Sun 2010-10-10 11:56 EDT

The Federal Reserve's Relevance Test - Project Syndicate

Joseph E. Stiglitz

...as investors look outside the US for higher yield, the flood of money out of the dollar has bid up exchange rates in emerging markets around the world. Emerging markets know this, and are upset -- Brazil has vehemently expressed its concerns -- not only about the increased value of their currency, but that the influx of money risks fueling asset bubbles or triggering inflation. The normal response of emerging-market central banks to bubbles or inflation would be to raise interest rates -- thereby increasing their currencies' value still more. US policy is thus delivering a double whammy on competitive devaluation -- weakening the dollar and forcing competitors to strengthen their currencies...

Federal Reserve's Relevance Test; Project Syndicate.

Sat 2010-10-09 10:56 EDT

And Then There Were None | afoe | A Fistful of Euros | European Opinion

Edward Hugh

...rather than being over, what the debt crisis now may be entering is a new stage, where one sovereign bond after another is being chisled out and sent off to join their Greek counterpart in the isolation ward...the Irish economy has never really left recession...Irish GDP has now contracted on a quarterly basis for 9 out of the past 10 quarters, and there is no evident end in sight....the riskiest lenders to nationalized Anglo Irish Bank may not get all their money back...In the Portuguese case it is the budget deficit issue which is unsettling the markets, with the spread widening sharply following the revelation that far from the deficit being reduced is was actually increasing...Neither the European sovereign debt crisis nor the banking sector crisis has been resolved and both continue to mutually reinforce each other...the EU's stress tests for banks had manifestly failed to restore the necessary confidence.

afo; euro; European opinion; fisted.

Jesse's Café Américain Wed 2010-09-29 09:13 EDT

Slouching Towards Bethlehem: Double Dip or Banana Split?

Jesse

NBER: "If the 2010 contraction we are now monitoring in consumer demand for discretionary durable goods scales to the full economy as faithfully as the "Great Recession" did, the second dip will, at minimum, be 33% more painful than the first dip and will extend at least half again as long." This is the case for trouble dead ahead, a worse decline in consumer activity and therefore GDP than the first, and the likelihood of further quantitative easing from the US Federal Reserve to patch over the inability of the political process to reform the financial system and balance the real economy because of their myriad conflicts of interest. These policy errors favoring a small minority will most likely result in a stagflation of the most pernicious and corrosive kind, high unemployment and a rising price of essentials, that may ultimately test the fabric of society...

Banana Splits; Bethlehem; double dip; Jesse's Café Américain; Slouching.

Fri 2010-09-17 19:54 EDT

Obama's Thatcherite Gift to the Banks

Michael Hudson

I can smell the newest giveaway looming a mile off. The Wall Street bailout, health-insurance giveaway and support of real estate prices rather than mortgage-debt write-downs were bad enough, not to mention the Oil War's Afghan extension. But now comes a topper: the $50 billion transportation infrastructure plan that Obama proposed in Milwaukee -- cynically enough, on Labor Day. It looks like the Thatcherite Public-Private Partnership, Britain's notorious giveaway to the City of London underwriters. The financial giveaway had the effect of increasing prices for basic infrastructure services by building in heavy financial fees -- guaranteed for the banks, who lent the money that banks and property owners used to pay in taxes in more progressive times...This threatens to be the kind of tollbooth program that the World Bank and IMF have been foisting on hapless Third World populations for the past half-century. The ``infrastructure bank,'' reports The New York Times, ``would be run by the government but would pool tax dollars with private investment.'' It would be a test balloon for financing ``a broader range of projects, including water and clean-energy projects,'' for which Democrats already are drawing up a blueprint...

bank; Obama's Thatcherite Gift.

Credit Writedowns Sun 2010-05-16 14:53 EDT

Spinoza, Descartes and suspension of disbelief in the ivory tower of economics

...The core of my argument will come from James Montier, now at the fund manager GMO. As a strategist at Dresdner Kleinwort Benson in 2005, he wrote a timeless piece on the debate between two 17th century philosophers René Descartes of France and Baruch de Spinoza of the Netherlands. Descartes was of the view that people process information for accuracy before filing it away in memory. Spinoza made the opposite claim, that people must suspend disbelief in order to process information. The two competing ideas were put to the test; and it appears that Spinoza was right about the need for naïve belief, something that has grave implications for investing, the subject of Montier's essay..."Distraction, then, is an especially useful technique when a person's arguments are poor because even though people might be aware that some arguments were presented, they might be unaware that the arguments were not very compelling."...

credit writedowns; Descartes; disbelief; economic; ivory-tower; Spinoza; suspension.

naked capitalism Mon 2010-04-26 10:08 EDT

Martin Wolf: China, Germany Commiting World to Deflation

...large foreign exchange surpluses, beyond what is useful to defend a currency, is NOT a sign of strength. They cannot be spent without causing the currency to appreciate, something that surplus-dependent countries are unwilling to do. Thus these holdings, which were incurred by acting as de facto export subsidies, cannot be utilized without serving as import subsidies....This battle of wills is rooted on every front in domestic politics, plus a collective inability to recognize that our current version of globalization is no longer workable. But we appear likely to test the current system to destruction rather than come up with less drastic ways out.

