Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list has Nobel laureate Joseph Stiglitz assessment of Japan's economic stimulus moves ........ and the last article maintains that Wall Street is winning the post-crisis regulation battle.
Gasoline prices fell an average of 2.9 cents cents nationwide this past week from last weeks rise of 0.9 cents from the week before (+8.5 cents since 29 April) - with the largest rise in the Gulf Coast (~+2.9).
Average prices by region and a breakdown by grade follow after the "Read More".
How does the disconnect between words and actions develop? We looked at recent survey data from a multitude of sources that shed light on bad behavior in business.
The intense rivalry between Airbus and Boeing has escalated significantly following the recent first flight of the former’s state of the art A350 XWB. This aircraft is the first in a series of highly-efficient and long range passenger planes intended to compete with Boeing’s 787 Dreamliner.
Econintersect: What happens when a Federal Reserve Governor goes to a jobs fair? Sarah Bloom Raskin did just that and told her story as part of a presentation at The Roosevelt Institute Institute conference last week: A Bold Approach to the Jobs Emergency. Based on her experience at the jobs fair she was motivated to look at some specific data on jobs and has some very specific data points that are not often mentioned by others.
Some details of the data and a video of the presentation available after the Read more >> jump.
Econintersect: The federal government launched a program called HAMP (Home Affordable Modification Program) in 2008 and expanded it as of 01 June 2012. According to a recent Bloomberg/Businessweek article, only 1.1 million have been successful enough to be considered permanent. That is less than 10% of the total of over 12 million mortgagors who were underwater at the height of the crisis in 2009. The government program was referred to recently by Bloomberg as "ham-handed". Bloomberg said that the "well-intentioned program" was "as clunky as its name".
It now appears that there may have been bank collusion to help prevent HAMP from being more effective.
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list discusses stock market Vulnerability this summer ........ and the last article takes a strong position against strength in the U.S. housing market.
The global advertising market is expected to grow by a modest 3 percent this year as the economic mood remains fragile in many major ad markets. According to Magna Global, total media ad revenue is predicted to reach $486 billion this year, with television remaining the most important advertising medium.
TV ad revenues will account for 40 percent of the global total this year as digital advertising continues its rise through the ranks. Digital advertising is the only category expected to see double-digit growth this year and is now bigger than print advertising on a global scale. Newspapers and magazines continue to see their ad revenues decline (-3.3 percent and -5.1 percent respectively) as reading habits are shifting toward digital consumption.
The U.S. education system is not as internationally competitive as it used to be; in fact, the United States has slipped ten spots in both high school and college graduation rates over the past three decades, according to a new report and scorecard from the Council on Foreign Relations' Renewing America initiative, which examines the domestic foundations of U.S. power. U.S. national security is directly linked to issues such as education because shortcomings among American workers threaten the country's ability to compete with other countries and set a compelling example internationally.
Three Chinese astronauts are on a 15-day mission and inhabiting the Tiangong 1 space station. China’s second female astronaut, Wang Yaping, is giving lectures to middle and elementary school students while in orbit. Nie Haisheng is the mission's commander. Born in 1964, he flew on Shenzhou 6 in 2005. Wang Yaping is China’s second female astronaut. She was born in 1980. Zhang Xiaoguang is the mission’s pilot, responsible for conducting the rendezvous and docking with the Tiangong station. He was born in 1966.
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list has a story about Brazil's monetary woes ........ and the last article is about how even subliminal hints about money can degrade ethics.
This week 11 central banks took policy decisions with Indonesia becoming the third emerging market central bank to raise rates this year while three banks cut rates (Ukraine, Belarus and Mozambique) and seven kept rates steady (Russia, Japan, Iceland, New Zealand, Korea, Philippines and Peru).
Indonesia’s rate hike was significant because it underscored the determination of central banks in emerging markets to combat inflation and their readiness to take on financial markets and avoid any semblance of economic instability.
Brazil has already raised rates twice this year to push down inflation while Egypt raised its rate in March, arguing that high inflation will do more damage to the economy in the medium term than the temporary impact on growth from a rate rise.
Creditplus takes a look at the popularity of motor financing in the UK, the USA and Australia, comparing annual percentage rates and recent trends.
UNITED KINGDOM
When discussing spending trends of the last few decades, Great Britain has often being described as a 'country of borrowers' and certainly the way in which Brits finance their car purchases would bare testament to that.
