The patchwork of attempts to prop up the financial system has taken on a life of its own - we call it bailout economics. At every step, Adam Smith’s “invisible hand” to guide the economy has become less evident. Back in the 18th century, the economist coined the term as…
Ultra-low central bank rates are not without their perils. In making this claim, we refer not to the risk of excessively stimulating the economy (which is another matter, and not one likely to be confronted for some time), but rather to the undesirable complications that arise when central bank rates…
The economy is likely to remain in recession for a while yet, as the effects of continued deleveraging, wealth destruction, credit tightening and negative recession dynamics (skyrocketing unemployment and business destocking) should keep growth rates negative during Q2. However, in the middle of the year we expect a range of…
Here’s a brief lesson on the law of unintended consequences: if you rule out failure as an option, your negotiating power is greatly diminished. Take the automotive industry: last fall, politicians touted that bankruptcy was not an option. Unsurprisingly, neither bondholders nor labor unions were willing to give major concessions….
The world’s a mess and in our eyes policy makers are inadvertently doing their best to worsen a bad situation. Let’s assume you’ve had it and want to hide somewhere safe to ride out the storm. Unfortunately there appears to be no such thing as a safe asset anymore. Therefore…
The market has been in the process of mounting a significant rally out from the historic lows set by 0.9060 in November 2007. It now appears that a fresh higher low is in place by 1.1465 (November 2008 low) to be confirmed on a break back above 1.3020. The late…
Shaken insurance giant AIG has argued that fair value accounting is what got the world into this financial crisis. This debate is flaring up once again as it becomes ever more apparent that many of the world’s largest banks would be insolvent if they priced their securities at “fair” market…