China; deflation; Germany Commiting World; Martin Wolf; naked capitalism.

naked capitalism Thu 2010-04-22 18:57 EDT

More Evidence of Lack of Competitiveness of Many Chinese Exporters

...From Bloomberg: The profits of China's makers of household appliances, automobiles and cell phones may plunge by between 30 percent and 50 percent if the Chinese currency were to strengthen by 3 percent, according to a state media report. Small and medium-size exporters with low price-negotiating powers will face losses and may even go out of business, according to the Xinhua News Agency's Economic Information Daily newspaper, citing the results of a ``stress test.'' ... Richard Kline: ...Not that it matters at all for US manufacturing whether the renminbi notches up or not. Because wealth enterprises in the US don't really give a damn about their host country. Low-value added assembly will simply flow to Vietnam, Bangaladesh, back to Mexico, or the like. An industrial policy presupposes a political policy. And the malefactors of great wealth have complete control of US governmental policy, as we see, and not the least interest in investing in their host country. Great wealth here is parasitical, in a word. Fuddling about with currency rates won't change the political equation at all.

Chinese exports; competitions; evidence; lack; naked capitalism.

Jesse's Café Américain Thu 2010-01-07 19:07 EST

Class Warfare American Style

Jesse

Matt Taibbi's reaction to the ZeroHedge story with regard to Turbo Tim's lifting of the government support on Christmas Eve for the GSE's was exactly my own. You can read it in its entirety here. What he does not overtly say is that this is class warfare, and it is becoming worse in the US than at any time since the 1930's. And the outcome of this will be a fundamental test of the US commitment to its republic. The media stokes the viewing public into emotionally-based and virulently distracting arguments about liberal versus conservative, while the gentried class skins them all alive.

Class Warfare American Style; Jesse's Café Américain.

zero hedge Thu 2009-10-22 20:14 EDT

Monday's Reverse Repo Test A Disaster?

On Monday the Federal Reserve held a major reverse repo test, as was announced by the NY Fed and by Zero Hedge. We have subsequently received several unconfirmed reports that the conducted test has been a disaster...

disaster; Monday's Reverse Repo Test; Zero Hedge.

Jesse's Café Américain Sun 2009-09-13 12:21 EDT

Signs of an Approaching Decline in US Equities That Could Be Quite Impressive

Jesse

There is a strong correlation between this US equity rally and the Fed monetization of debt, which indicates a 'hot money' flow into US stocks but with thin volumes from a significant market bottom. This points to 'technical price trading' by the financial sector, also known was price manipulation, or trading stocks like commodities. Continued heavy insider selling from those with the best forward view of the real economy is a clear sign of a top. No one can trust what the Fed or the Administration are saying about an economic recovery, as much now as ever. Obama's administration is no reform government ...We will not be surprised if there is a significant decline, first to a pullback of about 7 to 10 percent. Then we will see if the market can rally on renewed dollar devaluation and if not, then another major slide to test lower levels.

Approaching Decline; Equities; impressive; Jesse's Café Américain; signed.

The IRA Analyst Tue 2009-09-01 19:21 EDT

Q2 2009 Bank Stress Test Results: The Zombie Dance Party Rocks On

...the Fed and Treasury spent all the available liquidity propping up Wall Street's toxic asset waste pile and the banks that created it, so now Main Street employers and private investors, and the relatively smaller banks that support them both, must go begging for capital and liquidity in a market where government is the only player left

IRA Analyst; Q2 2009 Bank Stress Test Results; Zombie Dance Party Rocks.

Fri 2009-07-24 00:00 EDT

naked capitalism: Details on Banks' Victory Over Treasury in Stress Tests Emerge

bank; details; naked capitalism; Stress Tests Emerge; Treasury; victory.

Fri 2009-07-24 00:00 EDT

naked capitalism: Yet More Stress Test Doubts

Richard Kline: ``the entire core of the financial system has become an aggregated slime mold of formerly distinct Enrons, bloated 100 times larger''

naked capitalism; Stress Test Doubts.