Of the 2,044,609 new cars sold in the UK in 2012, a whopping 71.2% of those were purchased using motor finance, compared with 63.5% in 2011 according to figures from the Finance & Leasing Association (FLA). A total of 1.91m new and used cars were purchased using motor finance in the UK in 2012, seeing a 14% rise on a total of 1.67m in 2011. In monetary terms, their borrowing for car purchasing equates to around £2.2bn a year spent on new cars.
This infographic compares different generations in the workplace and includes stats on people working from home and how the introduction of technology has changed work environments for the current generation. Father's generation is no longer in the majority.
After a relatively slow start, sales of hybrid vehicles in the United States have really taken off. The very first hybrid models were imported to the United States and went on sale during the late 1990s. Japanese firms led the way and still have a dominant grip on the market.
The Honda Insight was the first hybrid automobile to go on sale, though it was quickly joined and overhauled by the Toyota Prius. American firms struggled to compete with mass-produced Japanese hybrids, and the first home-grown examples only appeared in 2004 in the shape of the Ford Escape.
Econintersect: Over the past three weeks weeks ago we presented parts 1 and 2 of a four-part summary of the PBS Frontline documentary on the Great Financial Crisis, "The Untouchables". This week we present Part 3.
[Video (21 minutes) can be viewed after the Read more >> jump.]
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list has a discussion by GEI contributor Shah Gilani about trading on early looks at news releases ........ and the last article is about secret surveillance court permitting some disclosures about activities.
The tiny IRIS satellite makes close-up observations of the surface of the sun. The detailed images made in ultraviolet light will rival those from the Japanese Hinode solar satellite. The satellite's single instrument, a high-powered ultraviolet telescope, sees only 1 percent of the sun at a time, but can resolve features just 150 miles (240 kilometers) across on the face of the sun. IRIS orbits in a polar, sun-synchronous path that takes the satellite over the equator at the same local time each day.
Econintersect: According to the Financial Times, Face book is the first internet company to reveal the extent to which the U.S. government has ordered information divulged about users. Facebook said that between 9,000 and 10,000 separate orders had been received for the last six months of last year, resulting in information being turned over for 18,000 to 19,000 users.
Econintersect: On 01 July 2013 interest rates for student loans are set to double from 3.4% to 6.8% unless congress takes action to renew expiring legislation. However, Senator Elizabeth Warren and Rep. John Tierney, both Democrats from Massachusetts, have proposed a more aggressive solution: Have the government administer the loans for one year using Federal Reserve Bank funds made available through the Fed's discount window at the same interest rate available to banks. This would be the first flight for helicopter Ben to unload over Main Street should the bill ever get passed. The thinking behind the one year limit on the lending process is that time would then be available to work out a longer range student loan program.
After a noticeable lull in the mid-1990s, the number of journalists being killed around the world has gradually risen since 2001. Many of these deaths can be attributed to numerous post 9/11 conflicts including the invasion of Iraq, where 32 journalists were killed in 2007 alone.
By 2011, the Arab Spring was in full swing, and unrest in Egypt, Tunisia and Libya claimed more lives of reporters. Acclaimed international photographer Tim Hetherington and his colleague, Chris Hondros, were among the high profile fatalities in 2011, killed in Misrata during the Libyan civil war.
Econintersect: Click Read more >> below graphic to see today's list.
The top of today's reading list remarks about the lowest inflation since 1960 ........ and the last article criticizes Peter Schiff's bullish position on gold.
Fed's Balance Sheet is a record $3.367 trillion (up from the last week's $3.357trillion). The complete balance sheet data and graphical breakdown of the cumulative and weekly changes follows the "read more".
At this week's Electronic Entertainment Expo, most of the attention has been focused on the next generation of video gaming. Both Sony and Microsoft revealed more details about their upcoming consoles, while Nintendo tried to rebuild some excitement around the faltering Wii U by announcing a handful of new games to feature the company's beloved trademark characters such as Mario, Luigi and Donkey Kong.
has opened a portal to Amazon's great products. All purchases at Amazon using this link help support Econintersect at the same prices one normally receives.
Residential building permits and construction completions in May 2013 continues to show the industry growth - but the rate of change is more constant.
Our analysis paints a slightly different picture than the headline data - and shows the May data is much less good than the headlines even though it shows this sector expanding.
