Prieur’s readings (January 6, 2009)
This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.
• Leslie Norton (Barron’s): A Japanese Rx for the west: keep spending, January 4, 2009.
An interview with Richard Koo: America seems to be suffering from the same affliction that has hobbled Japan for so long – a balance-sheet recession. And no matter how hard the Federal Reserve tries, it won’t end until businesses shake their heavy loads.
• Peter Boone & Simon Johnson (Bloomberg): Global boom builds for epic bust, January 5, 2009.
The boom will be pleasant while it lasts. It might go on for a number of years, in much the same way many people enjoyed the 1920s. But we have failed to heed the warnings made plain by the successive crises of the past 30 years and this failure was made clear during 2009. The most worrisome part is that we are nearing the end of our fiscal and monetary ability to bail out the system. We are steadily becoming vulnerable to disaster on an epic scale.
• Luca Di Leo (The Wall Street Journal): Fed’s Hoenig warns on too-big-to-fail, backs Glass-Steagall, January 5, 2010.
A top US Federal Reserve official said Tuesday it’s necessary to consider how banks considered too big to fail can be broken up so they no longer pose a systemic risk to the U.S. economy. “Beginning to break them, to dismember them, is a fair thing to consider,” Federal Reserve Bank of Kansas City President Thomas Hoenig told a panel at the annual meeting of the American Economics Association.
• Brian Wesbury & Robert Stein (Forbes): Bernanke absolves Greenspan – and himself, January 5, 2009.
Federal Reserve Chairman Ben Bernanke gave an important speech in Atlanta over the weekend. He defended the Greenspan Fed, saying the policy of low rates in the early 2000s did not cause a bubble in housing. If the Fed plans on stubbornly staying the course with 0% interest rates in 2010, what better way to convey that inclination to investors than by defending the loose money of the 2000s?
• Randall Forsyth (Barron’s): Seemed like a good idea then, January 5, 2009.
It’s a new year, when the natural inclination is to start afresh and close the books on the past. Yet, after the disastrous “decade” just past, some perpetrators of the worst blunders of those ten years seem intent upon insisting they really had the right idea all along.
• Charlie Rose (Bloomberg BusinessWeek): Paul Volcker: The lion lets loose, December 30, 2009.
Charlie Rose talks financial reform with former Federal Reserve Chairman Paul Volcker.
• David Smith (Times Online): This decade will tip the economy to the east, January 3, 2010.
We start this decade with the combined gross domestic product of the G7 (America, Japan, Germany, Britain, France, Italy and Canada) comfortably ahead of that of the E7 (China, India, Brazil, Russia, Mexico, Indonesia and Turkey). By the end of it, according to John Hawksworth of Price Waterhouse Coopers, the E7 will be in the ascendancy.
• Martin Wolf (Financial Times): The eurozone’s next decade will be tough, January 5, 2009.
The countries on the periphery of Europe’s single currency are in deep trouble thanks to the imbalances within the eurozone. And none of the solutions look palatable.
• Michael Tsang (Bloomberg BusinessWeek): Emerging stocks could lose 20% as Mobius sees IPO backfire, January 5, 2010.
Emerging markets are attracting more money from initial public offerings than industrialized nations for the first time ever, a warning sign to Mark Mobius that the record rally in the shares may turn into a 20% decline.
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