The New York Times – Floyd Norris: Misreading the Lessons From Financial Crises With the Fed ready to step in at every tipping point, the need to rethink regulation was overlooked. The policies of Paul Volcker contributed to two recessions but he later become a legend. The world has experienced one financial crisis after another… Continue reading Learning From Past Crises
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Bloomberg – Fed ‘Credibility Gap’ Makes Any Pre-June Move Harder: Economists (no link) Matus, a former NY Fed analyst, said part of disconnect in expectations is result of Fed’s “credibility gap” “Every time we see the Fed at a point where it seems we should know where they’re going, they’ve balked”: Matus “Best example” is… Continue reading The Fed’s Credibility Gap
Brussels Blog (FT Blog) – Leaked EU summit conclusions: Draghi left hanging? But according to a leaked draft of the communiqué for next week’s summit, Draghi may have to deliver his quo without a eurozone quid. The text (which we’ve posted here) makes clear that leaders have no intention of delivering a new blueprint any… Continue reading The Eurozone Two-Step
The Financial Times – The double whammy in dollar’s growth story After five years of risk-on, risk-off trading, it is natural to expect a stronger dollar on scary days, as investors seek safety. But, instead, the dollar dropped on both Tuesday and Wednesday — with the troubles in Greece leading to the euro’s best day… Continue reading Dollar Correlation Shifting
FT Alphaville – The Fed and oil: 2014 is not 2011 in reverse Throughout 2011, the midpoint of the FOMC’s long-run estimates for the unemployment rate (a proxy for the Fed’s estimate of full employment) was about 5.5 per cent. Yet the unemployment rate that September, the same month in which year-over-year inflation peaked, was… Continue reading Is Crude’s Fall Testing The Fed’s Dual Mandate?
The New York Times – Neil Irwin: Employers Will Have to Raise Wages. They Just Don’t Know It Yet. Here’s a theory to try to make sense of the disconnect: During the recession, employers got spoiled. When unemployment was near 10 percent, talented workers were lined up outside their door. The workers they did have… Continue reading Raising Wages
The Wall Street Journal – Oil’s Fall Puts a Chill on U.S. Drilling U.S. energy companies are starting to cut drilling, lay off workers and slash spending in the face of an accelerating decline in oil prices, which fell to a fresh five-year low Wednesday. The number of rigs drilling for oil in North Dakota… Continue reading More On Shale Oil’s Breakeven Rate
<Click on chart for larger image> The Wall Street Journal – China Says Slower Growth Part of ‘New Normal’ China’s top leaders said the country’s economy faces significant downward pressure and that it needs to adjust to the “new normal” of slower but higher-quality growth. Leaders in remarks released at the conclusion of a three-day… Continue reading China’s New Normal
Bloomberg.com – Yuan Has Real Shot at IMF Blessing on Reserve Status For the first time, China has a real shot at getting the International Monetary Fund to endorse the yuan as a global reserve currency alongside the dollar and euro. In late 2015, the IMF will conduct its next twice-a-decade review of the basket… Continue reading The Yuan As An Official Reserve Currency
The Financial Times – Strong dollar hits US corporate profits A strengthening dollar is proving a costly headache to companies across the US and Europe. The rising greenback shaved $8bn off North American and European third-quarter sales, with more than 275 companies warning of negative foreign exchange impacts in the period, data from currency consultancy… Continue reading The Effect Of A Rising Dollar On U.S. Profits
The Financial Times – Watch out for ‘ouch’ potential of global volatility Greece’s stock market crashes. Shares plunge in Shanghai. Tumbling oil prices hit junk bond markets and emerging market currencies. The trend seems clear: this year is ending in a burst of volatility. In fact, 2014 will go down in financial history as a… Continue reading Suppressing Volatility