Apartment building permits comparing May 2012 to May 2013 are slightly weaker this month.
The rate of annual growth for building permits in the last 12 months for this sector has been mostly in a channel between 25% and 40%. This month is in this channel after exceeding the channel last month.
Please note that the media concentrates on housing starts as a single metric for this data series - while Econintersect focuses on the general growth trends of the sector (permits versus completions) which are the best indicator of trends which show the health of this sector. Housing starts would give an indication of construction contribution to GDP.
The May 2013 Consumer Price Index (CPI-U) year-over-year inflation rate rose moderately from 1.1% to 1.4% . Core inflation (CPI less food and energy) was unchanged at 1.7%.
The dynamics were mixed but most movements in prices were moderate - with little one can say drove inflation in May.
The Producer Price Index (released last week) showed finished goods rose to 1.7% year-over-year inflation rate. It is seldom that the CPI is lower than the PPI.
by Michael Nayebi-Oskoui and Kamran Bokhari, Stratfor
Iranians went to the polls Friday to elect outgoing President Mahmoud Ahmadinejad's successor. Candidates reported few serious problems with the process, and the losers sent congratulations to the eventual winner, Hassan Rouhani.
Compared to the political instability that followed Ahmadinejad's 2009 re-election, this process was relatively boring. But however the news media felt about the election, Iran needs domestic stability if it is going to change its foreign policy in a very challenging geopolitical environment.
Read more »
Summary: Today we look at inflation, past and present. It tells much about who to trust for economic analysis, the current state of the US economy, and what we can expect in the future.
Contents
Introduction
The inflation picture
Implications
Why has inflation fallen since 2011?
Others see the rise in real rates
For More Information
(1) Introduction
During 2010 and 2011 the media overflowed with confident and dire warnings from conservatives of inflation — or even hyperinflation — coming quite soon. They were totally wrong, as economists such as Paul Krugman said at the time. Instead inflation has slowed, by some measures hitting record low rates. As the posts at the end show, readers of the FM website saw the correct side of this debate (this has been added as a win on the Past Predictions page).
Today we look at what actually happened, and what this might mean for our future. Read more »
The Empire State Manufacturing Survey (manufacturing in New York State) in June 2013 shows manufacturing is expanding after slightly contracting last month.
This noisy index has moved from 17.1 (May 2012), 2.3 (June), 7.4 (July), -5.9 (August), -10.4 (September), -6.2 (October), -5.2 (November), -8.1 (December), -7.8 (January 2013). 10.0 (February) , 9.2 (March), 3.1 (April), -1.4 (May) - and now 7.8.
Expectation was for a reading of 0.8 to 1.0 versus the 7.8 reported
New orders sub-index of the Empire State Manufacturing Survy again shows this sector is contracting, and unfilled orders continues to say this sector is contracting.
As this index is very noisy, it is hard to understand what these massive moves up or down mean - however this regional manufacturing survey is normally one of the most pessimistic.
Read more »
This piece is originally from Voxeu.org (June 05, '13)
Europe has been postponing the recapitalization of its banking sector. This column argues that it has been doing so for far too long. Without such a recapitalization, the danger is that economic stagnation will continue for a long period, thereby putting Europe on a course towards Japanese-style inertia and the proliferation of zombie banks.
Unlike the US, Europe failed to recapitalize its biggest banks following the financial crisis of 2007-09. Instead, policymakers gambled that economic recovery would lift the profitability of financial institutions, enabling them to increase their capital buffers over time. It is now clear that this strategy has failed. The Eurozone is in a new recession and the depressed share prices of many banks signal that they are in dismal health. Read more »
The Fed’s QE has been great for bubbles. Since the Fed began publishing its open market operations daily starting in 2002, we’ve been able to see the correlations of the direction of the Fed’s System Open Market Account (SOMA) with 3 stock market bubbles, plus the biggest credit and housing bubbles in history, and the creation of fake bubble jobs in 2005-2007.
When the bubbles collapsed in 2007 and 2008, the fake jobs disappeared. Read more »
The University of Michigan Consumer Sentiment preliminary number for June came in at 82.7, down from the 84.5 final reading for May. Today's number was below Briefing.com consensus of 83.0 and Investing.com's more optimistic forecast of no change.
