Prieur’s readings (November 18, 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.

• OUPblog: Oxford Word of the Year 2009: Unfriend, November 16, 2009.
Every year the New Oxford American Dictionary prepares for the holidays by making its biggest announcement of the year.  This announcement is usually applauded by some and derided by others and the ongoing conversation it sparks is always a lot of fun, so I encourage you to let us know what you think in the comments.

Without further ado, the 2009 Word of the Year is: “unfriend”. “Unfriend” – verb – to remove someone as a “friend” on a social networking site such as Facebook.

• Martin Wolf (Financial Times): Grim truths Obama should have told Hu, November 17, 2009.
Obama should have made clear the need for China to revalue its currency and rebalance the global economy when he met Hu Jintao. He could reasonably threaten punitive action, such is the need for change.

• Bill Owens (Financial Times): America must start treating China as a friend, November 17, 2009.
Many think the Chinese are unable or unwilling to accept a progressive agenda, but we will never know unless we try.

• George Chen (Reuters): China, US eye pact to help troubled banks, November 17, 2009.
Chinese and US regulators are negotiating a pact aimed at encouraging Chinese financial institutions to buy into small and medium-sized banks in the United States, bankers briefed on the plan said on Tuesday. Chinese bankers have complained that it’s been difficult for them to set up branches or invest in banks in the world’s leading economy, due partly to US regulators’ tough supervision and strict approval process for financial deals. But the global financial landscape has been revamped by the credit crisis, and cash-rich Chinese banks are now bigger players on the world scene and are scouting around for investment targets.

• Qing Wang and Qing Wang (Morgan Stanley via Fullermoney): A dialogue on the renminbi, November 11, 2009.
Morgan Stanley maintains their long-standing view that the current renminbi exchange rate arrangement will remain unchanged at least through mid-2010. While they believe an exit from the current regime of a de facto peg against the USD may occur in 2H10, any subsequent renminbi appreciation against the US dollar is, in their view, likely to be modest and gradual.

• Randall Forsyth (Barron’s): Everybody’s dissing the dollar, November 17, 2009.
Notwithstanding the Fed’s rare statement of support, the buck buckles further. The bearish dollar trade gets more crowded.

• Edmund Andrews (The New York Times): Continuing unemployment is predicted by Fed chief, November 16, 2009.
In a departure from the usual practice of Fed chairmen, Mr. Bernanke tried to reassure global investors about the recent fall in the value of the dollar by saying that the central bank was “attentive to the implications of changes” and would “continue to monitor these developments closely”. It is rare for Fed officials to comment on exchange rates, which for decades have been the responsibility of the Treasury Department. Mr. Bernanke’s message seemed to be that the Fed saw no cause for alarm in the dollar’s weakness and that it would not need to bolster the dollar by raising interest rates sooner than it would otherwise.

• Nouriel Roubini (Daily News): The worst is yet to come – unemployed Americans should hunker down for more job losses, November 15, 2009.
As a result of the terribly weak labor markets, we can expect weak recovery of consumption and economic growth; larger budget deficits; greater delinquencies in residential and commercial real estate and greater fall in home and commercial real estate prices; greater losses for banks and financial institutions on residential and commercial real estate mortgages, and in credit cards, auto loans and student loans and thus a greater rate of failures of banks; and greater protectionist pressures. The damage will be extensive and severe unless bold policy action is undertaken now.

• Mike Whitney (Counterpunch): Why the crisis isn’t going away, November 3, 2009.
Bernanke knows that a bloated financial system poses unnecessary risks to the economy; just as he knows he should wind-down existing lending programs (which just encourage more speculation) and focus on rebuilding household balance sheets. The only way to put the economy back on a solid foundation is by helping struggling workers get back on their feet so they can create more demand. The objective should be full employment and broad, sustained wage growth, which is precisely what Minsky recommended.

• Roger Lowenstein (Bloomberg): Banking fix made easy with six simple steps, November 17, 2009.
Financial reform seems to be flailing. Legislation has been proposed, but it is complicated and diffuse. Most of the proposed fixes are incremental changes that don’t seem likely to prevent a future bubble. The House and Senate are squabbling over which federal agency should take the lead in supervising banks. The administration, as well as the Congress, has fallen into the trap of trying to fix everything. Instead, they should agree on the most important remedies.

• Andrea Hopkins (Reuters via Sharenet): Lessons from the crisis – re-educate the geeks, November 17, 2009.
The world may have already moved on, but quantitative finance guru Paul Wilmott is undaunted in his quest to save the global financial system from mindless mathematicians. In North America this week, then on to China and India, the Oxford-trained mathematician is going global with his message to fellow math geeks who permeate big banks and hedge funds everywhere – the people he believes drove the financial world to the brink of collapse last year. “We’re sort of on a mission,” said Wilmott, explaining his six-month course for quantitative financial analysts – “quants” – who are looking to add real skills to the algorithms that helped bring debt markets to their knees.

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