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Private credit overhangs and the business cycle

Private credit overhangs and the business cycle

Back in 2012, three economists published a paper via the San Francisco Fed that looked at nearly every advanced economy business cycle from 1870 forward with the object of understanding the role of credit in the business cycle. Matthew Klein at the Financial Times alerted me of the paper.Now, what the economists found, not surprisingly, was that “financial-crisis recessions are more costly than normal recessions in terms of lost output; and for both types of recession, more credit-intensive expansions tend to be followed by deeper recessions and slower recoveries”. I want to discuss this both in terms of endogenous money and in terms of its implications for the present recovery and proposed recovery solutions. What follows is pretty wonky but very important as a thought piece for framing the economic environment.

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Country by country macro update, part 2, September 2014

Country by country macro update, part 2, September 2014

Yesterday, I did a broad overview of four markets of interest to global investors. And I wanted to continue my thoughts on this here with a few more markets and with a deeper dive into some of my thinking about the UK. Britain, Part 2: I want to take the UK on first, because I am doing a headline story […]

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Some thoughts on Scottish secession from the UK

Some thoughts on Scottish secession from the UK

Britain faces a crisis of monumental proportions as the Scottish electorate decides whether to leave the Union and make Scotland a fully independent country for the first time since 1707 when it first entered into political union with England. This vote has all sorts of ramifications for the currency, monetary policy, fiscal policy and the banking system within the UK and Scotland. But it also has far-reaching implications for the whole of the EU. I have a few thoughts on how to frame the issue below as well as a model for how to secede if it comes to that.

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A government bond bullish scenario is taking form

A government bond bullish scenario is taking form

Welcome back to Credit Writedowns! Labor Day is behind us now and I intend to have a much more regular posting schedule going forward. But the lack of posts has given me some time to reflect on the global macro situation without the need to write about it on a daily basis. And this has given me some distance from […]

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Cyclical recovery petering out before it hits middle class

Cyclical recovery petering out before it hits middle class

Before I get into the details today, I want to note that going forward, I may not have the bandwidth to be able to post on a daily basis. I am going to try. But there are definitely going to be weekdays going forward where I won’t be able to post given other commitments I am making. I don’t want […]

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Edward Harrison’s Ten Surprises for 2014, Update 2

Edward Harrison’s Ten Surprises for 2014, Update 2

Today is the time to update you on how my 2014 surprises are faring and why. Just to remind you, the surprise list is based on Byron Wien’s list of ten surprises which he has been conducting for the last thirty years. Surprises are events to which investors assign 1-in-3 odds of happening but which I believe have a more […]

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My thoughts on weakness in Europe and China

My thoughts on weakness in Europe and China

I am back from my summer holiday. There has been a lot of news in the time since I last posted. And the news flow is coming from a lot of different places. So, let me start up again with a post highlighting what I think are some of the key macro issues in a number of countries around the […]

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Upbeat cyclical trends are juxtaposed to underlying financial fragility

Upbeat cyclical trends are juxtaposed to underlying financial fragility

This post is on the same topic of the US economy that I addressed yesterday. But I want to go a bit deeper and add more colour to my comments. Signs that the US economy’s cyclical outlook are improving are getting ever more numerous, especially when we look at the labor market. Jobs numbers In the US, jobless claims came […]

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US GDP numbers and Russian sanctions scenarios

US GDP numbers and Russian sanctions scenarios

The bottom line here is that I have been and still am bullish on the cyclical prospects in the US, UK and Spain in particular. The US jobless claims numbers are unusually low and that tells you that slack in the labour market is declining. Moreover, we are likely to see inventory builds here, adding to more momentum. Nonetheless, I do have two caveats for the US.

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Economic and market themes: 2014-07-25 Ukraine, China, Japan, technology overvaluation

Economic and market themes: 2014-07-25 Ukraine, China, Japan, technology overvaluation

Ukraine is at risk of becoming a failed state
China’s growth is due to stimulus
Japan’s macro figures worsen
Microsoft’s strategy is weak
Facebook is overvalued

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The EU weighs level three sanctions on Russia just as the European economy improves

The EU weighs level three sanctions on Russia just as the European economy improves

This is a long-form post on Ukraine. The big news, however, is from the European Union where the PMIs and a slew of other economic data came out today. The data showed the European economy improving broadly from its weakened recovery status. This will give the ECB room to take a wait and see approach. At the same time, the EU foreign ministers met yesterday and, according to reports are ready to impose heavier sanctions on Russia in the wake of the downing of Malaysia Airlines Flight 17 over Ukraine. There’s a lot data to digest here so let me start off with the EU – Ukraine – Russia narrative.

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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.

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