See the chart below [the read more] for a long-term perspective on this widely watched index. I've highlighted recessions and included real GDP to help evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.
The headlines say seasonally adjusted Industrial Production (IP) improved an insignificant 0.1% in May 2013 and up 1.6% year-over-year. Econintersect's analysis using the unadjusted data is that IP was showed a decline of 0.9% month-over-month but the year-over-year was up 1.5% year-over-year.
The year-over-year rate of growth is trending down using a three month rolling average, and is down using any rolling average between 6 to 12 months.
Industrial production is being affected by large movements in utilities, but the data was soft in most categories.
The market was expecting a month-over-month increase of 0.1% (vs the headline growth of 0.1%).
The manufacturing sub-index (which is more representative of economic activity) was up 0.1% month-over-month - and up 1.7% year-over-year - seasonally adjusted.
The Producer Price Index had a significant jump in inflation this month.
The BLS reported that the Producer Price Index (PPI) finished goods prices year-over-year inflation rate rose from 0.6% in April to 1.7% in May 2013 - with the month-over-month growth up 0.5%. The PPI represents inflation pressure (or lack thereof) that migrates into consumer price.
The market had been expecting inflation of 0.1% to 0.2% month-over-month in finished goods prices compared to the 0.5%. It was foods and energy cost rise which is driving inflation.
Introduction
This article begins a project to critique the work by economists concerning regulation that has led to the award of Nobel prizes. The prize in economics in honor of Alfred Nobel is unique. It is not part of the formal Nobel Prize system. It was created by a large Swedish bank and it is the only "science" prize frequently given to those who proved incorrect. The theme of my series is how poorly the work has stood the test of predictive accuracy. Worse, it has led to policies in the private and public sector that are criminogenic and explain our recurrent, intensifying financial crises.
New factory orders (actual, adjusted for inflation and not seasonally adjusted), which is a broader measure than durable goods orders because it includes non-durables, managed to stabilize at a 0.6% year to year gain in April. That followed 5 straight months of year to year declines. As the Fed inflates a stock market bubble, US manufacturing has gone nowhere.
Real Factory Orders, The Stock Market, and The Fed – Click to enlarge
Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) for April 2013 is better than the headline data.
the three month rolling average of business sales with this month's data is continuing to trend less good (positive growth, slower rate of improvement) - even though this was a good positive month in this noisy data series.
The inventory levels are not sending any warning signals but are on the high side.
In May 2013, year-over-year price deflation continues in import prices for 12 of the last 13 months. Export prices are also deflating for the second month in a row:
with imports down 0.6% month-over-month, down 1.9% year-over-year
and exports down 0.5% month-over-month, down 0.9% year-over-year.
The dominate factors in the month-over-month changes were falling oil import prices and falling non-food export prices - however both import and export prices fall was broad based with few exceptions (food export prices grew).
Read more »
Retail sales came in for the second month in a row stronger than anticipated.
both Econintersect's and the headline analysis were similar this month;
the headline numbers show backward revisions were slightly downward - however this was a data reset month going back three years (this reset did little to change the previous comparisons and levels);
motor vehicles were the biggest strength in this months data.
Econintersect Analysis:
sales up 0.5% month-over-month, up 4.3% year-over-year
From Terminal Velocity (3) – “The Pyramid Scheme”[i]:
Reading between the lines, it is clear that the Fed intends to maintain a large balance sheet of assets for some time; even after interest rates have begun to normalize. The Fed will then use a rolling form of Operation Twist, across the Yield Curve and across asset classes, in order to target particular areas that it believes need influencing. The overall size of the balance sheet and its composition will then be managed, to achieve a background of benchmark interest rates for specific capital market sectors and the economy in general. This balance sheet management will involve increases and decreases in overall size, in addition to substitution of different assets and maturities. In this way, the Fed intends to anticipate and prevent bubbles or excessive tightness in liquidity from occurring.
It therefore looks as though the Fed will allow QE to roll off via expiry; and that it is quite prepared to provide specific monetary support to specific credit instruments, even as interest rates are rising in general. The intention and capability are to make the economic recovery sustainable during the rising rate environment.
In Part 1 of this report we looked at non-farm payrolls, which come from the BLS the Current Employment Statistics Survey or CES, a survey of business establishments. The BLS also does a survey of households. The household survey or CPS — Current Population Survey– sometimes tells a different story from the establishment survey. It’s also important in that it breaks out full time employment from total employment so that we can analyze that important metric separately.
