Green shoots, 1930

aus Paul Krugman’s Blog:

Via the WSJ’s Real Time Economics, a blog that has been keeping track, day by day, of what the Journal was saying at the same day in 1930. What’s striking is the optimism: story after story says, in effect, that the worst is over and recovery is just around the corner:

Col. Ayres, VP Cleveland Trust, predicts an abrupt recovery in stock and commodity prices by Labor Day due to current consumption exceeding production. Distinguishes between two types of depression, “V”-shaped and “U”-shaped.

One thing that surprised me about the WSJ story, however, was this assertion:

Of course, the current recession is nowhere near severe as the Depression. A great series of charts by the Council on Foreign Relations shows that by almost every measure the Great Depression was more severe by this point in the cycle.

Hmm. By this time I thought everyone paying attention to this stuff was familiar with the Eichengreen-O’Rourke work. EO point out that the original Great Depression was most severe in America, while this one is more severe in a number of other countries. So you want to do a world comparison — and if you do, we’re actually tracking the first year of the GD quite closely. Here’s world industrial production:

 

The Three Essentials of Financial Reform

von Robert Reich’s Blog:

As the White House unveils its long-awaited proposals to prevent another Wall Street meltdown in the future, keep a lookout for three essentials. Without them the Street will revert to its old ways as soon as the coast clears. In fact, now that the government has bailed out the Street, the biggest banks will take even larger and more irresponsible risks because they’re officially too big to fail. So these three reforms are critical.

The Chinese Proposal for a New Global Super Currency

The Chinese are flexing their muscles on the question of the global reserve currency system dominated by the dollar.

2 ausgezeichnete Artikel von Nouriel Roubini. The Chinese Proposal for a New Global Super Currency Roubini

The World Finance Crisis & the American Mission

Now that we are—or may be—over the worst of the crisis, attention has partly switched to trying to understand its deeper causes. The two most popular explanations to have emerged are the „money glut“ and the „saving glut“ theories. The first blames the crisis on loose fiscal and monetary policy, which enabled Americans to live beyond their means. In particular, Greenspan, chairman of the Federal Reserve in the critical years until his retirement in early 2006, used low interest rates to keep money too cheap for too long, thus allowing the housing bubble to get pumped up till it burst.

An excellent aticle explaining the exchange rates issues between US and BRIC countries from the New York Review of Books.

Skidelsky World Fianace Crisis and American Mission NYR 07_09

The End of the Recession?

I walked into the office yesterday evening and there was someone on CNBC talking about how the 50-day moving average of the S&P 500 rising above the 200-day moving average was telling us the market was getting ready to rise and the recovery had started. I listened to his babbling for another 2-3 minutes and couldn’t take it anymore (and no, it was not my friend Larry Kudlow, who is a lot more balanced than whoever was on.)

We keep getting told that the market is telling us „something,“ usually that the recession is going to end. For some reason, people keep repeating the bromide that the market looks out about 6 months. To that I politely say, rubbish.

John Mauldin, Best-Selling author and recognized financial expert, is also editor of the free Thoughts From the Frontline that goes to over 1 million readers each week. For more information on John or his FREE weekly economic letter go to: http://www.frontlinethoughts.com/learnmore

Lesen Sie den ganzen Artikel: Mauldin The End of Recession

Japan Back in Deflation?

• Japan, which underwent deflation from 1999 to 2005, is back in deflation and may be facing a protracted period of falling prices due to anemic demand growth. CPI excluding fresh food fell 1.1% y/y in May, the steepest decline since records began in 1970 and the third consecutive month of negative growth. Core CPI inflation was negative for the fifth consecutive month in May. Wages slid 2.5% y/y in April 2009, extending their longest losing streak since 2003. The negative output gap is at its widest since records began in 1980

China’s Super-Sovereign Reserve Currency Idea: Could the SDR Be a Reserve Currency?

• People’s Bank of China’s Financial Stability Report (June 2009): To avoid intrinsic shortcomings in using a sovereign currency as a reserve currency, there is a need to create an international reserve currency that is divorced from sovereign states and can maintain a stable value over the long term. It also suggested that the IMF step up its review of the economic and monetary policies of reserve currencies to encourage stability, a view previously expressed by finance ministry officials (Reuters)

• Nouriel Roubini: The process that will lead – in the medium to long term – to a challenge of the U.S. dollar as the major global reserve currency has started. The U.S. creditors – the BRICs, the Gulf states and others – are becoming increasingly alarmed that the U.S. will deal with its unsustainable fiscal path via inflation and debasement of the value of the U.S. dollar via depreciation. So they will not sit idly waiting for this to happen: they are already diversifying into gold, into resources (as China purchases mines and energy, mineral and commodity resources all over the world)

What Next For The Global Crisis?

Simon Johnson on a World Bank Conference. Simon Johnson is a senior fellow at the Peterson Institute for International Economics and the Ronald A. Kurtz Professor of Entrepreneurship at MIT’s Sloan School of Management.

There are two views of the global financial crisis and – more importantly – of what comes next.  The first is shared by almost all officials and underpins government thinking in the United States, the remainder of the G7, Western Europe, and beyond.  The second is quite unofficial – no government official has yet been found anywhere near this position.  Yet versions of this unofficial view have a great deal of support and may even be gaining traction over time as events unfold.

Wrenches thrown into the (uncertain) speed of economic recovery

Nobody ever said that a recession was easy; but it looks like the recovery is going to be a little rocky, too. Renewed optimism has brought about increasing mortgage rates and gas prices – both factors have the potential to cripple an economic recovery, as households are thrown back to the economic wolves.

Growing Pains for the Euro

 

Adam S. Posen, coeditor o fThe Euro at Ten: The Next Global Currency?, asserts that the euro has

helped stabilize the European economy but is also falling short of its potential in the face of the global financial crisis. Siehe den ganzen Artikel: posen Growing Pains for the Euro