Prieur’s readings (March 29, 2010)

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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.

• Wolfgang Münchau (Financial Times): Europe has resolved nothing over Greece, March 28, 2010.
It is hard to imagine even a hypothetical scenario in which the European Union would disburse emergency aid.

• John Mauldin (Thoughts from the Frontline via Investors Insight): What does Greece mean to you? March 26, 2010.
How does an event like a problem in Greece (or elsewhere) affect you? And I mean, affect you down where the rubber hits your road. Not some formula or theory about the velocity of money or the effect of taxes on GDP. That is the question John Mauldin answers this week.

• Nouriel Roubini, Christian Menegatti and Arpitha Bykere (Forbes): No Greece in the American machine, March 25, 2010.
Likening EU member debt to US state debt is misguided.

• Matthew (Forbes): Bill Gross – what it takes to escape the debt trap, March 24, 2010.
The US has it. Greece and Portugal don’t.

• Gregory Mankiw (The New York Times): Trying to tame the unknowable, March 26, 2010.
The economy is recovering, in baby steps, from the financial crisis and deep recession of 2008 and 2009. A big question still looms on the horizon: What can policy makers do to prevent this kind of thing from happening again? Perhaps the best place to start is to acknowledge what we cannot do. One thing we cannot do very well is forecast the economy …

• Simon Johnson (The Huffington Post): Senator: Which part of “too big to fail” do you not understand? March 26, 2010.
How do you feel about a small set of big financial firms having this kind of power?  How is that good for the rest of the business community, let alone regular citizens and our democracy? This administration is perfectly capable of taking on the big banks.  All that is missing is a little clarity of thought and a fair amount of political courage.  Or they can just call up Senator Kaufman.

• Andrew Martin (The New York Times): Does this bank watchdog have a bite? March 26, 2010.
For now at least, the nation’s front line for consumer financial protection resides on the 34th floor of a downtown office tower here, amid cubicles surrounded by posters that read, “Improving the Customer Experience – Be a LEADER in every call.” What many customers may not realize is that the man who oversees the operation used to represent the very banks they are complaining about.

Reading break:

Considering the short-term technical picture of the US dollar Index, Adam Hewison (INO.com) provides a video analysis, expecting a reversal before too long (i.e. euro up; dollar down). Click here to access the presentation.

• John Hussman (Hussman Funds): Possible outcomes: A typical post-war recovery or a perfect storm, March 29 2010.
The primary uncertainty here relates to whether or not the recent easing of credit difficulties will prove to be durable, or simply a temporary lull. We will obtain a significant amount of clarity over the coming months.

• Caroline Baum (Bloomberg): Lower home prices can fix what government can’t, March 26, 2010.
Alas, all the Fed’s purchases and all the government’s men can’t put the residential real estate market together again. Between them, the federal government and central bank can lower mortgage rates, modify mortgages, use their power to get private lenders to modify mortgages, and create incentives to move inventory, such as the first-time homebuyer’s tax credit. What they can’t do is manufacture enough artificial demand for an asset that was artificially inflated to begin with.

• Jim Jubak (MSN Money): A whole new brand of inflation, March 25, 2010.
The version that’s overtaking developing countries is threatening to spread to the rest of the global economy, and it’s something the developed world isn’t used to dealing with.

• Ian Bremmer (Financial Times): China knows the time for lying low has ended, March 28, 2010.
Though this will not be easy to carry out, Beijing is now quietly embarking on political and economic “decoupling” from the US.

• Yiping Huang (Business Insider – The Money Game): Krugman doesn’t understand that NO ONE wins in a trade war with China, March 26, 2010.
Paul Krugman is one of the international economists I most respect. He is a towering figure in the study of international trade. But his understanding of some international economic policy issues is, to put it generously, naïve. In fact, were the Obama administration to follow his policy advice, the world economy could encounter more serious difficulties, if not another recession, in the years ahead.

• Edward Chancellor (GMO): China’s red flags, March 2010.
Were China’s economy to slow below Beijing’s 8% growth target, bad things are liable to happen. Much of the new infrastructure would turn out to be otiose; excess capacity would linger in many industries; the real estate bubble would burst and the banking system would face a rash of non-performing loans. Investors who are immersed in the China Dream ignore this scenario. When the China juggernaut eventually stalls, they face a rude awakening.

• The Economist: The British economy: the pain to come, March 25, 2010.
A terrible recession will be followed by a lacklustre recovery, but Britain is no basket-case

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