In my May article I referred to a very interesting IMF paper written by Il Houng Lee, Murtaza Syed, and Liu Xueyan. The study, “China’s Path to Consumer-Based Growth: Reorienting Investment and Enhancing Efficiency”, attempts among other things to evaluate the efficiency of investment in various provinces within China. I argued in the newsletter that the paper supported my contention that China has over invested beyond its capacity to absorb capital. Read more »
Investors have suffered with low yields, but profited from rising bond values during the 30-year bull market for bonds.
We believe the bond market is moving into a bearish phase, putting the value of existing bond holdings at risk.
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Investors have been conditioned to believe that traditional bonds are safe and can deliver 5% annualized yields over the long term. In the current climate, neither may be true.
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A variety of income-producing options are available for those who want to diversify bond portfolios and seek better yields.
Historical analysis shows that a diversified portfolio would have outperformed traditional bonds during the last bear bond market and in periods of rising interest rates.
When I look at potential trading opportunities, I like to scan for stocks that have high short selling positions in them. These are the traders betting against the stock.
Now, while there's always some validity to why a stock becomes a short selling target, it's not always the case; this is where I see contrarian trading opportunities.
Going against the grain does work, but there have been cases where a contrarian strategy has blown up in my face. The key here, like any other situation, is to make sure you have an exit strategy. So while some traders view heavy short selling positions as a negative, I view extreme short selling as a possible trade opportunity to make money by betting against the herd.
The Hindenburg Omen-a harbinger of stock market crashes-eerily appeared again last week ... and the Dow Jones promptly dropped 205 points. But its appearance brought mostly scorn from the mainstream financial media.
Here are just a few of the headlines from the past week:
"Hindenburg Omen is Just Hot Air"
"Why 'Hindenburg Omen' Is Just a Superstition"
And our personal favorite:
"Hindenburg Omen is idiotic, and if you believe in it, you should lose your right to own stocks-or anything"
Several Wall Street analysts reacted as if even being asked about the Hindenburg Omen offended them.
Economic conditions in the global economy are taking a quick turn in the wrong way!
Consider the Purchasing Managers' Index (PMI) of the U.S. economy tracked by the Institute of Supply Management. Last month it contracted for the first time since November of 2012 and only the second time since July of 2009!
The PMI registered 49.0 in May, compared to 50.7 in April. (Source: Institute of Supply Management, June 3, 2013.) Any reading below 50 suggests the manufacturing sector is experiencing a contraction.
Insider buying dropped sharply with insiders purchasing $22.81 million of their stock last week compared to $152.67 million in the week prior. Selling declined modestly with insiders selling $1.27 billion of stock last week compared to $1.31 billion in the week prior.
Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week went up to 55.6. In other words, insiders sold more than 55 times as much stock as they purchased. The Sell/Buy ratio this week compares unfavorably with the prior week, when the ratio stood at 8.6.
Dollar/Yen chart update. The USDJPY currency pair is threatening a move to the 92.50 area previous support level as the corrective move lower has gained momentum. The dollar has lost almost 10% since May 22, when it hit a peak around 103.74 yen.
The latest COT data shows large specs at the Chicago Mercantile Exchange had cut their long USD wagers by around 30% on the weekly basis. Traders likewise cut the net short JPY bet by 13% on the prior week to record a $9.5 billion position as of last Tuesday.
Price had found resistance this week when testing the SenkouspanA level on the 10/6/13. This is an element of the Ichimoku Kinko Hyo indicator that is plotted alongside Senkou span B with the area between filled with shaded indicator lines (the cloud).
After weeks of speculation based upon speeches, newspaper columns, and pundit pontification we will finally have some hard information. Maybe. The two-day FOMC meeting will include not only the regular announcement of the decision, but also revised economic forecasts and a press conference by Chairman Bernanke. Everyone will be watching for any hints of a change in policy.
Will the Fed reduce the pace of the current QE purchasing?
If not, will it provide more information about the timing of a possible change?
Below is a summary of the activity at Trefis during the past week that Trefis thought Econintersect readers would find interesting.
Trefis is a financial community structured around trends, forecasts and insights related to some of the most popular stocks in the US. It provides the unique feature of allowing the user to model future valuation based upon projected changes in components of each business. It also provides communication capabilities among members, including consensus of member analysis compared to Trefis staff analysis and blogging opportunities for members.