Thu 2009-07-23 00:00 EDT

naked capitalism: Bank Stress Test Dance of the Seven Veils Continues

Bank Stress Test Dance; naked capitalism; Veils Continues.

Tue 2009-06-16 00:00 EDT

naked capitalism: Citi and Bank of America "Encouraged" to Get More Capital as Result of Stress Tests

America; bank; capitalism; Citi; encouraged; naked capitalism; resulting; stress test.

Tue 2009-06-16 00:00 EDT

AP Exclusive: Fed tests harder on regional banks - Yahoo! Finance

AP Exclusive; Fed tests harder; finance; regional banks; Yahoo.

Tue 2009-06-16 00:00 EDT

naked capitalism: Stress Tests Favor Big Trading Firms Over Regional Players

naked capitalism; regional players; Stress Tests Favor Big Trading Firms.

Tue 2009-06-16 00:00 EDT

naked capitalism: Guest Post: Stress tests reveal Citi and BofA need more capital, but you knew that already

BofA need; capitalism; Guest Post; knew; naked capitalism; Stress tests reveal Citi.

Tue 2009-06-16 00:00 EDT

naked capitalism: Markets Cheer Stress Test Double Speak

Markets Cheer Stress Test Double Speak; naked capitalism.

Tue 2009-06-16 00:00 EDT

naked capitalism: Quelle Surprise! Bank Stress Tests Producing Expected Results!

Bank Stress Tests Producing Expected Results; naked capitalism; Quelle Surprise.

The IRA Analyst Tue 2009-04-21 00:00 EDT

The Institutional Risk Analyst: Stress Test Zombies: Not Too Big To Fail? Tough Tootsies Little Banks!

2009-03-13; ``The Bernanke/Geithner approach to not dealing with the financial crisis amounts to a hideous public subsidy of the global transactional class, a transfer of wealth from American taxpayers to the institutional investors who hold the bonds and derivative obligations tied to the zombie banks, AIG and the GSEs. All of these companies will require continuing cash subsidies if they are not resolved in bankruptcy.''

bank; big; fail; Institutional Risk Analyst; IRA Analyst; Stress Test Zombies; Tough Tootsies.

Wed 2009-04-01 00:00 EDT

naked capitalism: Now It's Official: Stress Test Results Pre-Determined

naked capitalism; officials; Stress Test Results Pre-Determined.

Thu 2009-02-26 00:00 EST

naked capitalism: William Black: "There Are No Real Stress Tests Going On"

former senior bank regulator William Black

naked capitalism; Real Stress Tests Going; William Black.

Tue 2009-02-24 00:00 EST

naked capitalism: Bank Stress Testing: Less Than Meets the Eye

Bank Stress Tests; eye; meet; naked capitalism.

Fri 2009-01-16 00:00 EST

naked capitalism: Chinese Central Bank to Test Program to Settle Trade in Yuan Rather Than Dollars

Chinese Central Bank; Dollar; naked capitalism; settle trade; test programmed; Yuan.

Mon 2008-07-14 00:00 EDT

naked capitalism: The Real Test of the Not-Yet-A-Plan Fannie & Freddie Operation

naked capitalism: The Real Test of the Not-Yet-A-Plan Fannie & Freddie Operation

Freddie operation; naked capitalism; Plan Fannie; real test.

Thu 2008-07-03 00:00 EDT

Information Arbitrage: Straight-talk on FAS 157: Blackstone and their Banker Buddies Have it Wrong

gap management; "Trading risk becomes liquidity risk when you can't trade...Do real stress-testing of liquidity scenarios and construct a capital structure that address much of the liquidity risk posed by non-standard assets...So why do risk managers and bank managements' so consistently make bad decisions? Probably because there is an over-reliance on measures that are seemingly quantifiable."

Banker Buddies; Blackstone; FAS 157; Information Arbitrage; straight-talking; wrong.

Sat 2008-05-17 00:00 EDT

naked capitalism: Media Rorschach Test: Divergent Readings on the Saudis' Wee Production Increase

Bush's visit to Israel's 60th birthday celebration preceding Saudi visit guaranteed cool reception; Saudi's may gain influence by increasing production AFTER US election

Divergent Readings; Media Rorschach Test; naked capitalism; Saudi; Wee Production Increase.

Mon 2007-11-05 00:00 EST

PrudentBear

Road to Ruin: Credit Bubble Bulletin, by Doug Noland; "subprime and the SIVs were peanuts in comparison to the CDO market. Well, the CDO marketplace is chump change compared to Credit Default Swaps and other over-the-counter (OTC) Credit derivatives that...have never been tested in a Credit or economic downturn"; CDS debacle looming

Prudentbear.