The Great Debate UK

What to make of the U.S. resurgence

-Kathleen Brooks isUSA-DOLLAR/ research director at The opinions expressed are her own.-

Back in the summer, things in the U.S. were so dire that the Fed had to step in to the breach and boost the economy with a $600 billion cash injection. This was only formally announced in November, yet within two months the outlook for the U.S. economy has brightened markedly. The dollar has had a flying start to the year and appreciated more than 2 per cent against the other major currencies.

But is this reversal in fortunes too good to be true and can the huge juggernaut of the U.S. economy really turn around this quickly?

The chief reason for the boost in investor sentiment, particularly towards the dollar, is the uptick in some of the major U.S. economic indicators. The widely watched ISM surveys have jumped in recent months and there are positive signs that the recovery that was noticeable in the manufacturing sector of the U.S. economy is now spreading to the much larger services sector. Investment houses rushed to revise higher their growth forecasts at the end of last year after President Obama agreed to a two-year extension of the Bush tax cuts. All of a sudden the U.S. economy was hitting the headlines again for all of the right reasons, and after giving the dollar a wide berth for most of the second half of 2010 investors are once again happy to own the greenback.

History, bunk and the bond market

–Laurence Copeland is a professor of finance at Cardiff University Business School . The opinions expressed are his own–

The title says it all: “This Time is Different” by Reinhart and Rogoff tells how, for centuries, monarchs and, later, nation states have persuaded lenders to forget their chequered credit record and trust them yet again with loans on relatively easy terms. Although, by the nineteenth century, Western European countries had mostly reached a stage where their reputation seemed worth preserving at  some cost, more or less from the moment they achieved their independence the South American countries established a tradition of default which they have guarded jealously to the present day, and as Reinhart and Rogoff make clear, Greece has defaulted at regular intervals ever since it became an independent nation in 1832.

Irish debt restructure hangs in the balance



Kathleen Brooks is research director at The opinions expressed are her own.

The assault on the Irish bond market by bond investors has continued with a vengeance this week with 10-year bond yields hovering close to nine percent at 8.91 percent. Since August yields have been trending higher, but they accelerated sharply in mid-October, when they were at six percent. At this rate, yields could be in double figures by next week.

Thank you, Gordon Brown


BRITAIN-INFLATION/–Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own.–

If the economics profession has sunk in public estimation in the last two or three years, it would hardly be surprising. Our failure to predict the crisis is something which cannot be simply brushed aside lightly, as some of my colleagues would love to do.

EU stress tests: for banks or governments?


- Laurence Copeland is a professor of finance at Cardiff Business School. The opinions expressed are his own.-

Worries about Europe’s banking system go back at least to 2007, but whereas the U.S. (and UK) banks appear to have weathered the storm, there are fears that for European banks the worst may lie ahead.  Concerns centre on four areas.

from MacroScope:

Should central banks now sell gold?

Central banks in debt-strapped countries have a golden opportunity ahead of them, if you will excuse the pun, to help their countries' finances by selling their yellow metal holdings.

At least, that is the message that Royal Bank of Scotland's commodities chief Nick Moore has been giving in recent presentations -- and he thinks it might happen.   The gist is that gold is now at a record price but banks have not come close to  meeting their sales allowance for the year.

A history lesson for lenders



-Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own.-

Anyone looking for a broader perspective on the events of the last three years could hardly do better than choose for bedtime reading “This Time is Different” by Carmen Reinhart and Kenneth Rogoff.

Sovereign default risk, fact or fiction?

-Jane Foley is research director at The opinions expressed are her own.-

If a gauge is needed to measure how concerned investors are at about sovereign default risk, we need look no further than the price of gold which has made fresh all time highs this week.

You could not make this stuff up

-David Kuo is director at the financial website The Motley Fool. The opinions expressed are his own.-

You could not make this up if you tried.

Britain gets its knickers in a twist over a hung parliament, Europe has been unceremoniously skewered by a Greek debt crisis, and if that wasn’t bad enough, the Bank of England’s Monetary Policy Committee sits idly by as the rate of inflation climbs.

Eerie calm before Britain’s election

– James Saft is a Reuters columnist. The opinions expressed are his own –

To look at sterling and gilts, you would hardly know that Britain is sailing into a general election which will likely deliver a weaker government with a diminished ability, if not will, to grapple with high debts, an uncertain role in the global economy and an aging population.