International Monetary Fund
- Hilsenrath: Next Cut in Fed Bond Buys Looms - Reduction to $65 Billion Could Be Announced on Jan. 29 (WSJ)
- China Workforce Slide Robs Xi of Growth Engine (BBG)
- Obama pulls the race card: Obama Says Race May Blunt Poll Standing in Interview (BBG)
- Chinese firm's IPO deal switches banks as chairman's daughter moves from JPMorgan to UBS (SCMP)
- China and Russia may hold joint naval drill in the Mediterranean (RT)
- Iran invite to Syria talks withdrawn after boycott threat (Reuters)
- Seven Chinese IPOs Halt Trading After 44 Percent Share (BBG)
- U.S. military says readying plans for Olympic security assistance (Reuters)
- Thank you Bernanke: Investors Most Upbeat in 5 Years With Record 59% Bullish in Poll (BBG)
- From His Refuge in the Poconos, Reclusive Imam Fethullah Gulen Roils Turkey (WSJ)
But fear not, dear poor people of the world, for Lloyd Blankfein, Mark J. Carney, Mario Draghi, Haruhiko Kuroda, Christine Lagarde, Jacob Lew, Shimon Peres, Larry Fink, David Cameron, Shinzo Abe, Marissa Meyer, and many others are there fighting for you. Fighting all the way...
The IMF has reported that its resident respresentative in Afghanistan - 60-year-old Wabel Abdallah - is among the 15 people killed in a coordinated assault at a Kabul restaurant by the Taliban. The upscale taverna is well-known to be frequented by foreigners and ex-pats. As Reuters reports, Abdallah had been leading the IMF's office in the Afgan capital since 2008 and IMF Managing Director Christine Lagarde said "this is tragic news, and we at the fund are all devastated."
- NSA phone data control may come to end (AP)
- China to rescue France: Peugeot Said to Weigh $1.4 Billion From Dongfeng, France (BBG)
- China to rescue Davos: Davos Teaches China to Ski as New Rich Lured to Slopes (BBG)
- Hollande’s Tryst and the End of Marriage (BBG)
- Iran has $100 billion abroad, can draw $4.2 billion (Reuters)
- Target Hackers Wrote Partly in Russian, Displayed High Skill, Report Finds (WSJ)
- Nintendo Sees Loss on Dismal Wii U Sales (WSJ)
- Goldman's low-cost Utah bet buoys its bottom-line (Reuters)
- Royal Dutch Shell Issues Profit Warnin: Oil Major Hit by Higher Exploration Costs and Lower Oil and Gas Volumes (WSJ)
- EU Weighs Ban on Proprietary Trading at Some Banks From 2018 (BBG) - so no holding of breaths?
- Sacramento Kings to Accept Bitcoin (WSJ)
- Here comes JPM's next multibillion legal reserve: Federal Probe Targets Banks Over Bonds (WSJ)
- Mulally Bows Out of Microsoft CEO Race, Staying at Ford (BBG)
- United States sending more troops and tanks to South Korea (Reuters)
- Eurozone unemployment sticks at record high (FT)
- China-Japan 'Voldemort' attacks up ante in propaganda war (Reuters)
- Alternative Lenders Peddle Pricey Commercial Loans (WSJ)
- John McAfee: glad Intel dropping name from security software (Reuters)
- Jobless Benefits Bill Stays Alive Amid Talks on Offsets (BBG)
- Chicago Colder Than South Pole as Frigid Air Clamps Down (BBG)
- Former Miss Venezuela shot dead in attempted robbery (Reuters)
With Washington fighting over whether to stop emergency unemployment benefits in the US, the Saudi Arabian government has re-written their economic textbooks with some wonderful new logic. In an effort to encourage its citizens to seek jobs in private companies (as opposed to the majority in government jobs - which the IMF sees as unsustainable), the Saudis are introducing compulsory unemployment insurance for all citizens with jobs. As Reuters reports, "It may not be the most cost effective solution in the near term but if it helps normalise the labour market it is a price worth paying." With unemployment at 12%, and only 30-40% labor force participation, the costs could be significant.
