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The chart below from the blog Pragmatic Capitalism shows the U.S. Federal government deficit for each quarter since 1952. Here’s my take, using the same chart a year ago that Pragmatic Capitalism used above today: The U.S. dollar is the world’s major reserve currency. Especially in the post-Bretton Woods world, this has meant capital account surpluses as foreigners accumulate [...]
This is me thinking out loud. Now you know I explained a few months ago why questioning Italy’s solvency leads inevitably to monetisation, subsequently adding why Investors will buy Italian bonds after ECB monetisation. So far, this view of the sovereign debt crisis is accurate. But what about so-called moral hazard? In the second post on why investors might buy [...]
I was on CNBC yesterday ahead of Ben Bernanke’s speech explaining the FOMC’s recent decision to add an explicit inflation target to its decision to extend its rate easing/permanent zero policy. If I find a video, I will post it below. Here are some thoughts I have since put together on the US economy first. I [...]
Wolfgang Münchau wrote a piece that was carried online today at Der Spiegel. I haven’t seen an English language version so I thought I would say a few words about the piece I saw in German. Münchau says that Standard and Poors was right – not necessarily about the ratings downgrades, but rather that Europe [...]
Since the possibility of further social tensions leading to nationalism is something on my radar screen, I thought I would post these videos from Euronews and Al Jazeera. In a good economy, these issues are nothing to get concerned about. But in a bad economy, especially one wracked by austerity and unemployment, tensions will have [...]
This story seems to be breaking out. Here’s how the Street.com puts it: Private antitrust litigation pitting some five million retailers against Visa(V), MasterCard(MA), and 13 large banks, including Bank of America(BAC) and Citigroup(C) has slipped under the radar of many analysts and investors who follow those companies, but the case may deliver a multi-billion dollar shock to bank bulls in [...]
Bloomberg wrote the following paragraphs about a recent interview with Mohamed El-Erian. What i thought was interesting was his belief that the Fed is out of bullets. Monetarists and Keynesians believe the Fed can still be effective by managing expectations. So the Fed is on a mission to improve its communication of interest rate policy. Like [...]
This is a post about the job guarantee idea in the context of a historic economic crisis. I intended to write this post on Thursday night as a response to a good post by Pavlina Tcherneva on the job guarantee that is now up on Credit Writedowns, but my schedule didn’t allow it. Now, I have a [...]
The UK was always going to be an important laboratory experiment for the US, as it imposed austerity by choice. This strategy has demonstrably failed, as the UK economy looks to have gone back into recession, public borrowing is on the rise, business and consumer confidence and spending have collapsed and unemployment is rising inexorably. Larry [...]
In January, I wrote my prognosis for 2011. The title was "Cautiously Optimistic Into 2011". I intend to write another post like this early in 2012 with asset allocation and market calls for the new newsletter. But right now I just want to review the basic outlook I presented.
You saw the piece I wrote on the likely policy path for European sovereign debt crisis. I was on RT’s Capital Account last night making the same points. Over the last few weeks, it had seemed like European policy makers were ready to just let the whole thing collapse. But now, the game of chicken is [...]
If you are a debtor who wants to cut your debt load for fear of a liquidity-induced insolvency, there are two ways to make your debt metrics improve. One is to increase revenue and the other is to shrink the debt.
This is going to be a relatively long post. But I think it’s important. I have been meaning to update my thinking about what I heralded in early 2009 as the “Fake Recovery” as the economy in the US began to turn. My view is that without policy support this recovery is now on its [...]