By Marc Chandler As the year winds down, a Gordian knot tying Russia, oil prices and China together is receiving a great deal of attention. Let’s see if we can unravel some of the confusing twists and turns. We turn first to China’s offer of assistance to Russia. The idea that Russia could activate its CNY150 bln (~$24 bln) currency […]
Tag: credit crisis
This is an abbreviated post from our subscription series at Credit Writedowns Pro. I am very interested in the intersection of private debt, financial fragility and economic growth because I believe this intersection is pivotal in understanding whether the secular forces which led to the Great Financial Crisis have been arrested. I want to use Ireland as a jumping off […]
The 2014 BIS Annual Report warns again about the perils of ultra-easy monetary policy as it did in the lead-up to the Great Financial Crisis. I think the BIS could prove a Cassandra here and will explain below. Nevertheless, many refuse to heed its warnings because of the concern with the sluggishness of the real economy in developed economies and the worry about becoming the next Japan. The problem, as the BIS states, is debt. But the answer is not restrictive policy and structural reform as the BIS argues. Rather it is an acceptance of fiscal policy outcomes as mostly endogenous.
Yesterday, I wrote up a piece at the New York Times’ Room for Debate forum about the legacy that Tim Geithner left behind, given his recent memoir “Stress Test”. The question was : “Did the government miss a historic opportunity to reshape the financial system — or was its moderate approach correct?” I recommend you read the other answers from […]
The big news in the markets today is the standoff in eastern Ukraine between pro-Russian armed rebels and the Ukrainian military. This has European markets selling off. The potential for problems in eastern Ukraine is something we should have seen as a possibility given the motives in the Texas annexation I outlined as a comparative case. Given that analysis, I still believe the question now is more about how Ukraine responds in eastern Ukraine than how Russia, Europe, NATO, or the US respond. It looks like we will get a military response. And as such, the potential for dramatically increasing tension with Russia is high. The European periphery will be especially vulnerable because of this. In addition, Russia is already moving away from the West as a hedge. Thoughts below
Private loan balances in the euro area continue to decline. Last month’s drop of 2.2% from the previous year was worse than had been expected by economists.
The West has accepted Crimea’s annexation and will likely only increase sanctions if Russia goes further The Ukraine – IMF deal will put the Ukrainian economy through the wringer Russia’s economy is going to tank due to capital flight Brazil’s economy is in jeopardy of recession The US is doing ok but not great as data have improved The Fed’s […]
Marc Faber appeared on Bloomberg Television yesterday to discuss the Chinese economy. While Faber generally seems to be a long-term bull on China, he had some disquieting things to say about the extent of malinvestment in China due to the recent round of government stimulus and infrastructure-oriented investment. Faber told Trish Regan and Matt Miller “I think that we had […]
US data have been better
European periphery market access continues to improve
Dollar weakness may be China-related
Gold continues to get safe haven bid
China’s slowing more likely to be abrupt
Ukraine has become a military issue; contagion will increase
A full-blown emerging markets crisis is now likely
Themes for today:
The US faces political constraints in a cyclical downturn that will limit government response
The US private surplus is under assault
Europe is improving and upgrades to bank stocks are bullish
The Fed tends to tighten before wage growth becomes sustainedEM hidden external debt in eastern Europe makes Ukraine a potential point of contagion
EM hidden external debt is large in China, Brazil and Russia
Business lending in the Eurozone is very poor – flat in the major core countries and falling in the periphery. There is a desperate need to ease credit conditions for SMEs in periphery countries. The slight easing of interest rates on certain categories of loan for Spanish SMEs is welcome, but it is nowhere near enough. The EU must find ways of improving access to finance for SMEs in periphery countries. The future of those countries, and perhaps even of the Eurozone itself, depends on them.
Today’s links carry a widely-diverging set of opinions about the moral issues surrounding the situation in Ukraine. But since this is a finance site, I want to discuss the economic issues. I continue to believe the Ukrainian situation will have only a modest impact on the global economy unless war breaks out. Moreover, Europe’s trade linkages to Russia make sanctions a trickier subject for Europe than the US. Expect to see diverging views within NATO and no meaningful economic penalty as a result.