Tag: sectoral balances

Economic and market themes: 2014-03-07

Economic and market themes: 2014-03-07

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

Auerback: US base growth is less than 2%

Auerback: US base growth is less than 2%

Marshall Auerback was on CNBC yesterday afternoon talking to Kelly Evans and Steve Liesman on Closing Bell. And his read on the US economy is like mine, 1.5-2.0% underlying growth. He thinks the weak Q1 numbers are not just weather-related. My view: Last year, the numbers were boosted by inventory builds and a credit accelerator. But wages are stagnant and […]

A view from Belgium, where EC officials are now officially saying austerity will end

A view from Belgium, where EC officials are now officially saying austerity will end

The first thing that jumps out at me is the interview with Marco Buti, who says point blank that austerity must end as it is “pointless”. That’s huge because he is Olli Rehn’s right hand man. And Rehn has just confirmed that the EC is relaxing timetables for France along with the Netherlands, Slovenia, and Poland. After the Draghi presser yesterday, in which, Draghi repeatedly pointed only to medium-term consolidation, the relaxed timetable on France and the Netherlands and Macro Buti’s upcoming comments make it clear that we have entered a new era of EU policy, as I remarked yesterday.

Why austerity in Europe will continue

Why austerity in Europe will continue

The reality of course, is that euro zone governments do have to worry about losing market favour. They cannot rely on the central bank as a debt buyer of last resort the way the Japanese, the British or the Americans can. If, for whatever reason, sovereign debt buyers become skittish about euro zone sovereign obligations, the impact is immediate and yields rise. In a worst case scenario, you get a crisis and default as we did in Greece. So the impetus to keep sovereign debt levels manageable is clear. This makes the euro zone different from other currency areas that have currency sovereignty and flexible nonconvertible currencies.

On Japan’s widowmaker trade and Reinhart and Rogoff

On Japan’s widowmaker trade and Reinhart and Rogoff

I was on the Daily Ticker with Lauren Lyster talking about Japan yesterday. My view is that there is no material negative change in Japan’s sovereign debt outlook nor will there be in the medium term because of Abenomics. The video is at the bottom of this post. Before you watch it let me say a little bit about why I take this view on Japan and speak more generally about government debt and deficits. Mike Konczal wrote a post that is getting a lot of buzz on high deficits and Reinhart and Rogoff that will be a good jumping off point for discussion.

Predicting major correction in 2013 as contrary indicators are mostly bearish

Predicting major correction in 2013 as contrary indicators are mostly bearish

Last year, I was bullish on European shares and this proved the right call as they modestly outperformed. As this year begins, I am doing a lot of thinking about my much-delayed “Ten Surprises for 2011” post. And as I compile list items, it’s clear I want to be bullish again, this time both on the economy and global markets. But there are a few things holding me back.