Articles By: Edward Harrison
[Premium] Daily Commentary: On policy advocacy and forecasting in Greece’s exit from the euro zone
I like write about what will happen and what policy makers will do rather than about what should happen and what policy makers should do. But Yanis Varoufakis’s post on the Grexit below tells you that Greece’s leaving would be catastrophic, a Grexit is a definite SHOULD NOT. I have a hard time finessing this one because I believe Greece’s situation in the euro zone is untenable economically and politically but that breaking up the euro zone will crystallize worst case outcomes for which we are not prepared
The euro zone has become a political economy black hole
Without going into the detail of my member posts, here’s what I can say: it is clear Greece will eventually exit the euro zone. The question is the timing. But, the political about-face necessary to prevent contagion is a lot larger than politicians are now prepared to take
On JPM’s Dimon’s still unassailable position and Facebook as the new Yahoo
I spoke to Paul Waldie and Brian Milner of the Globe & Mail on BNN’s headline on Monday. The big story was JPMorgan Chase and the London Whale trades. JPMorgan Chase’s CEO Jamie Dimon, as the leading lobbyists for the hands-off regulatory approach for US banks, has become a lightning rod for criticism of too big to fail banks in the US. Even so, I think it’s unlikely that Dimon will be forced out of his position. We also talked about Yahoo and the oversubscribed Facebook IPO. They are going to have to execute really, really well to justify the IPO valuation
[Premium] Amid plummeting trade growth, Chinese productivity trends are macro bearish
In recent months, we have seen a precipitous drop in Chinese trade growth. This comes from both the export and the import side. What’s happening? A large part of it is wages. As I indicated two years ago in a post on the Lewis Turning Point, China has already sucked a large portion of the labour out of its countryside villages. And that has buoyed wage growth. However, while the external account is deteriorating, import growth is shrinking along with export growth. So, it is not that the Chinese are buying more stuff from abroad and foreigners are buying less in China. It’s that demand is slowing globally, even in China. Here’s the problem domestically then: malinvestment and financial repression. This article explains why
US housing starts up 40% in last year but still half of 50-year average
Housing starts in the US were up today. The Wall Street Journal writes that number came in at 717,000, up from a low of 478,000 in April
[Premium] On my disbelief over the Greek exit chatter
I just re-opened the thread on “How and why Greece will leave the euro zone” because there has been so much chatter about a Greek exit. I am still a bit in disbelief that Europe would allow the Greek economy to crumble so much thy would be forced to exit. You have to think contagion risk from a Greek exit is still pretty high. That tells me Europe is bluffing about cutting Greece off. But politicians sometimes get backed into a rhetorical position that takes on a life of its own. So bad things can definitely happen
Another chart of the day: Greek bank deposits collapse
The chart below via Reuters’ Scott Barber is what an economic depression looks like. It covers Greek bank deposits from 1998 to present
Chart of the day: The German-Spanish 10 Year Spread is at an all time high
Spanish bond yields are spiking with no obvious reason to believe they will come down anytime soon. That puts the Spanish-German 10-year spread at an all time high
[Premium] Europe is on the brink of something very big
Euro zone bond markets have come completely unhinged this morning. Spanish 10-year yields have hit the highest level this year at 6.5%. While Italian 10-year yields broke above 6% for the first time since late January. Meanwhile, German yields have moved to a record low of 1.44%. We are now back to levels of stress we last saw during the Italian crisis in November and December. However, this time policy space has narrowed considerably. In short, Europe has reached the critical breaking point
[Premium] Daily commentary: On JPMorgan’s gigantic mistake
The big headline today is still JPMorgan Chase and it’s huge trading losses. Clearly this is a black eye for JPM but the question goes to what longer term consequences the incident will have
[Premium] More on the political economy of the coming Grexit
In February I wrote about the political economy of a Greek default (and euro zone exit), predicting that a Grexit was all but inevitable. In the last few days, there has been an almost feverish debate about this issue, so I wanted to update you with my thinking given how the situation in Greece and the eurozone has deteriorated since February and how the Greek exit from the euro will occur
Will the Greek exit be voluntary or involuntary?
Ever more voices are talking about the possibility of Greece leaving the euro zone despite the fact that there is no formal mechanism for a euro are member country to exit the single currency. This talk, however, makes sense because Greece’s situation is untenable economically and politically. The Grexit is a question of when and how not if