Links 19 April 2013

ScreenHunter_01 Apr. 02 06.19

Global Macro/Markets:

  • Reinhart/Rogoff and Growth in a Time Before Debt – Next New Deal
  • How a student took on eminent economists on debt issue – and won – Reuters
  • What’s causing sharp declines in crude oil prices? Sober Look
  • Fed and Bank of Japan caused gold crash – The Telegraph
  • Trading houses go cool on commodity prices – Financial Times
  • A map of the world’s growth forecasts in 2013 – The Economist

North America:

  • SEC to Move Past Financial Crisis Cases Under New Chairman White – Bloomberg
  • Weekly Initial Unemployment Claims increase to 352,000 – Calculated Risk
  • Fed Officials Say Big Banks May Need Higher Capital Levels – Wall Street Journal
  • A Senate in the Gun Lobbys Grip – New York Times
  • Canadians Now More Affluent Than Americans – Wall Street Journal. Yeah because Canada’s housing is twice as expensive!
  • Low- and middle-income households hit hardest by Great Recession – Calculated Risk





  • Wake up to the Twitter effect on markets – Financial Times
  • CAUGHT ON CAMERA: Fertilizer Plant Explosion Near Waco, Texas – YouTube
  • The Great Challenge of Macroeconomics – Abnormal Returns


    • This is really interesting stuff – the wealthy middle class economists want to label it as a silly speculation, but perhaps it has more to do with people intuitively understanding money more than they think.

      The worlds currency systems are being debased essentially to protect banks balance sheets. Whilst the spin is about jobs, all the benefit is going to a few in the finance industry.

      Currencies are looking more ‘gold backed’ than the central banks realise – tinker with it too much and people move back to the worlds oldest currency.

      I’m wondering if paradoxically this a deflation hint – central banks are getting to their political limits on currencies.

      • It is fascinating.

        Price falling as the ‘insiders’ sell but that does not discourage the outsiders.

        How often does that happen?

        Sounds like scepticism towards the management of the world economy and fiat currencies is seeping into the bedrock.

        What does a central banker have to do to get the message through that now is the time to lever up on fiat currency debt and speculate on asset values!

        The real deflation we are seeing is in Central Banker credibility.

        • My in-laws (who are vietnamese) have told us that in Vietnam, where people traditionally used to keep their savings in US$ (stashed in mattresses), gold and property they are now shifting to other metals, precious stones and even antiques

          The world is certainly interesting

      • +1

        the wealthy middle class economists want to label it as a silly speculation

        IMO, the same the wealthy middle class economists like the Kouk and Bloxo are probably surpticiously queuing up at Perth Mint offices when nobody is looking.

        Remember when Lehmen went belly up, PIMCO’s chief economist Mhd El-Erian [email protected] his pants and called his wife to withdraw as much cash as possible from the nearest ATM.

    • reusachtigeMEMBER

      Damn. I was hoping they would help break things. They still will though, but just not as much.

      • I still don’t get it reus…the answer is increased debt forever? In fact you have to have debt increasing at an exponential rate forever otherwise you are going to have what referred to as austerity. That is one giant misnomer for learning to live within one’s means and within the capacity of the natural world to deliver.

  1. Reinhart/Rogoff and Growth in a Time Before Debt – Next New Deal

    This post is a fantastic illustration of just what is wrong with modern economic thinking.
    The time frame is three years!!!!

    Hells bells did anyone really argue that increasing spending and debt would NOT have a positive effect on GDP growth in the short term? Short term you can ignore any limitations of problems created by the external account. Short term you can control infaltion by increasing your CAD importing cheaper goods.Short term, in a world gone mad with QE, you can ‘get away’ with more debt.

    Are these policies WISE?
    Are these policies sustainable in the long term? How will we and our children be set in two decades as a result of these policies?
    Are these policies now sustainable in a world where a five decade economic and social trend is fast coming to an end?

    Modern economic theory is totally myopic.

  2. The gold crash looks ominously deflationary. Kind of like investors are throwing in the towel and conceding that QE isn’t going to revive growth.

    China and India must be sitting on some huge losses on their gold reserves right now.

    • The thing the western world doesn’t get is that the Chinese look decades ahead. I don’t think they are too worried about the current blip in the Gold price.

      This is in contrast to the western world where our strategic economic thinking has been reduced to 24 hours. Really way out long term is like 1 to 3 years.

    • Agree with flawse above, short term price irrelevant to these countries, they are not trading the metal for profit. Nonetheless the last major Gold purchase from India was in 2008 as far as I’m aware (200 tonnes of the IMF sale). The last increase to China’s official reserves was in 2009 (although almost guaranteed they are continually adding, they are world’s largest Gold miner but also net importers of Gold). I doubt either has “huge losses” on their Gold reserves. But people need to stop thinking about Gold in $. These are strategic reserves, not speculative punts on price appreciation.

      • Gold has been more volatile, that’s for sure. Which isn’t really what you want from a reserve asset.

  3. Sri Lanka’s central bank governor said falling prices are an opportunity for nations to raise gold reserves and that the island nation will consider buying more.

    The Bank of Korea said the plunge isn’t a “big concern” because holding the metal is part of a long-term strategy for diversifying currency reserves. Reserve Bank of Australia’s assistant governor, Guy Debelle, said at a business lunch in Canberra on April 16 that gold has no “intrinsic value.”

    Hopefully the world doesn’t judge us by the naivety of our central bankers.