Author: Guest Author

A bad haircut

A bad haircut

Are these haircuts on Greek debt really such a good idea? Or are they really just a stopgap that will make things all the worse in the long-run?

Sure, Mr. Market seems to think they’re fantastic. But then, Mr. Market has always been about as easy to please as a rather stupid dog: give him a car to chase and he’ll be happy – until his nose inevitably meets the bumper, of course. After all, these are the same markets that rally every time the Fed or the Bank of England announces more monetary voodoo ala QE.

Quantitative Easing!!!

Quantitative Easing!!!

The BoJ announced today that it will expand its asset purchase programme by JPY5trn (USD66bn), with all the purchases being directed at JGB’s. Add that to the GBP75bn (USD120bn) by the BoE, CHF50bn (USD57bn) by the SNB and the EUR341bn (USD477bn) expansion of the ECB balance sheet since the end of June, and it collectively adds up to USD720bn. Clearly this explains the market rally from the low.

Paul Davidson: The State of Economics (wonkish)

Paul Davidson: The State of Economics (wonkish)

Paul Davidson argues that a theory is the way humans describe real world observations on the basis of a model that starts with a few axioms. An axiom is an assumption accepted as a universal truth that does not need to be proved. From this axiomatic foundation, the theorist uses the laws of logic to deduce conclusions that explains what we observe in the world of experience. All theories are generally accepted in some tentative fashion. Theories are not ever conclusively established and can be replaced when events are observed that are deviations from the current existing theory. Thus, the financial crisis of 2007-2009 should have been sufficient empirical evidence to indicate that the axiomatic basis of the mainstream theory needs to be replaced.

Why is the Fed lending dollars unsecured to the ECB… again

Why is the Fed lending dollars unsecured to the ECB… again

It remains my position that Congress should not allow the Fed to lend unsecured to foreign central banks without specific Congressional approval. But the Fed does currently have that authority and they are again using it to keep $ LIBOR from rising. And that lending must be in unlimited quantities to insure $ LIBOR is capped at the Fed’s target rate.