Prieur’s readings (September 29, 2009)

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This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Caroline Baum, Bloomberg Bond traders are boubters, lemmings or sissies, September 28, 2009.
Where are those gunslingers of yesteryear, ready at a moment’s notice to assert themselves in the marketplace, challenge the Fed on its easy-money stance and punish the federal government for its profligate spending? Why are bond traders so blasé when short-term interest rates have nowhere to go but up, the US economy is recovering, the Fed is ending its purchases of Treasury notes and bonds, the Treasury is continuing to sell notes and bonds, the dollar is sinking, and foreign central banks are making noises about the out-of- control US budget deficit?

• Jeremy Warner (Telegraph): The dollar is dead – long live the renminbi, September 25, 2009.
Whatever happens at the G20, the days of Western dominance are at an end, says Jeremy Warner.

• Bruce Bartlett (Forbes): We can’t cut spending, September 18, 2009.
Why? Because the votes aren’t there.

• Floyd Norris (The New York Times): A rich uncle is picking up the borrowing slack, September 25, 2009.
In the past, when the government became a heavy borrower, there was talk about crowding out private borrowers. But this time, interest rates have remained low and no one seems to be worried about that. The reason is simple: Rather than crowding out the private sector, Uncle Sam is now standing in for it. Much of the government borrowing went to investments in financial institutions needed to keep them alive. Other hundreds of billions went to a variety of programs aimed at stimulating the private economy, including programs that effectively had the government pick up part of the cost for some home buyers and some auto buyers.

• Emma Bonino (Financial Times): What did we really learn from the economic crisis?, September 28, 2009.
So far, all we have really done is change the decision-making body, while the causes and symptoms of the financial crisis remain unchecked.

• James Hamilton (Econbrowser): Federal Reserve reverse repurchases, September 27, 2009.
Here Hamilton offers some thoughts on Bloomberg’s account that the Fed has made inquiries with its dealers about the feasibility of a significant increase in the Fed’s reverse repo operations.

• Mohamed El-Erian (Financial times): Return of the old ways of thinking threatens recovery, September 28, 2009.
Investors have not yet accepted Mervyn King’s insight that the absolute levels of income, debt, wealth and unemployment, not just the rates of change, are what matters.

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