Credit Writedowns » central banks

[Premium] India will be worse than China

Edward Harrison — Tue, 22 May 2012 18:39:08 +0000

When I listed my Ten Surprises for 2012 in January I predicted that China would have a hard landing, defined as quarterly growth below 5% annualised by the end of this year. But I also said that India would be worse than China. And it is this combination that makes me more concerned about the global growth slowdown in emerging markets than the crisis in Europe. This is a big, big story but no one is talking about it because Europe is sucking up all of the air

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[Premium] On helicopter drops and wealth confiscation in Europe

Edward Harrison — Wed, 09 May 2012 19:18:01 +0000

Hugh Hendry made some remarks about confiscation last week that I addressed in my TV appearance on RT's capital account (see video here). The gist of his comments was that he fears government's ability to confiscate wealth as a means of dealing with the economic crisis in Europe. On RT, I said that I didn't think the situation had reached that point in Europe and so I was not overly concerned. But I do want to flag comments by a major bank economist that touch on these issues

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On helicopter drops aka free money and other links 31 Aug 2010

Bank of Canada: House price-to-income ratio outstrips norm by 35%

Edward Harrison — Wed, 25 Apr 2012 13:13:46 +0000

I have noted a number of times in the past that household debt levels in Canada have reached worrying levels. I am not the only one on to this. Canadian central bank head Mark Carney was in the news yesterday sounding the alarm on this as well. Mark Carney noted that Canadian household debt is being driven by a rise in house prices that has caused the house price/income ratio to now be 35% above the norm in Canada

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[Premium] Daily Commentary: On Auction Results from Spain

Edward Harrison — Thu, 19 Apr 2012 12:33:19 +0000

Today’s big news was the bond auction in Spain. Spain’s auction went off without a hitch but at a cost. Spain sold 2.5 bln euros ($3.3 billion USD). The Spanish Treasury sold a 1.1 bln euro bond maturing 31 Oct 2014 (average yield: 3.463%, bid-to-cover: 3.3 vs 2.0 at previous auction in October). The Treasury

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Why Valuation Doesn’t Insure Against A Significant Market Decline

Comstock Partners — Fri, 06 Apr 2012 17:43:42 +0000

Given a clearly overbought market, the re-emergence of Europe's sovereign debt problem and the Fed reducing the imminence of QE3, even the bulls concede that a correction is likely. Overall, however, investors remain optimistic, and are looking forward to any correction as a buying opportunity, maintaining that the economy is too strong and the market too cheap to decline very much. As we have written about in recent comments, we do not think the economy is anywhere as strong as many believe. Moreover, we do not accept the conventional wisdom that the market, at current levels is undervalued, a point we want to make in this comment

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Seven Observations about the Yen

Marc Chandler — Thu, 05 Apr 2012 20:30:04 +0000

The yen was the weakest of the major currencies in Q1, losing about 7.2% against the dollar. There was a clear shift in both speculative and portfolio flows. This is just one of seven observations about the Yen via Marc Chandler

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Progress on the monetary policy and banking debate

Edward Harrison — Wed, 04 Apr 2012 02:00:28 +0000

We seem to be moving forward with this discussion on monetary policy, banking, and reserves. John Carney does a good job of summarising some of the initial forays in this back and forth. I am going to try my hand at framing the discussion here using my own analysis of the comments iteratively, with the assistance of more comments of course. Where there are mistakes, I will fix them accordingly

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Endogenous or exogenous money?

Edward Harrison — Tue, 03 Apr 2012 17:49:51 +0000

I think the real difference between what Nick Rowe is saying and what people like Scott Fullwiler and Steve are saying is that Nick believes over the medium-term, central bank interest rate policy is endogenous. What I think Nick means is that Scott Fullwiler's view is reasonably clear and straightforward but that it only matters over a short-term time horizon because central bank interest rate policy adjusts endogenously over the medium-term to commercial bank and other economic variables such that it is really endogenous rather than exogenous

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More on why Minsky matters

Randall Wray — Mon, 02 Apr 2012 15:46:31 +0000

In Paul Krugman’s view, banks are not very important since all they do is to intermediate between savers and investors, taking in deposits and packaging them into loans. Now, I know that Krugman’s own specialty is not money and banking, so one would not expect him to have a deep understanding of all the technical details. However, he is an important columnist and textbook writer, so if he is going to expound upon “what banks do”, he should at least have the basics more-or-less correct. But he doesn’t. we need Minsky—whose views even from the 1950s are far more relevant to today’s real world banks than are Krugman’s

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Why Minsky Matters 27 Mar 2012

Krugman’s Flashing Neon Sign

Guest Author — Mon, 02 Apr 2012 12:26:39 +0000

The debate between Paul Krugman and my friend Steve Keen regarding how banks work (see here, here, here, and here) has caused me to revisit an old quote. Back in the 1990s I would use Krugman’s book, Peddling Prosperity (1995), in my intermediate macroeconomics courses since it provides a good overview of what were then contemporary debates in macroeconomic theory as well as Krugman’s criticisms of various popular views on macroeconomic policy issues from that era. One passage near the very end of the book has always remained in the back of my mind; in it, Krugman critiques a popular view that was and still is highly influential regarding productivity and trade policy. He writes: “So, if you hear someone say something along the lines of ‘America needs higher productivity so that it can compete in today’s global economy,’ never mind who he is or how plausible he sounds. He might as well be wearing a flashing neon sign that reads: ‘I DON’T KNOW WHAT I’M TALKING ABOUT.’” (p. 280; emphasis in original) In his latest post in this debate (which Keen replied to here), Krugman demonstrates that he has a very good grasp of banking as it is presented in a traditional money and banking textbook. Unfortunately for him, though, there’s virtually nothing in that description of banking that is actually correct. Instead of a persuasive defense of his own views on banking, his post is in essence his own flashing neon sign where he provides undisputable evidence that “I don’t know what I’m talking about.”

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