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 […]
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 […]
Goldman Sachs takes “A Look at Liquidity”, and tells us what they see. Suffice it to say that different people see different things, depending on their vantage point, like the proverbial blind men touching the elephant. Let’s see if we can construct a picture of the animal as a whole from the snapshots provided. What […]
The recently released PwC “Global Financial Markets Liquidity Study”, sounds a warning. Financial regulation, while perhaps well-intentioned, has gone too far. Banks may be safer but markets are more fragile. At the moment, this fragility is masked by the massive liquidity operations of world central banks. But it will soon be revealed as, led by the Fed, […]
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 […]
In the last few weeks, the ECB has been drawing on its liquidity swap line with the Fed, first $308 million for a week, then $658 million for a week, and last week back down to $358 million. What’s that about? It’s not such a large amount. Bank of Japan borrowed more in the past, […]
The long run balance of the U.S. Social Security system has improved, but almost all of the improvement comes from improved methods and data. That’s the sharp pencil part, explained in Section IV.B.6, pages 74-79, of the recently released 2015 Social Security Trustees Report. Put another way, Social Security is in better shape than we […]
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 […]
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 […]
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 […]