situation regarding the conflict in Ukraine has escalated considerably due to the downing of a passenger jet from the Netherlands to Malaysia. Given the visceral and gruesome nature of the events now unfolding, domestic political opinion throughout the West is now a major force in this conflict. However, given the political economy in Russia and the United States in particular, the potential for de-escalation is small. The potential for the conflict to now have wide-reaching economic impacts has grown. In the analysis below I explain how the political economy in the U.S. favours President Obama taking an increasingly hawkish position and how the political economy in Russia favours President Putin also maintaining an aggressive stance regarding Ukraine. In addition, the airline massacre also means that the EU will be galvanized into supporting tougher sanctions against Russia, with the potential of a tit-for-tat response.

Read more ›
Links: 2014-07-21

Links: 2014-07-21

News links for 21 Jul 2014

Read more ›
Exogenous shocks

Exogenous shocks

As I write this, Twitter is going berserk with news of Malaysian Airlines Flight 17 from Amsterdam to Kuala Lumpur with 280 passengers and 15 crew having gone down in Ukrainian airspace. There is video and photo footage of the wreckage. And my heart goes out to friends and family of those onboard because they are learning about the tragedy […]

Read more ›
Links: 2014-07-17

Links: 2014-07-17

How Russian Hackers Stole the Nasdaq – Businessweek Here’s why your Comcast rep is yelling at you | The Verge Popular Bitcoin Mining Pool Promises To Restrict Its Compute Power To Prevent Feared Fiasco | TechCrunch Netflix to FCC: reclassify Comcast and Verizon so they can’t choke the internet As more cheap Android handsets flood the market, Google Play app […]

Read more ›
More on how loss socialization actually happens

More on how loss socialization actually happens

Michael Pettis has a good piece on debt and credit that I ran on the blog this morning. His thoughts on loss socialization are important not just in the context of China but also of other markets like Europe, the US, Canada and Australia where private debt levels have increased markedly. Some of this has resulted in phantom growth which […]

Read more ›
Bad debt cannot simply be ‘socialized’

Bad debt cannot simply be ‘socialized’

Burgeoning debt was not an unlucky accident. It is fundamental to the way the growth model works, and we have arrived at the stage, probably described most imaginatively by Hyman Minsky in his work on balance sheets, in which the system requires an acceleration in credit growth simply to maintain existing levels of economic activity. China’s debt problems, in other words, cannot be resolved administratively, by fixing the shadow banking system, by imposing discipline on borrowers, or indeed by eliminating financial repression (much of which, by the way, has already been squeezed out of the system by lower nominal GDP growth). Without a massive transfer of wealth from the state sector to the household sector it will be impossible, I would argue, for GDP growth rates of anything above 3-4% – and perhaps even less – to occur without a further unsustainable increase in debt, whether that increase occurs inside or outside the formal banking system and whether or not discipline has been imposed on borrowers.

Read more ›
Why the European sovereign debt crisis is not over

Why the European sovereign debt crisis is not over

Earlier today, I had an interesting back and forth on Twitter with Edward Hugh, Claus Vistesen and Matthew Lynn about Europe and the ECB. I think we all believe there is more pain to come for Europe and likely there will be writedowns. But I think a lot of the problem has to do with the flawed institutional architecture and […]

Read more ›