Prieur’s readings (December 8, 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.

• Jonathan Davis (Financial Times): Ignore Buffett – gold’s time has come, November 22, 2009.
Warren Buffett … When asked for his views about gold, he typically replies with the answer, along the lines that gold has never been a good store of value and is unlikely ever to interest him as a home for his money. Gold, he says, “gets dug out of the ground in Africa or some place. Then we melt it down, dig another hole, transport it halfway round the world, then bury it again and pay people to stand around guarding it”. It has, he argues, “no utility”. There will always be other things that he would rather own.

• Michael Pettis (China Financial Markets): The difficult arithmetic of Chinese consumption, December 5, 2009.
How fast does consumption need to grow in China in order for a meaningful rebalancing to take place? Probably a lot more than you think. This is arithmetically the case because China is starting from such a low base.

• John Tang (UBS via Fullermoney): China – staying bullish for H110, December 2, 2009.
We believe strong economic growth, improving corporate earnings, an accommodative macro policy, and continued abundant liquidity will likely translate into a big bull market for China in H110. We are cautious on H210 due to potential rising inflation and the operations of government-sponsored projects.

• Steve Matthews (Bloomberg): NBER’s Hall says recession may be over, month unclear, December 4, 2009.
The improving labor market indicates the deepest US recession since the 1930s may have ended, though it is too soon to say precisely what month it stopped, said the head of the group charged with making the call.

• Sven Egenter (Reuters): Low interest rates lure banks to take risk: study, December 6, 2009.
Rock-bottom interest rates are luring banks into taking risky bets and central banks should be alert to the negative effects of loose monetary policy on financial stability, a high-profile study showed.

• James Kwak (The Baseline Scenario): The importance of capital requirements, December 7, 2009.
Arnold Kling of EconLog has done the hard work of setting out his theory of the financial crisis and what we should learn from it in a fifty-page but highly readable paper available here.

• Lucian Bebchuk, Alma Cohen and Holger Spamannine (Financial Times): Bankers had cashed in before the music stopped, December 6, 2009.
The top five executives of Bear Stearns and Lehman Brothers had cashed out such large amounts this decade that their wealth remained intact.

• Kevin Brown: (Financial Times): Call for rethink on OTC deals, December 6, 2009.
Plans to force over-the-counter trading of derivatives on to exchanges to reduce counterparty risk need to be rethought by regulators, one broker says.

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