Commentaries
Now raising intellectual capital
from Rolfe Winkler:
Could England be headed for a “sudden stop?”
From Landon Thomas at NYT: In Britain, visions of Japan's decade of stagnation
Britain may finally be emerging from recession, but many analysts warn that it is a false dawn. In fact, they argue, the economy here is so ravaged by growing debts and ruined banks that it could well be following in the steps of Japan’s lost decade of the 1990s.
I still don't understand why we refer to Japan's "lost decade," singular. The country is now moving into its third consecutive lost decade.The Nikkei is still at 1984 levels.
But back to the UK: the NYT piece quotes the latest research from Variant Perception (no link). I got it in my inbox earlier this week and it's a fascinating (though not pleasant) read. Notably, they talk about the outside possibility of a "sudden stop" event. As mentioned in this space before, a "sudden stop" is what happens to emerging economies when they lose access to capital markets. Confidence is lost in the government's ability to pay back debt and everyone races to get out of the system. See Argentina.
The problem is acute for indebted emerging markets because they don't borrow in a currency they can print. So, the argument goes, you can't have a sudden stop in Britain, or the US, because we print the currency in which our debt is payable.
from Rolfe Winkler:
Why gold if deflation is the threat?
Alice Schroeder wrote a great column for Bloomberg yesterday that I'm just getting to. The best stuff comes at the end, where she describes why some people are buying gold even though inflation doesn't seem to be a big risk. (Apologies in advance for block-quoting lots of stuff in this post, but I think it's worth it...)
In a nutshell: They aren't playing a conventional inflation trade. They're buying currency crisis insurance.
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The Wall
