ECB President interviewed

                    Find below the transcript of a recent and long interview between ECB President Mario Draghi and the Financial Times reporters, Lionel Barber and Ralph Atkins: _______________________________________________________ Financial Times: We are now more than four years into the financial crisis. What lessons would you draw so


Official MacroBusiness Glossary

Boganomics The strange nexus between anti-comptitive corporations and gullible but patriotic battlers. Bullhawk A half housing bull, half interest rate hawk. Examples include Christopher Joye, Adam Carr and Paul Bloxham Disleveraging The idea that falling credit growth can be sustained forever without ever tipping into outright debt-deflation. Futureboom! The concept of an ever expanding future


The MB Team discuss 2011

Before taking a well deserved break after the end of a remarkable year, the team at MacroBusiness sat down recently to share their views on the events of 2011 and the risk and opportunities that lie ahead. The discussion was framed around 5 questions with the first 3 answered in today’s post, with the remainder


China’s capital misallocation

Exclusively from Michael Pettis newsletter: For years I have been arguing that the Achilles heel of the Chinese growth model is the unsustainable rise in debt that comes as a necessary consequence of capital misallocation fueled by bank lending. Capital misallocation, I argued, was the nearly inevitable consequence of high investment growth over many years


The Italian economy is crashing

From the folk at 4cast comes this rather unsettling look at the trends within the Italian economy.   We’ve been exceptionally negative on Italy for some time now – see for instance ‘Italy GDP heading negative?’ from the 15th of July where we forecast a sharp downshift pulling the economy into recession over the end


Pettis: China won’t save Europe

Exclusively from Michael Pettis’ newsletter: There is little chance that any BRIC rescue is likely to happen, and if it does, it would be bad news for Europe, not good. …My guess is that nothing will happen except a few token gestures aimed mostly at generating positive headlines and boosting confidence. Why? Because if Germany,


Satyajit Das: Bail the banks, not the Greeks

Guest post by Satyajit Das The proposal to extend the maturity of Greek bonds emanating from the Élysée Palace reflects French strengths first identified by Napoleon III: “We do not make reforms in France; we make revolution.” Structured to meet a German requirement that private creditors contribute to the Greek bailout, the proposal falls short


Satyajit Das: CDS and Greece

Following is a guest post from Satyajit Das. The European Union’s linguistic gymnastics, redefining default as “restructuring” or “re-profiling” and the structure of any final deal on Greek debt has “real” implications for the arcane workings of the CDS market. In the film Casablanca, Rick (Humphrey Bogart) tells Captain Renault (Claude Rains) that he came to the city


Saul Eslake on commodity prices

Saul Eslake, Director of Productivity Growth Program at the Grattan Institute, yesterday presented a paper at the International Conference of Commercial Bank Economists in Amsterdam, the Netherlands, on some of the longer term demand and supply factors shaping the behaviour of commodity prices, over the past decade and over the next 5-15 years. The full paper is below and


Boganomics upsets The Australian

There’s nothing quite like the pleasure of being misquoted in the national broadsheet. That’s the experience of the Boganomics team today with The Australian selectively quoting from Friday’s runaway success story, CateGate, which was picked up by the Fairfax press. The Australian’s Cut and Paste section ran a series of excerpts today under the headline: Friends,


We’ve noticed

Houses and Holes posted 6.25 am. Karen Maley published 8.17 am.


Saul reveals all

Following is a guest post from Saul Eslake on last week’s Budget. Also find below a considered set of charts that offer a very clear view of last week’s Budget revenue assumptions. If you want to understand the punt we’re taking on China, not to mention growth in capital gains, this document is a must


CDS: More liquidity, more risk

By Satyajit Das In an opinion piece entitled “Hedging bans risk pushing up debt costs” published on 9 March 2011 in the Financial Times, Conrad Voldstad, the chief executive of the International Swaps and Derivatives Association (“ISDA”) and formerly a senior derivatives banker with JP Morgan and Merrill Lynch, made the case against the EU


Guest post: Derivatives regulation Part II

By Satyajit Das A question of values … Derivative contracts are valued on a mark-to-market (“MtM”) basis. This requires valuation of the contracts based on the current market price. OTC derivatives trade privately. Market prices for specific transactions are not directly available. This means current valuations rely on pricing models. In current accounting argot, most derivatives are Level 2


Hats off to McKibbin

MacroBusiness would like to doff its hat to Warwick McKibbin. The current and soon to be former RBA member has embraced the spirit of the Trickster and thrown a big spanner into the works in Canberra’s bull factory. We don’t agree with everything Dr McKibbin has to say, and on some things he doesn’t say