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AIIB Prelude to SDR Decision

AIIB Prelude to SDR Decision

In what can only be seen an unexpected Chinese success, several US allies have agreed to participate in China and India’s Asian Infrastructure Investment Bank. The frustration with the US on this issue is palpable. There is another issue at stake that head of China’s central bank Zhou Xiaochuan made clear at a forum yesterday. On a panel with the IMF’s Lagarde, Zhou pushed for the yuan to be included as a reserve asset and in the SDR basket.

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Repeat after me: sectoral balances must sum to zero

Repeat after me: sectoral balances must sum to zero

By Frances Coppola I do like sectoral net lending charts. This one is from the OBR’s latest Economic Forecast: The thing to remember about sectoral balances is they must sum to zero. It is not possible to have a negative external balance, as the UK does, with concurrent surpluses in the public, household and corporate sectors. If the UK is […]

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Greek default

Greek default

This post was originally written for Credit Writedowns Pro on 11 Mar. Two things I have written recently stand out as I contemplate what will happen in Greece. The first is that the institutions formerly known as the Troika had accepted Greece’s reform list sooner than I expected and that was positive. The second is that Greece could default before […]

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Front-running the Fed on interest rate hikes

Front-running the Fed on interest rate hikes

Written this morning for Credit Writedowns Pro The biggest takeaway from the latest Federal Reserve Open Market Committee meeting was the reduction in the ‘normal’ rate of unemployment from the 5.2-5.5% range to a 5.0-5.2% range. While the Fed did remove its ‘patient’ language regarding rate hikes, the lower unemployment levels give the Fed more room to stay accommodative. Some […]

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Currency wars, the Swiss franc, policy divergence and Fed rate hikes

Currency wars, the Swiss franc, policy divergence and Fed rate hikes

Edward here. I wrote the following post with the anodyne title, “The Swiss National Bank turns to negative rates” for Credit Writedowns Pro on 18 Dec 2014, almost three months ago.. But I am now putting it on the blog site because the Fed is poised to reveal tomorrow whether or not they actually will move to a full-on tightening […]

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Wolfgang Schaeuble the Salesman

Wolfgang Schaeuble the Salesman

When the Greek bailout extension deal got done, I mentioned that in the press conference that followed, German Finance Minister Wolfgang Schäuble made it clear he was looking to ‘sell’ the deal to the German parliament. And while he has been successful in doing so, recent evidence suggests that indeed he did have to work to make the deal viable. For me, this highlights the political constraints we are working under and reinforces my view that writedowns are not politically viable in Germany.

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Five Investing Themes That Need Further Examination

Five Investing Themes That Need Further Examination

Tiger 5 – Grexit is inevitable

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Why Understanding Money Matters in Greece

Why Understanding Money Matters in Greece

As Greece staggers under the weight of a depression exceeding that of the 1930s in the US, it appears difficult to see a way forward from what is becoming increasingly a Ponzi financed, extend and pretend, “bailout” scheme. In fact, there are much more creative and effective ways to solve some of the macrofinancial dilemmas that Greece is facing, and without Greece having to exit the euro. But these solutions challenge many existing economic paradigms, including the concept of “money” itself.

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Albert Edwards on China

Albert Edwards on China

In the last post at Credit Writedowns Pro on the jobs number, I promised to talk about currency issues but I didn’t! Here are two issues then: the increasing current account surplus in Germany and the strong dollar’s effect on China. On Germany, it’s notable that merchandise trade as a share of GDP in Germany was 70.8% for the years […]

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When do we decide that Europe must restructure much of its debt?

When do we decide that Europe must restructure much of its debt?

By Michael Pettis It is hard to watch the Greek drama unfold without a sense of foreboding. If it is possible for the Greek economy partially to revive in spite of its tremendous debt burden, with a lot of hard work and even more good luck we can posit scenarios that don’t involve a painful social and political breakdown, but […]

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How to look at the Greece bailout deal

Yesterday, Greece received an agreement in principal to extend its existing bailout program for another four months from the institutions administering that program. I believe this deal is a good basis for further work down the line. But Greece has a lot of work ahead of it, if it is to move to a new program. Moreover, Syriza will have to sell this deal as a bridge to the sustainable economic outcome it sold to its electorate in the January elections. At the same time, the Germans and the Finns at a minimum will have to sell this deal to their parliaments for it to work. Some thoughts below

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Negotiating strategies and political constraints regarding Greece

I am going to leave my market-based analysis and enter the murky waters of the political economy. I don’t like the uncertainty of the political economy, given how it is based on the quixotic and unpredictable actions of individuals. But the political economy is important in crisis situations and one cannot analyze an outcome properly without taking the politics into consideration. I was a diplomat at one point in time and hope that experience will aid me here. I have been good at understanding some of the political constraints in Europe so far and intend to discuss them here.

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