Author: Perry G Mehrling

Turbulent Exit?

In a followup from their much-discussed (by me here) May memo, Pozsar and Sweeney predict “A Turbulent Exit” when the Fed begins to raise rates.  FT Alphaville and Bloomberg both appreciate the importance of the memo, but focus attention on the exchange rate dimension, and so miss the main point.  Let’s walk through the argument […]

Defending the RMB

It’s hard to short China, but not so hard to short China’s currency, and that’s a problem for the central bank. We’ve all heard about PBOC intervention in the spot exchange market, where the central bank is selling some of its vast horde of USD Treasury securities and buying RMB (thus shrinking its own balance […]

The World in Depression, a Money View

Does this sound familiar?  Falling commodity prices, unsustainable official debts, crashing stock markets, pullback in global lending by dominant megabanks, misaligned currencies, plus a healthy dose of political dysfunction. These are the ingredients, according to Charles Kindleberger, that made for world depression in 1929-1939.  “My contention is that the difficulty lay in considerable latent instability […]

Flash Crash explained by HFT

The official report on events of October 15, 2014, is now public and it makes fascinating reading.  Most news accounts of the report have taken its bland no-smoking-gun conclusion at face value, but if you actually read the report a rather clear picture emerges, along with some rather obvious unanswered questions.  Bloomberg has the best […]

Ford to City: Drop Dead

I recently tweeted:  “Receivership is better than Grexit for Greece, hence Tsipras; but worse for Europe, hence Schauble.”  That’s the headline.  Here is the explication. On Greece, I have been trying to understand how rational people (on both sides) wound up with such an unworkable solution.  It seems to me that in the end Tsipras […]

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China’s Rocky Road Ahead, Financial Liberalization versus Financial Stability

A summary of the 3rd annual joint conference of the People’s Bank of China and the International Monetary Fund offers a snapshot of the state of debate.  So-called “renminbi internationalization” has been official policy since 2009.  By the end of this year, expect to see the launch of a new “China International Payments System” to facilitate […]

Old economic thinking is the problem, says BIS

The 85th Annual Report of the BIS is not perhaps the obvious first choice for beach-reading on a holiday weekend, but having read through its 119 pages, the core message reminds me of nothing so much as the most memorable line of the 40-year-old summer blockbuster “Jaws”:  “You’re going to need a bigger boat.” Notwithstanding everything […]