Prieur’s readings (January 5, 2009)
This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.
• Robert Reich (Robert Reich’s Blog): What’s ahead for the economy and politics in 2010, January 4, 2010.
Just about everything you’ll hear coming out of Washington starting now is really about November’s mid-term election. The gravitational pull of the midterms was already apparent last year, as Republicans marched in perfect lockstep to vote against whatever the President and Dems proposed (Republicans always have authoritarian discipline on their side, which is why they’re Republicans) but you haven’t seen anything yet.
• Ambrose Evans-Pritchard (Telegraph): Global bear rally will deflate as Japan leads world in sovereign bond crisis, January 4, 2009.
Weak sovereigns will buckle. The shocker will be Japan, our Weimar-in-waiting. This is the year when Tokyo finds it can no longer borrow at 1pc from a captive bond market, and when it must foot the bill for all those fiscal packages that seemed such a good idea at the time. Every auction of JGBs will be a news event as the public debt punches above 225% of GDP. Finance Minister Hirohisa Fujii will become as familiar as a rock star.
• Paul Krugman (The New York Times): That 1937 feeling, January 3, 2010.
Here’s what’s coming in economic news: The next employment report could show the economy adding jobs for the first time in two years. The next G.D.P. report is likely to show solid growth in late 2009. There will be lots of bullish commentary – and the calls we’re already hearing for an end to stimulus, for reversing the steps the government and the Federal Reserve took to prop up the economy, will grow even louder. But if those calls are heeded, we’ll be repeating the great mistake of 1937, when the Fed and the Roosevelt administration decided that the Great Depression was over, that it was time for the economy to throw away its crutches.
• Robert Rubin (Newsweek): Getting the economy back on track, December 29, 2009.
Many analysts think, as I do, that the recovery could be long and slow, with stubbornly high levels of unemployment persisting-even if we have two or three stronger quarters first. All of this has raised serious questions about the best way for long-term economic policy to promote growth, widespread participation in that growth, and personal economic security.
• Nick Timiraos and Anton Troianovski (The Wall Street Journal): Real estate faces tough recovery slog, January 4, 2010.
Real estate, which sparked the global economic downturn in 2008, struggled to recover in 2009. But the path to a full return to health is littered with land mines that could send the sector spiraling downward again, possibly upending the nascent economic revival. The commercial real-estate market is faced with huge amounts of unoccupied space and a deluge of defaults and foreclosures that are putting new stresses on banks and other financial institutions that already are on life support.
• Gideon Rachman (Financial Times): America is losing the free world, January 4, 2010.
The Obama administration is facing an unexpected and unwelcome development in global politics. Four of the biggest and most strategically important democracies in the developing world – Brazil, India, South Africa and Turkey – are increasingly at odds with American foreign policy. The US has been slow to pick up on this development.
• Mark Thoma (CBS MarketWatch): Did the Fed cause the recession? January 4, 2010.
Recent criticism of Bernanke and the Fed for their failure to use regulatory intervention to stop the housing bubble is correct, but perhaps directed at the wrong target.
• Nicholas Brady (Financial Times): Refocus the regulatory debate on essentials, January 4, 2010.
Do not allow the banking industry to create a combustible mix that will contaminate America’s central banking system. We will bitterly regret it if we fail to divide deposit-based banks from the shadow banking system.
Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.