Global Macro


Four dark clouds

The Dow went up a bit last night. Hooray! But if you think this correction is over, think again. This is the correction we have to have. Think about it. There are four big economies in the world: Japan, EU, China and the US. A dark cloud hangs over each. Japan is far worse than


The debt that killed the UK economy

Back in April, Dr Oliver Marc Hartwich from the Centre for Independent Studies wrote an article in Fairfax on the worrying parallels between the UK and Australian economies and housing markets. The current mood in Australia triggers eerie memories for me. I feel as if I have experienced this scenario before – not in Australia


Goosing the stockmarket

Regular readers will know that I am confident that QE3 is on the way sometime after markets get their swoon on. There are a number of reasons why I’ve formed that judgement. First, it’s because, in my view, the US economy is driven by markets, not the other way around. As Alan Greenspan argued in


Global energy amusement

On the day that OPEC trashed Ben Bernanke’s greatest hope of a bounce in the US economy, we offer the following global energy roundup from BP, chock full of interesting detail on production and consumption of oil, gas and coal. Makes for hours of scary reading! (h/t Zero Hedge)


No milky wilkies

Below find the full text of Chairman Bernanke’s speech this morning. No comfort here for markets. The upshot? No milky wilkies until you waaaaiiil… Chairman Ben S. Bernanke At the International Monetary Conference, Atlanta, Georgia June 7, 2011 The U.S. Economic Outlook I would like to thank the organizers for inviting me to participate once


Ups and Dow

As the US market starts to look rocky it is worth remembering that the rise over the last couple of years has been strong. The report by Prudential to which I referred on the weekend had some interesting insights into share valuations in America. It is not being driven by sentiment, it is being driven


Boozing with central banks

In mid to late 2007, I had a couple of beers with a very impressive individual who had just returned from a rather important US Federal Reserve conference. Apparently, the conference had been abuzz with discussion and dark rumour of an ensuing economic accident. My drinking partner told me that there was a distinct possibility


Avant garde economics

My esteemed co-blogger Deep T made the comment that too little attention is being paid on MacroBusiness to creative solutions to the problems that are documented in great detail on MacroBusiness. I would go a step further. Economic analysis generally suffers from a deep flaw. Because it is a quasi-science (although in no respect truly


Commodities crash brewing

So, the game of QE3 is afoot. Let’s begin with an excerpt from John Hilsenrath of the WSJ: Federal Reserve officials are in no hurry to respond to recent indications U.S. economic growth has hit another soft patch, despite chatter in financial markets that the Fed might start a new program of U.S. Treasury-bond purchases


QE3 chicken

Breaking news! Last night, Federal Reserve Chairman, Ben Bernanke, announced he is pregnant.  A glowing Bernanke told a packed press conference that the child was neither a girl nor a boy. It was, in fact, a third round of quantitative easing. The child is expected to be born before the year is out. Don’t say


Greece’s inevitable default

While browsing Bloomberg the other night I noticed two stories about Europe in the top stories list, one under the other. Greece’s Cabinet Approves Asset Sales German Construction, Exports Drove First Quarter When I saw them together I laughed out loud and wondered to myself how many people would see those two stories and understand


Risa and rise of the yuan

There is a changing of the guard going on in currency leadership that not many people are watching nor commenting on. It is similar in nature to what is happening with the leadership in global growth and the drivers of the economy and it is why Anthony Bolton of Fidelity moved from the UK to


Time to buy?

I really don’t think so. There are some fair reasons to think we might bounce in the short term. From the FT: Equities and commodities continued to stabilise following the risk sell-off seen at the start of this week, although nagging worries over eurozone sovereign debt kept anxiety levels among investors high. The latest concerns


Solon’s ghost: Greek default scenarios

The latest this morning is that the EU is trying to shoehorn Greek government asset sales. This could provide both the opportunity to pay down some public debt and boost productivity, helping the rest of the economy better handle the debt left over. However, I’m not yet reassured by these measures. It’s not at all


King dollar

FT Alphaville today catches up to reality with an explanation of movements in the $US: Take everything you ever thought you knew about foreign exchange and bin it. According to HSBC’s stellar FX guru David Bloom, currency markets are trading through the looking glass, and will continue to do so for some while. As he noted


Is Greece Lehman II?

