Global Macro

6

Global inflation surging

China, India, Europe, UK and even US inflation is accelerating sharply at the moment. Data over the weekend reinforced that the period of ultra-low rates is probably ending and rates might move more sharply than markets expect even with growth not yet assured.   Over the weekend the PBoC increased the reserve requirements for their

28

Glenn Stevens in full flight

Grab a coffee and read the following speech given by Glenn Stevens overnight. I could nit-pick a  few things but basically it’s a cracker.  America, Australia, Asia and the World Economy Glenn Stevens Governor Address to the American Australian Association 2011 Annual Spring Lecture Lunch New York – 14 April 2011 Thank you for the invitation

15

Yellen’ won’t help

I’m going to wonder off the reservation a little today and talk about the Fed, its balance sheet and risk assets.   Janet Yellen is Vice Chair to Ben Bernanke at the Fed. She is one of the Fed Governors. I always thought she was pretty switched on but last night she gave a speech 

6

Two speed world

The IMF released it’s quarterly growth update overnight and it’s worth a read. The full report is available below. The introduction argues: The world economic recovery continues, more or less as predicted. Indeed, our growth forecasts are nearly unchanged since the January 2011 WEO Update and can be summarized in three numbers: We expect the world economy to grow at

20

Here we go again

Well here we are again. Not that it wasn’t obvious, I have previously talked about why, and also about the Greek mess, this is no different. Europe’s wealthy countries looked to Portugal to resolve the year-old euro debt crisis by coming up with “sustainable” deficit cuts to pave the way to an 80 billion-euro ($116 billion)

3

Boom and bust is back

With Brent and WTI crude both surging to post-GFC highs Friday, I’m beginning to suspect that the world has entered a new era of oil price and growth volatility that spells the end of the Great Moderation. Why so? Supply and demand are the key to all things economic.  Previously at this site, the Unconventional

3

Risks to the Aussie

The question I asked last week about Chinese growth and iron ore demand seems to have been answered for now. That question was the following: Not only has the market not priced a significant, if cyclical, China slowdown, if it comes, Chinese steel makers may very well enter an inventory cycle that liquidates some portion

7

The cost of zero

In an era of extremely low interest rates in most of the developed world, pricing the cost of equity capital becomes a real problem. When debt capital is close to zero, then equity capital theoretically becomes extremely cheap, too. The 90 day Treasury bill is at 0.24%. Translating that into an earnings multiple (by turning

12

Quantitative unease

Any critical analysis of the period leading up to the GFC lays some of the blame of the bubble that built at the length of time that Chairman Greenspan left rates in the US incredibly low after the September 11 attacks. Certainly there were many other and much more important drivers of the debacle that

17

Leigh Harkness on debt saturation

In a follow up to his previous post please enjoy Leigh Harkness’s latest guest post on “Debt Saturation”. Many years ago, I tried to identify the relationship between money and inflation. I could not find a general rule for all situations, but for certain countries who adopted “pure” float, I found that inflation was equal

19

Hyper-inflation is here

Last weekend, the MacroBusiness New York bloggerspondent, Rotten Apple, mounted an interesting critique of the dominance of neo-liberal economics in the face of mounting evidence to the contrary.  It details the hypocrisy of our times: how a global debauch by the financial sector — one of the most irresponsible collective acts, or thefts, ever seen

2

Bosnia meets Iraq in Libya

Yesterday Australia’s own diplomatic superstar (no, I mean it), Gareth Gareth, wrote in SMH that: The international military intervention in Libya is not about bombing for democracy or Muammar Gaddafi’s head – let alone keeping oil prices down or profits up. Legally, morally, politically and militarily it has only one justification: protecting the country’s people

5

Projecting global growth

Below are two takes on the immediate future of the global economy from heavy-hitters RGE Monitor and PIMCO. First from RGE, Nouriel Roubini’s mob: Upside and downside risks to the global recovery The global economy today can be described as a glass that is half full and half empty. Upside/Positive Risks/Trends: Global recovery and actual

13

Guest Post: Leigh Harkness

I discovered Leigh Harkness’s web site a few months ago while doing some research on foreign trade.  His site so intrigued me that I contacted him to see if he would be interested in doing a series of guest posts about his research and experience in his little understood area of economics. Leigh accepted my

