Below is the video of Richard Nixon closing the gold window exactly 43 years ago today. Hat tip to Raja Korman
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 […]
I am skipping the news links today to go right to the daily commentary. I want to continue my thoughts on what’s happening in Europe and why I think the ECB will become more activist. There are a number of policy options on the table for the ECB including continuing to stand pat. But given both what ECB board members are saying and what the Lisbon Treaty defines as the ECB’s mandate, I believe we are about to see a big shift in policy toward greater activism. I’ll explain why below.
Jobless claims: a good coincident indicator of the US economy. If you look at changes in jobless claims it can also help you call turning points in the economy. I have done claims graphs a few times over the past six years but I haven’t posted an update in a while. So I wanted to update you on what the data are saying.
Continuing where I left off yesterday, it’s clear that the global economy is growing now. We see growth in the US, Europe, Japan, and in emerging markets. Economic growth is the norm, not the exception. And over the longer term, markets will rise to reflect that growth. That’s what I mean when I say market and economic momentum is up and to the right. Here’s the problem; there are periods of time when economies and markets fall out of bed. And sometimes the upheaval is so great, it turns into a generational divide – a depression and/or secular bear market. I believe there is a good case that we are still both in a depression and a secular bear market and I want to explain how that matters below.
Yesterday I looked at the Ukraine situation from a decision-tree framing. And my conclusion was that Western influence in Ukraine’s internal politics to aid regime change was a key factor in making the situation in Ukraine and its consequences more unpredictable. I believe markets are fairly complacent given the potential fallout, which could include military confrontation. Today, I want to use a different framing to look at Russian – US animosity over Ukraine. I am going to use the Franco-Prussian War as an analogy to give a sense of likely outcomes.
I knew Charles Keating, the head of Lincoln Savings, in my capacity as a financial regulator and as the subject of his wrath. His fraud schemes and the manner in which they targeted our system’s vulnerabilities in an era before Citizens United made the corruption of politicians by fraudulent CEOs child’s play remain the play book for the world’s most destructive financial frauds. Our failure to learn the ten lessons has caused immense suffering. Keating’s life, and the great harm he caused, will not have been in vain if we step back and use the occasion of his death to reflect on the changes we need to make.
As Ukraine prepares to evacuate its military from Crimea, I believe we should look at upside scenarios in Ukraine. Most of my commentary to date has been focused on risk assessment. But the pullout of Ukraine from Crimea is the first major sign of de-escalation I have seen in a while, which warrants a look at future positive outcomes.
Yesterday, I laid out what the annexation of Texas in 1845 might say about Vladimir Putin’s motives in Crimea. My conclusion, however, was that, whatever Putin’s motives, the Texas annexation tells us military confrontation was not to be discounted as an outcome of the Crimean crisis. Looking a little closer into the past, let’s look at what the disintegration of Yugoslavia can tell us. I believe the chief lesson will be that recognition of seceding republics moves the world from branches in a decision tree with limited nodes to branches with many more decision nodes, creating many opportunities for policy error.
In 1845, the United States annexed the Republic of Texas, a breakaway territory from the Republic of Mexico. This annexation created great hostility between the US and Mexico, leading to the Mexican-American war in 1846. The events are 170 years ago, so they aren’t relevant from a precedent perspective. But the broader circumstances are similar enough that the Texas annexation […]
Unless serious action is taken, Europe in particular (but the U.S. is not far behind) is at risk of falling into a very deep hole from which it may be extraordinarily difficult to dig itself out of. Once in, it will prove ever so hard to get out again. That is one of the key lessons learned from Argentina, even if the nature of Europe’s problems is different from those of Argentina.
By Win Thin A little history lesson about Ukraine and Crimea may help put recent developments into better perspective. What emerges is a very clear understanding of why both Russia and Ukraine feel that they each have historical precedent to support their positions: Russia believes Ukraine is part of Russia, while Ukraine (or at least parts of Ukraine) believes it […]