U.S. stocks fell on Friday as mixed data prompted investors to avoid equities after a week of volatile sessions marked by uncertainty over the fate of Federal Reserve stimulus measures. At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.70%, the S&P 500 index ended down 0.59% as well, while the Nasdaq Composite index fell 0.63%.
It seems to me that everything ever written about trading with price charts is always about the price action on the chart. A candlestick, line, bar, tick, point and figure, volume, or any other type of chart obviously represents the price action. All the information people write and read about has to do with the price action. I don't think I have ever seen anything written about the white space on the chart, all the area on a chart where there is no price action. In fact, traders and trading platforms refer to that space as the "background". It's funny that is called the background because to me, that is the most important area on the chart.
What is precious metals leasing, and why is it done...?
LEASING is an integral part of the precious metals market, writes Miguel Perez-Santalla at BullionVault.
Why is it necessary? For a diverse number of reasons, the first is the need for industry to borrow instead of buying outright the metal. This enables them to avoid owning the metal at a fixed price if they have not yet contracted to sell their product.
Other companies want to borrow rather than buying gold or silver, to keep their cash consumption down. Leasing gives their business greater flexibility in money management. Still others choose to borrow to free up cash. Finally, there are those in a bridge lease, commonly used in the oil refining and pharmaceutical fields.
Gary missed the market close report because of a Comcast internet service outage at his office. The market close report is presented with the help of our syndication partner Investing.com. U.S. stocks rose on Tuesday after the Federal Reserve kicked off a two-day monetary policy meeting, with many investors betting the U.S. central bank will keep stimulus measures in play in wake of soft inflation data.
At the close of U.S. trading, the Dow Jones Industrial Average finished up 0.91%, the S&P 500 index ended up 0.78%, while the Nasdaq Composite index rose 0.87%.
The final, speculative phase of the cyclical bull market in stocks that began in early 2009 continues to unfold in typical fashion. The uptrend has “gone parabolic,” accelerating into an unsustainable advance that will almost certainly be followed by a correction of equally violent character. The development of every bubble requires that the conventional mindset [...]
Last week, our cycle analysis identified the potential development of the latest short-term cycle low (STCL) in the stock market. On Friday, a cycle low signal was generated, confirming that a new short-term cycle is in progress. With respect to technical analysis, the uptrend from November remains extremely overextended and a break below key support [...]
This morning, the S&P 500 Index e-mini futures (ES-M3) are trading higher by 2.75 points to 1636.50 per contract. Many traders and investors seem to be on pause mode ahead of the highly anticipated FOMC announcement tomorrow afternoon.
Dollar/Yen chart update. The USDJPY currency pair is threatening a move to the 92.50 area previous support level as the corrective move lower has gained momentum. The dollar has lost almost 10% since May 22, when it hit a peak around 103.74 yen.
The latest COT data shows large specs at the Chicago Mercantile Exchange had cut their long USD wagers by around 30% on the weekly basis. Traders likewise cut the net short JPY bet by 13% on the prior week to record a $9.5 billion position as of last Tuesday.
Price had found resistance this week when testing the SenkouspanA level on the 10/6/13. This is an element of the Ichimoku Kinko Hyo indicator that is plotted alongside Senkou span B with the area between filled with shaded indicator lines (the cloud).
When I talk to many teenagers and grade schoolers, they seem to have no problem comprehending the fact that if you just create a lot of money, it’ll be like Monopoly money and it won’t have value. Governments do that for all kinds of reasons, especially to enhance political power to fight wars we shouldn’t be fighting or to pass welfare programs that aren’t deserved.
I should go further and say that the powerful attraction of the habits of thought engendered by “equilibrium economics” has become a major obstacle to the development of economics as science – meaning by the term “science” a body of theorems based on assumptions that are empirically derived (from observations) and which embody hypotheses that are capable of verification both in regard to the assumptions and the predictions.
This week Chinese President Xi Jinping will make his first official visit to Latin America since taking office. Xi will visit Trinidad and Tobego, Costa Rica, and Mexico. In a scramble the United States has sent Vice President Joseph Biden to the region on a goodwill mission at the same time.
