UK economy must perform a rebalancing act

20. April 2010, | John Mauldin

Long time readers know that I am a huge fan of Martin Wolf, economist and columnist for the Financial Times. His writing is the reason to get the Pink Lady (as the Financial Times is known) as far as I am concerned.  

This week’s Outside the Box has two columns back to back from last week from Wolf, talking about the problems in Britain which look like the same problem all over the developed world. Wolf argues (rather cogently) that the answer is to increase exports and for a further weakening of the pound. Quoting:  

The Only Way to Prevent Another Bailout of Wall Street is to Cap the Size of Wall Street Banks

Robert Reich’s Blog. Freitag, 16. April 2010, 17:20:00

The best way for Senate Dems and the White House to respond to the Republican charge that the Dem plan for financial reform doesn’t go far enough to prevent another bailout is to call their bluff — and simultaneously do what’s necessary to avoid another bailout: Cap the size of big banks, as the UK is close to doing for its big banks.

The so-called “resolution” mechanism the Dems are pushing to wind down any big bank that gets into trouble is a step in the right direction. But it won’t work if two or more giant banks are endangered at the same time — which is likely to be the case when the next crisis occurs because every big bank uses whatever profitable financial ploys every other bank uses (as they did in the runup to the crash of 2008).

How Serious Is the Risk of Deflation in the Eurozone?

• Eurozone inflation rose to 1.4% in March 2010, compared to 0.9% in February. Core inflation rose by 1% in March after declining to 0.9% in February (lowest rate in 10 years). Headline inflation rose due to base effects from in energy and food. Furthermore, an increase in energy prices by 7.2% y/y also contributed to push inflation upward by approximately 0.4 percentage points. BNP notes that „the inflation breakdown reported that core inflation, which excludes the most volatile components of the HICP such as energy and food prices, rose to 1% after declining to 0.9% in February [2010] (its lowest rate in almost 10 years). However, this increase was due essentially to the early time of Easter which pushed up price components such as leisure and hotels & restaurants in March. Therefore this increase should be only temporary. We expect core inflation to resume trending downwards as soon as next month.“

First, Let’s Kill the Angels

Equal Choice, Equal Access, Equal Opportunity
Some Quick Thoughts on Goldman
La Jolla and Dallas

John Mauldin, 17.4.

When you draft a 1,300-page „financial reform“ bill, various special interests get language tucked into the bill to help their agendas. However, the unintended consequences can be devastating. And the financial reform bill has more than a few such items. Today, we look briefly at a few innocent paragraphs that could simply kill the job-creation engine of the US. I know that a few Congressmen and even more staffers read my letter, so I hope that someone can fix this. The Wall Street Journal today noted that the bill, while flawed, keeps getting better with each revision. Let’s hope that’s the case here.

Then I’ll comment on the Goldman Sachs indictment. As we all know, there is never just one cockroach. This could be a much bigger story, and understanding some of the details may help you. As an aside, I was writing in late 2006 about the very Collateralized Debt Obligations that are now front and center. There is both more and less to the story than has come out so far. And I’ll speculate about how all this could have happened. Let’s jump right in.

Felderer und Robol: ‘Verstehen Bankbilanzen nicht mehr’

aus dem Börse Kurier, wenn auch relativ viel falsch zitiert ist.

IHS-Chef: Österreichs Bankensektor relativ gesund – Wirtschaftsprüfer: Tatsächliche Vermögenslage nicht mehr feststellbar

IHS-Chef Bernhard Felderer (im Bild) und Wirtschaftsprüfer Günther Robol waren sich heute – trotz sonst vieler unterschiedlicher Auffassungen über die heimische Bankenlandschaft – in einem einig: Für beide sind Bankbilanzen nicht mehr verständlich. Felderer, der auch im Generalrat der Nationalbank sitzt, ergänzte umgehend, dass die Nationalbank als Bankenaufsicht auch noch andere Informationsmittel habe, etwa die regelmässig stattfindenden Visitationen direkt in den Zentralen der Kreditinstitute.

Robol kritisierte, dass sogar für ihn als Wirtschaftsprüfer die tatsächliche Ertrags- und Vermögenslage einer Bank aus der Bilanz nicht mehr feststellbar sei. „Für meinen Berufsstand ist keine unabhängige Prüfung mehr möglich“, so der Experte bei einer Diskussionsveranstaltung anlässlich der IRR-Fachkonferenz „Kurs 2010″ in Wien.

