The Great Debate UK
from The Great Debate:
A rally that is both rational and crazy
(J
ames Saft is a Reuters columnist. The opinions expressed are his own)
Stocks and other risky assets are rallying around the world this week because the Group of 20 nations said on the weekend they would keep the economic stimulus flowing, a state of events which illustrates where we are and what a very strange place it is.
The G20, the only group of big hitters that matters because it is the only group which includes the Chinese, met in Scotland over the weekend and, as is the way of these things, did very little with immediate consequences for anybody.
In the communique they issued, the Group of 20 finance ministers, after congratulating themselves on the recovery, more or less admitted that the measures we once thought of as heroic are in the process of becoming commonplace.
"However, the recovery is uneven and remains dependent on policy support, and high unemployment is a major concern," the statement said. "To restore the global economy and financial system to health, we agreed to maintain support for the recovery until it is assured."
Is a bubble burbling in financial markets?
-Jane Foley is research director at Forex.com. The opinions expressed are her own.-
The discrediting of the efficient markets theory in the aftermath of the financial crisis appears to have been accompanied with growing support for the view that rather than efficient in nature, financial markets are predisposed towards the formation of bubbles.
from MacroScope:
London-Basel express
Having wrapped up the two-day get-together in London, G20 central bankers moved down to the Swiss city of Basel (I counted central bank governors and officials from at least 9 countries onboard the same flight) to discuss more about the global economy for a two-day meeting.
The focus here again is the global economic recovery, which seems to be gathering momentum, and the timing of exit policy -- which is essential in the future to avoid inflationary pressure.
from Commentaries:
Getting ready for the dollar’s fall
It just won't go away, this needling worry about the U.S. dollar losing its coveted top-dog status.
No matter that there are plenty of reasonable arguments to support the dollar as the world reserve currency -- namely there's just no alternative -- for perhaps decades to come.
Latvia: Apocalypse (not quite) now . . .
-Morten Hansen is head of the economics department at the Stockholm School of Economics in Riga. The opinions expressed are his own.-
Latvia, with its 18 percent year-on-year economic decline, ruthless budget cuts to meet the demands stated by the IMF-EU bailout package and recurring rumours of devaluation, may be the most written about country in the world right now, at least on a per capita basis.
from The Great Debate:
Get ready for the “Great Immoderation”
-- James Saft is a Reuters columnist. The opinions expressed are his own --
The recession will soon be dead, laid to rest alongside the idea of the "Great Moderation", a set of hopeful assumptions that underpins expectations about economic growth and asset valuations.
This, when investors, bankers and executives ultimately realise it will cause them to pull in their horns, take less risks and be less willing to pay high prices for assets.
from The Great Debate:
Uncertain Fed support sinks bonds
-- John Kemp is a Reuters columnist. The views expressed are his own --
The bond market's adverse reaction after the Fed announced no new asset purchase facilities or bond buyback programs highlights the fundamental difference between interest rates and quantitative easing (QE).
Rate cuts provide ongoing support for an indefinite period until the Federal Open Market Committee chooses to reverse them. In contrast, QE programs provide a one-off, time-limited boost that has to be continually reapplied to have the same effect.
from The Great Debate:
World stuck with the dollar, more’s the pity
-- James Saft is a Reuters columnist. The opinions expressed are his own --
The dollar is, and will remain, the U.S.'s currency and its own and everyone else's problem.
The idea of creating a global currency, as espoused by China earlier this week, is interesting, has a certain amount of merit and is simply not going to happen any time soon.
from The Great Debate:
Time to rethink inflation targeting
-- John Kemp is a Reuters columnist. The views expressed are his own --
It is time to add another victim to the ever-growing list of institutions (Bear Stearns, Lehman Brothers) and theories (value at risk, fair value accounting and originate to distribute) which have been tested by the financial crisis and found wanting. The central bank practice of inflation targeting -- the jewel in the crown of modern monetary economics -- has palpably failed.
Over the last two decades, inflation targeting has emerged as the most popular strategy for monetary policy among the world's major central banks, and become something of a state-of-the-art choice among theorists and central bankers.
