Category: Members

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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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 […]

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The Fed is already creating the next bubble

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, […]

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On the BIS annual report, monetary policy and the hazards of overindebtedness

On the BIS annual report, monetary policy and the hazards of overindebtedness

The 2014 BIS Annual Report warns again about the perils of ultra-easy monetary policy as it did in the lead-up to the Great Financial Crisis. I think the BIS could prove a Cassandra here and will explain below. Nevertheless, many refuse to heed its warnings because of the concern with the sluggishness of the real economy in developed economies and the worry about becoming the next Japan. The problem, as the BIS states, is debt. But the answer is not restrictive policy and structural reform as the BIS argues. Rather it is an acceptance of fiscal policy outcomes as mostly endogenous.

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Economic and market themes: 2014-06-27 Fed will trigger the next crisis

Economic and market themes: 2014-06-27 Fed will trigger the next crisis

The title here is a bit provocative I know. But it is really something I stole from an article about Stephen Roach’s view that I will use as a jumping off point for my Friday review.

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On how credit excesses will undermine this cyclical upturn

On how credit excesses will undermine this cyclical upturn

I am not impressed with macro policy that is managed purely to give a cyclical boost to the economy at the expense of secular sustainability. That makes it hard to look at what’s happening with macro policy now without scepticism and criticism. I would like to say that the upbeat near-turn forecasts are something to celebrate. But I can’t because they are predicated on unsustainable secular trends. A few brief thoughts below

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Some thoughts on the new Internet bubble

Some thoughts on the new Internet bubble

Going back to my comments from yesterday about the utility of macro, I want to talk a bit about credit excesses and valuation manias. The overall gist here is that manias are endemic to our system because psychology plays a big part in social systems. And while it is debatable how well macro policy can “lean against”, it is clear […]

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How economics has failed us

How economics has failed us

The title of this piece is a bit provocative but what follows is not intended to be a hit piece on the field of economics, rather I am going to use two recent articles on economics’ failure as a jumping off point for thinking about this particular economic cycle and what macro analysis can offer in navigating it. The overall […]

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