MacroScope

Waiting for the G20 to….?

Finance ministers and central bankers from the G20 meet this weekend in the English countryside to discuss the world’s financial and economic crisis. With this in mind, MacroScope asked a number of economists what they want to see from the meeting and the G20 summit to follow later and what they expect to see.

The answer, in short, appears to be that much is needed but not much expected.

Paul Mortimer-Lee, head of market economics, BNP Paribas:

“There will be progress on agreeing that regulation needs to be more effective and more effectively co-ordinated on a global scale but I am unconvinced we are going to go a long way further.  Some populist posturing on bank bonuses etc should be expected. The less is achieved in other areas the more this will get played up. On bank recapitalisation, they will all agree strong capital is a good thing, but in no way do I expect a concerted plan — it’s driven by events and the exigencies of the local banking system.

“I would like to see progress on the international financial architecture/the IMF and its resources. Maybe we’ll get some new facility and some agreement on more new cash … but a radical overhaul requires the power structure to be rejigged — more power to the (emerging economies) and less to Europe. This is not something European politicians will want to be high profile when it comes out.”

Sarah Hewin, senior economist, Standard Chartered:

“The economic data continue to worsen and markets remain in a state of fear. So the best outcome from the meeting would be a co-ordinated response to frozen credit markets and collapsing global economic activity.

“A wish-list would include announcements on: fixing banking systems, including cleaning up banks’ balance sheets by dealing with toxic assets; more and co-ordinated fiscal stimulus and wider adoption of quantitative easing; expanding the size of the IMF to enable it to support vulnerable countries; and commitments against protectionism.

from Mark Felsenthal:

Greenspan slammed

Former Fed Chairman Alan Greenspan isn't getting the respect he used to.

Greenspan's op-ed in the Wall Street Journal drew withering criticism from High Frequency Economics' Ian Shepherdson, who was unimpressed with the Maestro's denial of any Fed contribution to the country' worst financial crisis since the Great Depression.

Greenspan: "Given the decoupling of monetary policy from long-term mortgage rates, accelerating the path of monetary tightening that the Fed pursued in 2004-2005 could not have 'prevented' the housing bubble."

Shepherdson: "We were appalled and outraged by Alan Greenspan's self-serving it-wasn't-my-fault op-ed... If Mr. Greenspan can say with a straight face that this was not a consequence of the Fed's excessively easy stance then either he is delusional or a very talented poker player."

from Global Investing:

There’s no reset button

Mohamed El-Erian, chief executive officer of PIMCO (not pictured below), painted a bleak picture of the global economy at a press briefing of Allianz Global Investors earlier today.

"This is not the crisis within the global system. This is the crisis of the global system," El-Erian says.

"Internal circuit breakers are meant to deal with crises within the system. The crisis of the system challenges all the circuit breakers. There is no reset button."

from Tales from the Trail:

Bold budget boosts bailout

USA-OBAMA/How do you buy $750 billion of toxic bank assets with only $250 billion of taxpayer money?

If you know to play U.S. budget rules like a violin.

President Barack Obama told Congress in passing this week he might need more money than lawmakers have already approved to stabilize banks and pull the economy out of the ditch. 

How much? His budget virtuoso Peter Orszag said on Thursday he could support buying up to $750 billion in bad assets but only needed to set aside $250 billion to do it.

from Tales from the Trail:

When is a housing crisis like venereal disease?

If you're among those upset that your taxpayer dollars may be spent in volume to rescue people who -- for whatever reason -- can't make their mortgage payments, Federal Financial Analytics analyst Karen Shaw Petrou recommends thinking about it this way:

"Preventing foreclosures has a lot in common with treating syphilis. In both cases, you help some who are undeserving, but – in an economic collapse or a public-health emergency – one acts nonetheless. "

Just as in an serious epidemic, you'd take care of the problem and leave moral judgements to others, the right course of action is to take action to halt the housing crisis and leave the debate about moral hazard to economists, she wrote in a note to clients on Friday.

Echoes of 1933

Will President Barack Obama attend the summit of the Group of 20 rich and emerging countries in early April, hosted by UK Prime Minister Gordon Brown to tackle the financial and economic crisis?

The working assumption is he will, on one of his first foreign trips as president. But there is still no official confirmation.

At the G20 summit in Washington on Nov. 15, Obama’s transition team stuck strictly to the rule: “There is only one president at a time”, and the president-elect did not meet any of the foreign summiteers.

from Global Investing:

Never Mind The Bankers

Malcolm McLaren, the man who gave us The Sex Pistols, has found the real punks -- bankers. In an interview with Britain's The Observer, he says punk was not just about spiky hair and ripped t-shirts.

"It was all about destruction, and the creative potential within that. It turns out that the bankers may have been the biggest punks of all."

McLaren says we are now at a transformative moment.

"We're at the end of the culture of desires; we may be going back to a culture of necessity."

Bankers, bailouts and laughs

Stocks are tumbling around the world and Mainstreet is feeling the crunch, but at the Institute of International Finance (IIF) luncheon it was hard to see the dark side past the luxurious chocolate mousse cake and keynote comedy.

Jacob Frenkel, the vice-chairman of American Internal Group (AIG) — yes, that insurer on the receiving end of an $85 billion government bailout a few weeks ago (and now an extra $37.8 billion loan ), gave a light-hearted address on the G7′s plan of action to combat the credit crisis.

Frenkel was quick to take issue with the lack of details in the G7 plan and urged the importance of concrete dates.