6

And now a war…

It’s a busy year. We’ve only just begun and we’ve had global famine, nuclear plague and now war. So, where are we in a global macro sense? The great settings remain unchanged. The US is still struggling out of its funk by attempting to reflate the entire world through a falling dollar. China is still

7

Intervention and the AUD

AUD/JPY and USD/JPY are up sharply at present on the back of comments from Japanese Finance minister that G7 countries will intervene to support the Dollar (sell Yen). There is also talk they will buy stocks which is what the HKMA did during the Asian crisis. The New York Times just sent a release out

4

Late to the party

As governments far and wide wake up to the danger of fallout in Japan, one is tempted to conclude that the crisis is past its worst. Governments have a habit of coming late to the party. But, in this case, I’m not so sure. I continue to think that markets are underestimating the damage being

9

Japan’s critical moment

An hour ago the IAEA released the following: Temperature of Spent Fuel Pools at Fukushima Daiichi Nuclear Power Plant Spent fuel that has been removed from a nuclear reactor generates intense heat and is typically stored in a water-filled spent fuel pool to cool it and provide protection from its radioactivity. Water in a spent

4

Japan Update 2

The situation in Japan seems to have just got considerably worse. From the BBC live feed. 0325:More on that news conference by Chief Cabinet Secretary Yukio Edano. He said: “At around 0830 today, at Fukushima Daiichi nuclear power plant, white smoke has been seen coming out of reactor three. And regarding this, currently we are

21

History resumes

I remember the nineties fondly. They were the years before housing bubbles. The years when cricket still had meaning and moustaches were not yet the gimmick of some new age fad. The years when talent still determined who became famous. And the years when the singularity of American might gave the world a moral centre,

10

Japan Update

Update: European markets are also getting hammered . See BBC for more. It seems that only the stock market has realised what the hell is going on. I captured this on my phone earlier in the day, the Nikkei closed down 10.55%  after BOJ intervention. But it just seems absolutely bizarre that I am even discussing

4

Japan: Suddenly it seems much worse

There is a now  constant stream of slowly worsening news coming out of Japan.  As H&H linked to in a recent post the expected outcome of the Boiling Water Reactors should be far less worrying than what is being reported. A quick check of the BBC feed shows some chilling details of what is believed

3

High risks

The US equity market held up pretty well last night but looks to me to be are underestimating risks all around. Poor Japan seems headed toward mutliple meltdowns. Live coverage is available at the BBC. New Scientist reports that assuming meltdowns are occurring then it is only a question of whether containment of the radioactivity

0

Not today

There is so much to say on the financial front about what is happening in the world right now. China finally seems to be making the right noises about its movement towards consumer led economic growth, take it or leave it.  Bahrain has erupted again and is now asking for its much larger neighbour to step

2

Into the maelstrom

Let me begin my reiterating my sympathies for the Japanese. There are a number of very big cross currents at work for markets today. The first, of course, if the suffering of the Japanese. Across the world, the coverage is remarkably alike, a result perhaps of diminishing foreign correspondent budgets and the secrecy of the

10

Did “endless growth” just end?

First, a few quick notes of congratulation. To my esteemed colleagues, Delusional Economics, who has been cross-posted in full glory at Naked Capitalism for his scything critique of Greece’s travails. And Rotten Apple, who made the links (also at Seeking Alpha) with his take on long term investing and gold. Our long-planned reverse takeover of American

15

Spiralling into the moussaka

From the morning links: Explosive growth of unemployment recorded in Greece, with a total number of unemployed is at 733,645, according to data from the Greek Statistical Authority (ELSTAT) that were released Wednesday. The percentage of registered unemployed reached 14.8% in December 2010 an increase of one percentage point compared with November. The number of

0

Revenge of the PIIGS

Overnight, markets received a boost from OPEC member’s declaration that they’ll fill any existing or potential supply gap. Later, there was some doubt about the veracity of the claim. The energy complex nonetheless retreated a little, as did gold, and equities jumped. Metals were sold off early then bounced to be even. However, other markets remain

5

Gold, Silver and Oil Ratio

As part of my “Crashlist” I regularly follow the spot price (in USD) for gold, silver and oil as they are the three benchmarks that measure the strength of the global economy, the value of the US dollar and the speculative excess inherent in modern global markets. Bullion Baron has some great insight into these