Unconventional Economist

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Links 20 September 2013

Global Macro / Markets: Policy makers have not tackled the causes of the crisis – Financial Times Satyajit Das: The Suzerainty of Central Bankers – Naked Capitalism Banking Without Risk Is Impossible – Bloomberg Druckenmiller: QE is biggest redistribution of wealth ever – optionmonster.com North America: 6 things you need to know about Janet Yellen

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Coalition axes Climate Department

By Leith van Onselen It hasn’t taken long for the new Coalition Government to fulfill its election promise to disband the Climate Commission and sack its commissioners: The Coalition is delivering on an election promise to dispense with the commission, saving taxpayers $580,000 this financial year and $1.6 million in following years… “The Coalition believes

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The US economy is addicted to stimulus

Cross-posted from Peter Schiff at Euro Pacific Capital The Fed’s failure today to announce some sort of tapering of its QE program, despite the consensus of an overwhelming percentage of economists who expected action, once again reveals the degree to which mainstream analysts have overestimated the strength of our current economy. The Fed understands, as

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Manufacturing recession rolls on

By Leith van Onselen The apparent recession in the Manufacturing sector rolls on, with the release of the latest Westpac–ACCI Survey of Industrial Trends, which is the longest running business survey in Australia (dating back to 1966), revealing that economic conditions manufacturing deteriorated in the three months to September, with the Composite Index falling by

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Is the Fed taper debate off the agenda for 2013?

From Elliott Clarke at Westpac comes the below neat summation of last night’s decision by the Federal Reserve not to wind-back (“taper”) its $US85 billion a month of bond purchases: Ahead of the September FOMC meeting, we maintained our position that the macroeconomic conditions apparent in the US economy did not warrant tapering. Specifically, despite

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Productivity: the only way to raise living standards

By Leith van Onselen In early 2003, I joined the Australian Treasury where I was immediately introduced to the Department’s “Three P’s” framework, which effectively argued that Australia needed to: 1) boost productivity; 2) raise workforce participation; and 3) increase the population via skilled migration, if the nation was to continue to enjoy rising living

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GM puts heat on Coalition over car subsidies

By Leith van Onselen General Motors Holden (GMH) has delivered a simple message to the new Coalition Government: commit to subsidising the Australian car industry within two months or we will follow Ford in ceasing production in Australia. From the AFR: Holden had promised it would keep its Adelaide manufacturing operations until 2022 under a $275 million

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Fed delays QE taper citing economic risks

By Leith van Onselen Well that was an anti-climax. After months of speculation that the Federal Reserve would begin “tapering” (winding down) its $US85 billion monthly bond purchase program (known as “quantitative easing” or QE) at its September Federal Open Market Committee (FOMC) meeting, held overnight, it decided against acting. In choosing not to taper

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Australia must look to Texas on housing policy

By Leith van Onselen The New Zealand Initiative last week released a brilliant new report entitled Different Places, Different Means: Why Some Countries Build More Than Others, which provides a comprehensive assessment of housing supply systems in four markets: Britain; Switzerland; Germany; and Texas. As argued by me many times before, the report describes Britain’s

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Does who chairs the Fed really matter?

Cross-posted from The Conversation The surprising news that Larry Summers has withdrawn his bid to become the next chair of the US Federal Reserve has opened up the big question of who should lead America’s central bank. The new front runner is Janet Yellen, the Fed’s current vice chairwoman. Most commentators and economists seem to

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China plans another back-door bank bailout

Cross-posted from Kate McKenzie at FT Alphaville Chinese authorities are continuing their efforts to finish mopping up the bad debts left from the big bank bailout of 1999-2000, in what some believe is an attempt to address — or, head off — another financial crisis. So far we’ve seen IPOs, private capital raisings, quietly retiring

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Links 19 September 2013

Global Macro / Markets: Greenberg: This Market’s the Greater Fool Theory – The Street John Kay – A fixation on liquidity is not healthy for financial markets – johnkay.com Beating the Market Has Become Nearly Impossible – Institutional Investor Market fears risky collateral to cause new crisis – thetradenews.com North America: Federal Reserve issues FOMC

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WA loses its AAA credit rating

By Leith van Onselen From The Australian comes news this afternoon that Western Australia has lost its prized AAA credit rating: Ratings agency Standard & Poor’s said today it had lowered its rating for WA to `AA+’ from `AAA’, citing the government’s “limited political will” to cut spending. It is the first time since 2003

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Solomon Lew calls for huge rate cut to pad retail

By Leith van Onselen Following his diatribe yesterday, wrongly blaming the former Labor Government for the retail sector’s woes, retail mogul Solomon Lew has dished-up more self-interest, calling on the Reserve Bank of Australia to slash interest rates by another 0.5% in the lead-up to Christmas. From the Australian: RETAIL magnate Solomon Lew wants an

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Barclays cuts China growth forecast

By Leith van Onselen Barclays has just released research lowering its GDP growth forecast for China to 7.1% in 2014, from 7.4% previously. While the near term growth outlook has improved, Barclays sees growth slowing into 2014 on the back of “industrial sector overcapacity, financial and fiscal risks (high corporate and local government debt, intertwined

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Janet Yellen poised to lead the Fed?

By Leith van Onselen From Bloomberg comes a report that Professor Janet Yellen, who has been president and chief executive officer of the San Francisco Fed since June 2004, is poised to take over the chair of the Federal Reserve once Ben Bernanke’s term expires in January 2014: Janet Yellen is overwhelmingly seen as likely

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Canadian house prices set record as debt grows

By Leith van Onselen The Canadian housing market continues to reach for the stars. After house prices fell for six consecutive months to February 2013, following the introduction of a range of macroprudential controls on high loan-to-value ratio mortgage lending, values have since for six straight months, pushing Canadian housing values to their highest level

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Infrastructure PM must face Chinese gorilla

Cross-posted from The Conversation Tony Abbott wants to be known as the infrastructure prime minister. He could be remembered for building roads and scrapping high-speed rail. But the role of Chinese finance and technical expertise in infrastructure provision is the elephant in the room. The Abbott government must manage an increasingly political debate about “freeing

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Good share value is hard to find

From Damien Klassen at Wilson HTM comes the latest Valuation Dashboard report, which shows that the hunt for value in the Australian share market is getting more difficult: Like us at MB, Klassen also doesn’t believe the market’s consensus view that the RBA will hike interest rates into the mining investment cliff: And Klassen also