Over the weekend came this news from the WSJ: French Finance Minister Christine Lagarde signaled Paris might support a rescheduling of Greek debt, warning that Greece is at risk of default if it doesn’t do more to bring its public finances into order. The comments mark a shift in France’s position in a debate that


Emerging vs developed: the great divergence

Perhaps an underappreciated consequence of the 2008 global financial crisis has been a great divergence in the fortunes of developed economies and those of emerging markets. In its May “Secular Outlook“, the bond fund manager PIMCO has some very nice charts that illustrate this process well. First, while the debt levels of G20 advanced economies


Is QE setting markets up for a crash?

As highlighted today by my colleague Houses and Holes, a growing number of commentators — most recently Richard “Balance Sheet Recession” Koo — are weighing in on on the folly of quantitative easing and the risk that it poses for asset prices. The main charge is as follows. As The Bernank himself has hinted at


Richard Koo on QE3

Mr ‘balance sheet recession’ himself holds forth on the follies of QE. Highly recommended reading… As I spoke with investors in London and Geneva last week, markets were rocked by a resurgence of fiscal problems in Greece and a steep drop in the price of silver andother commodities.In London there was talk in the market that the drop in commodity


The black swans of Greece

I have spoken about Greece many times before. It is a country in all kinds of trouble economically caused by fiscal mismanagement and monetary  incompatibility. What has always amazed me is that for some reason, ignorance or delusion or a bit of both, anyone who expected to be paid on their Greek debts thought that


Grantham calls the top

For those of you with a memory longer than a few days, it was Jeremy Grantham of GMO who famously called the bottom in the great GFC equity rout. Whilst I never put anyone on a pedestal, Granthan is one of the few equity strategists that sees the way markets actually work these days. Overnight


Mirror image

It’s an advanced Western nation with historically weak household debt and rising savings, booming exports but a weak external position, a set of cunningly guaranteed too-big-to-fail banks, slumping house prices and a dramatically two-speed economy. Pop quiz: Is it the US or Australia? It’s a trick question because the answer is it’s both. Last week


Weekend Musings: AFG, Turning bearish, Budget and Greece

Another weekend, another dive into what is rumbling around my thought box. AFG Mortgage Index. AFG’s latest mortgage report came out this week. Their overview of the lending market was fairly bearish. AFG, Australia’s largest mortgage broker, has called on the Government to address weak consumer confidence, after figures for April showed mortgage sales fell


Milk money (QE3)

That was no ordinary night. The $US doesn’t bounce 2% without some serious spur. And the entire commodities complex (CRB) down 3.5%! This is a similar signal to the flash crash of last year, which presaged the sell off into the double-dip funk of mid last year. Here we have the first signal of the triple-dip


The century of old age

As mentioned previously, the 21st century will be the century of old age, where declining birth rates meet longer life expectancies. This ageing of the population will affect many areas of the international economy, from consumption and growth to asset valuations. The impacts from ageing will likely be most acute in Western Nations, although some developing countries, most


Is al-Qaeda still a risk?

Following is an excellent assessment of the current and future path for al-Qaeda from Jamestown, a world-leading international relations website. How Important is Bin Laden Anyway? Bin Laden is not a religious scholar; he is not a military planner; he is not even a politician. He will, however, always be the man who brought down


Inflation expectations my butt

So, Bernanke has given markets what they need to hear. First, it’s damn the lifeboats on commodities inflation: Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The unemployment rate remains elevated, and measures of underlying inflation continue to be somewhat low, relative to levels that the Committee judges to


Mixed signals

There’s a lot of noise today. And yes, it’s threatening to be a “risk off” event. Some typical signs are there. Gold is up. Commodities and the Aussie are down. The euro got monstered. The $US bounced hard. But it isn’t that simple. Grains are up solidly which is definitely a growth/inflation play and there


Europe’s new issues

As I noted in my previous article on Portugal the Fins have been posturing for more serious austerity from the PIIGS. It seems however that as of today the circumstances in Finland have changed somewhat and the outcome for the rest of Europe could have just become far more difficult. A Finnish election has just been