The two leaders will spar over the airwaves, web, and blogosphere offering different visions of cooperation. The US should use this opportunity to strengthen ties with the region and take advantage of the fact that Latin America’s love affair with China appears to be cooling.
When I first went to work for the Nixon administration, I told my mom,
“Mom, you can’t believe it. I just wrote a speech for Nixon and he used every single word. Well, he did make two little changes. Everywhere I had ‘is’ he put ‘is not,’ and everywhere I had ‘is not’ he put ‘is,’ but other than that, Mom, it’s exactly my speech.”
Nixon did all sorts of things wrong: the import surcharge, the wage and price controls, the huge increase in social spending, the doubling of the capital gains tax rate. But to my way of thinking, Nixon’s biggest problem was going off gold.
A NOTE: Does anybody have a clear vision of the desirable financial system of the future? This article has one. It gives simple answers to 12 simple questions panellists at a recent IMF conference failed to answer.
I was honoured when the IMF asked me to moderate the Financial Regulation panel at this year’s Rethinking Macro II conference. And while naturally, I delivered one of the more enlightening and thought-provoking policy discussions of the conference, I did fail in my duties as moderator to make sure my panellists covered all the excellent questions our sponsors submitted to us. Of course, this was to be expected, as panellists at these types of events almost never address the topics requested of them (I certainly never do), but rather, like Presidential candidates, answer the questions they want to answer. However, being the conscientious person I am, who accepts responsibility for my mismanagement (unlike some bank CEOs we know), I will now step up and answer those questions myself.
UK prime minister David Cameron held a speech this week that according to the Guardian that was "months in preparation". Here is the main part:
He said the need for domestic reform was being driven by the pace of global competition. "Those who defend the case for an ever bigger state and ever bigger spending, or those who say we don't need to radically reform welfare or education, they're fundamentally saying we can ignore these leaner, fitter countries who are breathing down our neck."
Click on image for larger view of entire Adam Smith grave marker. Location of Adam Smith grave: Canongate Churchyard, Royal Mile, Edinburgh, Scotland.
Jon Stimpson is the owner and president of National Scale Technology, based in Huntsville, Alabama.
Experience has made Jon very philosophical about life. Here is one of his guiding principles: Life is filled with opportunity and adversity. Every one experiences both. The ones who succeed are the ones who best handle the adversities. Some even turn them into opportunities ...
Jon was born in Hartford, Connecticut in 1951. After university, he worked for an insurance company, because there were no jobs available in his chosen field: engineering. Several years later, one "real" job became available and his career finally began.
Recently, Michael Pettis has written a book on Chinese rebalancing and published an article at Foreign Policy on the euro zone crisis. While I have read through the first chapters of his book and will publish a critique at a later stage, I want to take issue with his article. While his Saldenmechanik (balance of payments mechanics) is the right approach, his neglect of endogenous money leads to the wrong causalities and therefore the wrong conclusions.
We have further proof about how thin-skinned Treasury Secretary Geithner was, but we have it in the form of a weird May 29, 2013 story by Ben Protess in the New York Times. The story is in part about me, though it doesn’t mention me, because it is a story that notes that Treasury was able to convince NPR to remove from its December 13, 2013 broadcast, a statement I made criticizing Geithner – an action that NPR took and noted, but without naming me as the source of the criticism. The weird part of the NYT story is that while it confirms the accuracy of the statement I made about Geithner it asserts that the statement by the unidentified “academic” criticizing Geithner was false.
You might not expect me to endorse an article titled "The 7 Reasons Why People Hate QE." I won't disappoint that expectation, but I will say that I do endorse, and appreciate, the civil spirit in which the author of the piece, Eric Parnell, offers his criticism. We here at macroblog, like our colleagues in the Federal Reserve System more generally, pride ourselves on striving for unfailing civility, and it is a pleasure to engage skeptics who share (and exhibit) the same disposition. What the world needs now is ...well, maybe I'm getting carried away.
Let me instead appropriate some of Mr. Parnell's language. It is worthwhile to explore some of the reasons that people do not like QE from someone who does not share this opposing sentiment. In particular, let me focus on the first of seven reasons offered in the Parnell post:
This week 11 central banks took policy decisions with Indonesia becoming the third emerging market central bank to raise rates this year while three banks cut rates (Ukraine, Belarus and Mozambique) and seven kept rates steady (
When discussing spending trends of the last few decades, Great Britain has often being described as a 'country of borrowers' and certainly the way in which Brits finance their car purchases would bare testament to that.
