Post Tagged with: "credit"
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
Banking Wasn’t Meant to Be Like This
the banks now browbeat governments – not by having ready cash but by threatening to go bust and drag the economy down with them if they are not given control of public tax policy, spending and planning. The process has gone furthest in the United States. Joseph Stiglitz characterizes the Obama administration’s vast transfer of money and pubic debt to the banks as a “privatizing of gains and the socializing of losses. It is a ‘partnership’ in which one partner robs the other.” Prof. Bill Black describes banks as becoming criminogenic and innovating “control fraud.” High finance has corrupted regulatory agencies, falsified account-keeping by “mark to model” trickery, and financed the campaigns of its supporters to disable public oversight. The effect is to leave banks in control of how the economy’s allocates its credit and resources
Stephen Roach on US, the Fed, China, and Europe
Stephen Roach says the Fed is going all in in support of QE and I agree. But what else are they going to do? Look at Europe, for example. The ECB there has a hydra-headed problem with sovereigns and banks on the brink of insolvency and they too have expanded the balance sheet like mad. China faces many of the same challenges with excess credit growth and fragile financial firms in the face of asset price deflation
[PREMIUM] More on the Fed – Obama stimulus plan
My last weekly said the hand-in-hand Fed activism and fiscal activism via Obama’s mortgage proposal is bullish. Let me add a bit of colour here
[PREMIUM] The Fed’s Rate easing and Obama’s Mortgage refi plan are bullish
Investors must still be worried about the fallout from the European meltdown. However, the situation in the US is looking much better than it did last week because of this aggressive policy response
On building debt
I am glad to say that the overinvestment thesis is much more widely acknowledged today than it was even two or three years ago, but one myth, I think, is that most of the overinvestment excesses in China are concentrated in the real estate sector. I have always argued that it is infrastructure where the most amount of investment has been wasted
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
Brief Note on Big Surge in US Consumer Credit
Late yesterday the US reported the biggest jump in consumer credit in a decade. It reinforces the signal of the gradual healing of the labor market and the resilience of the US consumer. The report increases the risk that the November personal consumption expenditures are revised higher from the initial 0.1% estimate
China: Lots of news, signifying nothing new
I don’t think there is a whole lot to say about this week’s numbers beyond what I have been saying for the past several months. Nothing substantial has really changed. China’s external account is worsening, and will continue to worsen since global imbalances have no choice but to adjust. Growth in China is slowing but remains relatively rapid, and as unhealthy as ever, but there is little likely to be done to improve the quality of growth until 2013. Beijing will continue veering back and forth between stomping on the credit accelerator and stomping on the credit brakes as the only way they can manage the economy
Michael Hudson on the erosion of democracy
Michael Hudson was on RT’s Capital Account with Lauren Lyster, speaking about the loss of democracy that has accompanied the global financial crisis. The video is below, but recently Michael also wrote two articles for the Frankfurter Allgemeine Zeitung in which he gives one a more in depth view of his perspective
Charts of the day: Understanding the latest economic data out of China
The weak November HSBC PMI for China has added to market bearishness. This is not the official PMI but we do note that while the HSBC measure has been below 50 for 4 of the 5 past months, the official PMI has yet to fall below 50, but it was reported at 50.4 in October, the lowest since February 2009. A further drop in the official PMI below 50 seems hard to avoid. Slowing in the Chinese economy is inevitable given the deteriorating external environment as well as PBOC tightening measures taken in 2010-