Welcome to the New Normal

Aus John Mauldin’s Newsletter:

Unemployment is high and rising. But if the recession is over, won’t employment start to rise? The quick answer is no. We look deeper into the Statistical Recovery and find yet more reasons to be concerned about near-term deflation. This week we consider all things unemployment and ponder the need to create at least 15 million jobs in the next five years to return to a full-employment economy – and the implications for both the US and world economies if we don’t. Economic is often about what we can clearly see, and yet it is understanding what we can’t see that gives us true insight. We start with a collection of facts that we can see and then begin a thought exercise to find the implications.

What We See

First, the unemployment rate is now officially at 9.7%. We are approaching the official high we last saw at the end of the double-dip1982 recession. In the chart below, notice that unemployment rose throughout 1980 and then began to decline, before rising rapidly as the economy entered the second recession within two years. Also notice the rapid drop in unemployment following that recession, as opposed to the recessions of 1991-92 and 2001-02, which have been characterized as jobless recoveries. Unemployment was as low as 3.8% in 2000 and saw a cycle low of 4.4% in early 2007.

(For the record, all this data is available on the Bureau of Labor Statistics website. There is a treasure trove of data. They are quite open about what they do and how they do it. When I call to ask a question, they are quite helpful. How people interpret the data is not their fault.)

Leaders of G-20 Vow to Reshape Global Economy

aus der heutigen NYT:

Kommentar dazu:

1. so stellt sich der kleine Barrack das halt vor
2. man möge den Hund nicht auf die Knackwurst aufpassen lassen
3. wesentliche systemische Änderungen (too-big-to-fail, Tennung in Basic Banking und Game Banking, Beschränkung von Anstieg von Finanzeinkünften vs. Realeinkünften, etc) sind sicherheitshalber nicht beschlossen worden!
4. die Zahlen und Ziele sind sehr präzise!!!

By EDMUND L. ANDREWS

PITTSBURGH — One year after a financial crisis that began in the United States tipped the world into a severe recession, leaders from both rich countries and fast-growing powerhouses like China agreed on Friday to a far-reaching effort to revamp the economic system.

The agreements, if carried out by national governments, would lead to much tighter regulation over financial institutions, complex financial instruments and executive pay. They could also lead to big changes and more outside scrutiny over the economic strategies of individual countries, including the United States.

Global Debt Comparison

Ein sensationelles, besorgniserregendes Tool: Economist Global Debt Comparison

Financial Regulation, the Pessimistic View

James Kwak | Sep 21, 2009

Satyajit Das, who knows more about derivatives than I know about anything, has a guest post on naked capitalism about derivatives regulation. The quick summary? Don’t bet on it.

“‘Holy water’, ‘hosanna’s’ or other utterances (based on particular religious convictions) will be sprinkled or said in the form of initiatives to improve disclosure, increase capital and a new centralised counterparty (’CCP’) to reduce the risk of a major dealer failing. Fundamental issues – the use for derivative for speculation, mis-selling of instruments to less sophisticated market participants, complexity, valuation problems – will not be substantively addressed.”

The 7 Habits of Highly Suspicious Hedge Funds

Rick Bookstaber | Sep 18, 2009

You’ve heard this story before: A trader at a bank is knocking the cover off the ball. His success garners political power within the bank. He creates a fiefdom that insulates him from the rest of the firm; his trading group explodes in size. He lives a conspicuous, extravagant lifestyle. His ego alienates the management and intimidates the support staff. Then the trader hits a rough patch. He uses all the tricks in the book to keep his poor results under wraps while he tries to find a way to recoup. Everyone is gunning for him, so he has to get back into the black, and fast.

How does he try to do that? He ratchets up his risk. He knows he won’t be able to turn it around fast enough if he plays it prudently, whereas there is some chance to stay in the game if he bets it all on 00, or better yet, if he levers up as much as he can, borrows all the money he can get his hands on, and then bets all of that on 00. If he loses, well, he was going to be gone anyway, so he may as well try for the big time.

The G20’s Crowded Agenda

Rachel Ziemba | Sep 23, 2009

This week we review the critical issues G20 leaders will focus on when they meet this week in Pittsburgh. The coordinated and unilateral policy actions taken by these countries and others—including aggressive fiscal and monetary stimulus, increased funding to the IMF, and backstopping financial systems globally—helped stop the economic freefall. The economic outlook has improved since their last meeting in April, but the challenge of navigating towards sustainable growth is equally difficult, and the coming period brings the risk of policy missteps as countries begin to plan their exit strategies. On the eve of the G20 meeting, there remain significant divides over the timing and scope of exit strategies from monetary accommodation, the path towards fiscal consolidation, and the drive for financial regulatory reform.

Iceland Monetary Policy: Key Rate Held at 12.0% in September, but Central Bank to Auction CDs

• Iceland’s central bank kept the key policy rate unchanged at 12.0% at the September 24, 2009 meeting, but decided to auction 28-day certificates of deposit (CDs) to mop up excess liquidity in the banking system.

• Central Bank: Conditions for the phased removal of capital controls might soon be in place if bilateral and multilateral financing is secured. „During the transition period, monetary policy will be guided by the interim objective of stabilizing the króna.“

What’s on the G20 Agenda in Pittsburgh?

• Uri Dadush of the Carnegie Endowment notes „the stated purpose of the upcoming summit is not to break new ground but to verify progress on previous commitments.“ G20 leaders face the challenge of shaping a sustainable recovery, avoiding a relapse into crisis as government support is withdrawn, identifying the right lessons to avoid future crises and setting the future agenda on issues relating to climate change, etc. Dadush argues that the G20 should be the key body for such economic policy-making.

Austria: Corruption in the Banking Sector

aus dem neuen 2009 Global Corruption Report von Transparency International: Global_Corruption_Report_2009_170909_2_web

 

 „The cases of MEL and BAWAG demonstrate problems and ineffi ciencies in the Austrian banking control system, as well as the relationships between the banking sector and politics. Several other less spectacular cases, such as that of AMIS, a fi nancial assets company, also reveal this fact. The traditional lack of coordination between ministries, the central bank and the control authorities has been improved, but the typical Austrian arrangement of close ties between representatives of these bodies and political parties still exists. The very complicated ownership structure of banks (including the central bank) and organisations with strong political infl uences can still lead to confl icts of interest“. Zum Länderbericht Österreich auf den Seiten 310-313 der Länderberichte. 12_part_two_country_reports_europe[1]

Why the Dow is Hitting 10,000 Even When Consumers Can’t Buy And Business Cries „Socialism“

aus Robert Reich’s blog:

22. September 2009, 18:01:08  (Robert Reich)

So how can the Dow Jones Industrial Average be flirting with 10,000 when consumers, who make up 70 percent of the economy, have had to cut way back on buying because they have no money? Jobs continue to disappear. One out of six Americans is either unemployed or underemployed. Homes can no longer function as piggy banks because they’re worth almost a third less than they were two years ago. And for the first time in more than a decade, Americans are now having to pay down their debts and start to save.

Even more curious, how can the Dow be so far up when every business and Wall Street executive I come across tells me government is crushing the economy with its huge deficits, and its supposed “takeover” of health care, autos, housing, energy, and finance? Their anguished cries of “socialism” are almost drowning out all their cheering over the surging Dow.