Iranians went to the polls Friday to elect outgoing President Mahmoud Ahmadinejad's successor. Candidates reported few serious problems with the process, and the losers sent congratulations to the eventual winner, Hassan Rouhani.
Compared to the political instability that followed Ahmadinejad's 2009 re-election, this process was relatively boring. But however the news media felt about the election, Iran needs domestic stability if it is going to change its foreign policy in a 
During 2010 and 2011 the media overflowed with confident and dire warnings from conservatives of inflation — or even hyperinflation — coming quite soon. They were totally wrong, as economists such as Paul Krugman said at the time. Instead inflation has slowed, by some measures hitting record low rates. As the posts at the end show, readers of the FM website saw the correct side of this debate (this has been added as a win on the 
The Empire State Manufacturing Survey (manufacturing in New York State) in June 2013 shows manufacturing is expanding after slightly contracting last month.
Europe has been postponing the recapitalization of its banking sector. This column argues that it has been doing so for far too long. Without such a recapitalization, the danger is that economic stagnation will continue for a long period, thereby putting Europe on a course towards Japanese-style inertia and the proliferation of zombie banks.
Unlike the US, Europe failed to recapitalize its biggest banks following the financial crisis of 2007-09. Instead, policymakers gambled that economic recovery would lift the profitability of financial institutions, enabling them to increase their capital buffers over time. It is now clear that this strategy has failed. The Eurozone is in a new recession and the depressed share prices of many banks signal that they are in dismal health. 
In May 2013, year-over-year price deflation continues in import prices for 12 of the last 13 months. Export prices are also deflating for the second month in a row:
Reading between the lines, it is clear that the Fed intends to maintain a large balance sheet of assets for some time; even after interest rates have begun to normalize. The Fed will then use a rolling form of Operation Twist, across the Yield Curve and across asset classes, in order to target particular areas that it believes need influencing. The overall size of the balance sheet and its composition will then be managed, to achieve a background of benchmark interest rates for specific capital market sectors and the economy in general. This balance sheet management will involve increases and decreases in overall size, in addition to substitution of different assets and maturities. In this way, the Fed intends to anticipate and prevent bubbles or excessive tightness in liquidity from occurring.
It therefore looks as though the Fed will allow QE to roll off via expiry; and that it is quite prepared to provide specific monetary support to specific credit instruments, even as interest rates are rising in general. The intention and capability are to make the economic recovery sustainable during the rising rate environment.
Houng Lee, Murtaza Syed, and Liu Xueyan. The study, “China’s Path to Consumer-Based Growth: Reorienting Investment and Enhancing Efficiency”, attempts among other things to evaluate the efficiency of investment in various provinces within China. I argued in the newsletter that the paper supported my contention that China has over invested beyond its capacity to absorb capital. 
When I look at potential trading opportunities, I like to scan for stocks that have high 
Economic conditions in the 
Dollar/Yen chart update. The 
After weeks of speculation based upon speeches, newspaper columns, and pundit pontification we will finally have some hard information. Maybe. The two-day FOMC meeting will include not only the regular announcement of the decision, but also revised economic forecasts and a press conference by Chairman Bernanke. Everyone will be watching for any hints of a change in policy. 
Why is it necessary? For a diverse number of reasons, the first is the need for industry to borrow instead of buying outright the metal. This enables them to avoid owning the metal at a fixed price if they have not yet contracted to sell their product.
I was honoured when the IMF asked me to moderate the Financial Regulation panel at this year’s Rethinking Macro II conference. And while naturally, I delivered one of the more enlightening and thought-provoking policy discussions of the conference, I did fail in my duties as moderator to make sure my panellists covered all the excellent questions our sponsors submitted to us. Of course, this was to be expected, as panellists at these types of events almost never address the topics requested of them (I certainly never do), but rather, like Presidential candidates, answer the questions they want to answer. However, being the conscientious person I am, who accepts responsibility for my mismanagement (unlike some bank CEOs we know), I will now step up and answer those questions myself.
Jon Stimpson is the owner and president of National Scale Technology, based in Huntsville, Alabama.
We have further proof about how thin-skinned Treasury Secretary Geithner was, but we have it in the form of a weird May 29, 2013 
You might not expect me to endorse an article titled "