«Wir lebten in einer Frivolitätsepoche»

29. November 2008, nzz online. Alt, aber daher besonders gut.

Ein Gespräch mit dem Philosophen Peter Sloterdijk über die Finanzmarktkrise

Peter Sloterdijk bei einem Auftritt in Zürich. (Bild: NZZ / Christian Beutler)

 Die gegenwärtige Finanzkrise hält die Welt in Atem. Peter Sloterdijk hat eine philosophisch-literarische Theorie der Globalisierung vorgelegt. Im Gespräch mit Paul Jandl denkt er über riesenhafte Pseudovermögen, Panikökonomie und die neue Stärke des Staates nach.

U.S. Trade Deficit Widens on Higher Imports

The U.S. trade deficit widened by 7.4% to reach US$39.7 billion in February 2010, after narrowing by 7.3% m/m in January 2010. Both imports and exports rose in February, but imports rose faster. The widening of the deficit came from a 6.5% widening of the non-petroleum deficit, while the petroleum deficit widened 1.6% m/m. The services surplus narrowed 6.7% in January, while the real trade deficit widened 0.7% m/m, the U.S. Bureau of Economic Analysis (BEA) reported on April 13. The trade gap with EU countries widened in February 2010, as did the gap with Mexico and South America, the BEA reported on April 13, 2010. The trade gap with OPEC countries, Africa and Pacific Rim countries including China narrowed.

China Records a Large Trade Deficit: Sign of More to Come?

In March China recorded a trade deficit of US$7.22 billion, the largest in at least six years, as imports soared 66% y/y to US$119 billion and exports climbed 24% to US$112 billion from 2009′s weak base. The higher cost of China’s commodity imports accounted in part for the widening gap, as did slowing export growth after the Lunar New Year holiday. China had a US$9.9 billion surplus with the U.S., offset by large deficits with commodity exporters and Asian countries. The March result follows a narrow trade surplus of US$7.6 billion in February, when exports rose 46% to US$94.5 billion but contracted on a seasonally adjusted basis. A trade deficit had been expected following recent government comments, but the size of the deficit was much larger than consensus. The trade deficit may weaken the pressures for appreciation, but China’s sheer volume of commodities imports suggests that price pressures are rising, which could be countered by an increase in domestic currency purchasing power. Net exports are expected to remain a drag on growth in 2010, albeit a much smaller drag than in 2009.

Der Föhrenbergkreis hat einen neuen Mitbewerber bekommen: Das Institute for New Economic Thinking (INET)

Von George Soros mit 50 Mio $ unterstützt, hat das Institut am vergangenen Wochenende die Arbeit mit einer Konferenz in Cambridge aufgenommen.

Der Unterschied zu uns:

1. 5o Millionen $ eben
2. dort sind berühmtere Mitglieder, die erklären, warum das alles nicht vorhersagbar war (siehe Standard Artikel)
3. die sind sonderbar ausgewählt; einige wichtige fehlen (Kotlikoff, Roubini, Shiller ,…)
4. bei uns sind keine Täter dabei

Trotzdem einige gute Videos: Akerlof, Rogoff.

Reform We Can Believe In

John Mauldin, 9.4.

It’s Time for Reform We Can Believe In
The Fed Must Be Independent
Credit Default Swaps Threaten the System
Too Big To Fail Must Go
And This Thing About Leverage
What Happens If We Do Nothing?
New York, Media, and La Jolla

Casey Stengel, manager of the hapless 1962 New York Mets, once famously asked, after an especially dismal outing, „Can’t anybody here play this game?“ This week I ask, after months of worse than no progress, „Can’t anybody here even spell financial reform, let alone get it done?“ We are in danger of experiencing another credit crisis, but one that could be even worse, as the tools to fight it may be lacking when we need them. With attacks on the independence of the Fed, no regulation of derivatives, and allowing banks to be too big to fail, we risk a repeat of the credit crisis. The bank lobbyists are winning and it’s time for those of us in the cheap seats to get outraged. (And while this letter focuses on the US and financial reform, the principles are the same in Europe and elsewhere, as I will note at the end. We are risking way too much in the name of allowing large private profits.) And with no „but first,“ let’s jump right in.