Use of lower-rated debt in repos has returned to pre-crisis levels

Looks like there’s a storm brewing in the U.S. repo markets.

It figures: profit-center banks have every motivation to stay one step ahead of the regs and the pols. Since the gamekeepers have now gotten around to looking at proprietary trading and bringing derivatives onto exchanges, you can almost bet your first-born that the next crisis will be in neither one of these areas but someplace else entirely different

Economics in the Age of Deleveraging

Clearly, economic policy is now far more complex than it appeared to be before the GFC. As we enter this Age of Deleveraging, the worst thing we can do is apply policies that appeared to work during the preceding Age of Leverage—but were in fact predicated on ever-rising private sector indebtedness. Politicians should be sceptical of conventional economic advice at this time; it would be much wiser to study the history of the 1930s instead

Headline 4Q-2011 GDP Growth of 2.75% Masks Mixed Signals

This report is disturbing because of how the headline number masks real and troubling weakness in the more substantive details. Hopefully anyone trying to engineer the economy is basing their tinkering on better information than that provided by the BEA. In fact, it is likely that much of the negative consequences of the recent economic event can be attributed to precisely the poor quality and timeliness of the economic and monetary information available to those whose hubris drives them to such tinkering

Has banks’ bonus culture really changed?

We’re more than 3 years out from a crisis caused in part by these very same decision-making processes on compensation. So why is it that we don’t fully understand them yet

EU leaders are already backtracking on the agreement of 5 weeks ago

The big news out of Europe on Friday was not S&P’s downgrade of 9 countries, France included. The ratings agency told us weeks ago that it might do this. No, much more important was the ECB’s saying in the bluntest possible terms that the EU leaders are backtracking on the fiscal compact agreed just 5 weeks ago by 26 of the 27 countries

More on the self-regulatory banking saga, SEC version

Is there any government body having a harder time of it these days than the SEC? Sometimes it feels like someone pinned a giant “Kick me” sign to its collective back. I’ve written previously about a key factor that I think is partly responsible for its general toothlessness. But this simply can’t be the excuse for all of its failings

Why bank deposits are piling up at the ECB

Central Banks, whenever they buy any asset create new reserves. Commercial banks and people do NOT have the capacity to destroy those reserves. Once the Fed or ECB wires the money or creates that asset line item on its spreadsheet, there is an equal and offsetting liability on its spreadsheet called reserves. This spreadsheet cannot be broken

So what’s the dumb money doing right now?

All I want to know is: who’s buying this stuff in size? I might like the other side of that one

Mosler: I advocate tax relief and jobs, but forecast muddle through at best

Warren Mosler proposes a full FICA suspension, a $150 billion one time distribution to the states and an $8/hr federally funded transition job for anyone willing and able to work. However he believes these proposals will likely not be followed and predicts muddle through at best as a result

Guess what truth and “truthiness” in the TARP bailout reveal?

Every 60 days the Government Accountability Office issues a report on the various TARP programs. Each report looks at how the Office of Financial Stability, the body currently overseeing all TARP programs, is performing on a given metric. The latest report looks at the estimated lifetime costs to U.S. taxpayers of the programs still in operation, and also at how the Treasury communicates these costs to the public. As for this latter question the short answer is: very selectively, indeed

Is MMT’s Job Guarantee Crucial?

Pavlina Tcherneva argues that the job guarantee is not just an afterthought to MMT but a crucial component that has so far offered the most coherent counter-cyclical economic stabilizing mechanism

What has the Fed done to avoid the US becoming the next Japan?

Imagine being on the FOMC and in the mainstream paradigm. In 2008 you moved quickly to make sure the US would not become the next Japan. What do you have to show for it, 3 years later