Category: Economy

My thoughts on the US Q4 2015 GDP numbers

My thoughts on the US Q4 2015 GDP numbers

The US economy is not in a recession right now and the latest numbers on US GDP confirm this view. And while the headline growth number was weak, the consumer spending and personal income numbers are supportive of 2%ish growth into 2016. Some brief comments below U.S. GDP growth came in at a very weak 0.7% annualized pace for Q4 […]

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Is there a US Goldilocks scenario possible for 2016?

Is there a US Goldilocks scenario possible for 2016?

The jobs report today was a strong one, underscoring the ability of the US economy to power through. Am I uneasy about where we are in the economic and credit cycle and the accuracy of the Fed’s forward guidance? Yes – and I tend to think most of the risk is to the downside. Even so, there is a Goldilocks scenario […]

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Profit mean reversion and recession

Profit mean reversion and recession

Yesterday I retweeted an interesting tweet by Business Insider’s Henry Blodget which references an article on data compiled by Barclays on profit mean reversion and recession. The gist of the article is that a profits recession generally presages a real recession except perhaps to the degree the profit downturn is caused by the volatile oil sector. While I am not […]

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If we don’t understand both sides of China’s balance sheet, we understand neither

If we don’t understand both sides of China’s balance sheet, we understand neither

These debt-related shocks will occur regularly for many more years, and each shock will advance or retard the rebalancing process so that it affects the way future shocks occur. There are only a few broad paths along which the Chinese economy can rebalance, and if we can get some sense of the China’s institutional constraints and balance sheet structures, we can figure what these paths are and how likely we are to slip from one to another. In order to get Chinas right I would argue that above all we must understand the dynamics of debt, and of balance sheet structures more generally.

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Internal and external balance of savings and investment

By Michael Pettis I was recently asked by an Australian economics journal to write a review of a book I had already read, The Leaderless Economy, by Peter Temin and David Vines (published in 2013). Because the book is a great place from which to start a discussion on the links within the global economy, I decided to base this essay […]

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Trends and prospects for private-sector deleveraging in advanced economies

Trends and prospects for private-sector deleveraging in advanced economies

Major advanced economies have made mixed progress in repairing the private sector’s balance sheets. This column explores private sector deleveraging trends and calls for a set of policies that will return debt to safer levels. Monetary policies should support private sector deleveraging and policymakers should not ignore the positive impact of debt restructuring and write-offs on non-performing loans.

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How do you say “dead cat” in Latvian?

How do you say “dead cat” in Latvian?

By Frances Coppola This, my third post on Latvia, looks at its recovery from the 2008-9 recession. Latvia is often held up as the “poster child” for harsh austerity measures as the means of returning to strong economic growth. In order to hold its currency peg to the Euro, it embarked on a brutal front-loaded fiscal consolidation in 2009, sacking public […]

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What multiple should we give China’s GDP growth?

What multiple should we give China’s GDP growth?

By Michael Pettis Last week Derek Scissors, a think tank analysts at the American Enterprise Institute, published an articlein which he referred to an October, 2014, study by Credit Suisse that attempts to measure total household wealth by region and by country. Scissors argues that in the interminable debate about whether or not China will overtake the US as the […]

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Moral Hazard Taken Too Far

By Marc Chandler There is an element that links the terrible human tragedy in the Mediterranean and the ongoing Greek crisis.  It is Europe’s over-emphasis on moral hazard. Moral hazard is the idea that people will act irresponsibly if they do not have to bear the consequences.   No doubt, the concept offers valuable insight, up to a point.  The problem […]

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Greece: Irresistible Force Meets Immovable Object

By Marc Chandler Greece is expected to submit a more complete list of reforms in order to free up funds so the country can service its obligations.  Four times the Greek government has provided lists and four times the European group of finance minister rejected it. The IMF, which violated its own rules over the objections of its senior staff […]

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Is Greece’s Debt Odious?

There is a legal concept called “odious debts.” It can be traced back more than a century. The US helped create a precedent for it by denying Cuba’s responsibility for the debt incurred under Spanish colonial rule. The concept took on added significance in the post-colonial era more broadly. The issue here is the continuity of legal obligations from one regime to another especially as it pertains to the debt acquired.

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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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