- Heavy snowstorm hammers northeastern U.S. (Reuters)
- Coins Remain a Bright Spot for Gold (WSJ)
- Gross’s Mistake on Fed Taper Echoes Across Pimco Funds (BBG)
- China December services PMI falls to four-month low (Reuters)
- General Mills Starts Making Some Cheerios Without GMOs (WSJ)
- U.S. considers flammability risk of Bakken crude after accidents (Reuters)
- China Mobile’s Costly iPhone Deal with Apple (WSJ)
- Hezbollah Upgrades Missile Threat to Israel (WSJ)
- UK House Prices Cap Best Year Since 2006 as Mortgages Surge (BBG)
- China tells police to be loyal to party amid graft crackdown (Reuters)
Alan Greenspan's Modest Proposal: Fix Broken Economic Models By... Modeling Irrational "Animal Spirits"Submitted by Tyler Durden on 01/02/2014 15:26 -0400
We leave it to everyone's supreme amusement to enjoy the Maestro's full non-mea culpa essay, but we will highlight Greenspan's two most amusing incosistencies contained in the span of a few hundred words. On one hand the former Chairman admits that "The financial crisis [...] represented an existential crisis for economic forecasting. The conventional method of predicting macroeconomic developments -- econometric modeling, the roots of which lie in the work of John Maynard Keynes -- had failed when it was needed most, much to the chagrin of economists." On the other, his solution is to do... more of the same: "if economists better integrate animal spirits into our models, we can improve our forecasting accuracy. Economic models should, when possible, measure and forecast systematic human behavior and the tendencies of corporate culture.... Forecasters may never approach the fantasy success of the Oracle of Delphi or Nostradamus, but we can surely improve on the discouraging performance of the past." So, Greenspan's solution to the failure of linear models is to... model animal spirits, or said otherwise human irrationality. Brilliant.
- China cash injection fails to calm lenders (AFP)
- European Union Stripped of AAA Credit Rating at S&P (BBG)
- Last-Minute Health-Site Enrollment Proves a Hard Sell (WSJ)
- Bernanke’s Recession-Fighting Weapon Developed by 1900s Banker (BBG)
- Asia Stocks Are Little Changed Amid China Funding Concern (BBG)
- Regulators' Guidance on Volcker Rule Gives Banks Little Relief on Debt Sales (WSJ)
- On one hand: Man Who Said No to Soros Builds BlueCrest Into Empire (BBG); on the other: Michael Platt's BlueCrest Capital Poised for Rough Close to 2013 (WSJ)
- BOJ Keeps Record Easing as Fed Taper Helps Weaken Yen (BBG)
- Bank of England becomes more cautious on economic predictions (FT)
- Gold Climbs From Lowest Close Since 2010 as Goldman Sees Losses (BBG)
"If secular stagnation concerns are relevant to our current economic situation, there are obviously profound policy implications... Some have suggested that a belief in secular stagnation implies the desirability of bubbles to support demand. This idea confuses prediction with recommendation. It is, of course, better to support demand by supporting productive investment or highly valued consumption than by artificially inflating bubbles. On the other hand, it is only rational to recognize that low interest rates raise asset values and drive investors to take greater risks, making bubbles more likely. So the risk of financial instability provides yet another reason why preempting structural stagnation is so profoundly important."
As a general rule, extreme economic decline is almost always followed by extreme international conflict. Sometimes, these disasters can be attributed to the human survival imperative and the desire to accumulate resources during crisis. But most often, war amid fiscal distress is usually a means for the political and financial elite to distract the masses away from their empty wallets and empty stomachs. War galvanizes societies, usually under false pretenses. We're not talking about superficial “police actions” or absurd crusades to “spread democracy” to Third World enclaves that don’t want it. No, we're talking about REAL war: war that threatens the fabric of a culture, war that tumbles violently across people’s doorsteps. The reality of near-total annihilation is what oligarchs use to avoid blame for economic distress while molding nations and populations. Because of the very predictable correlation between financial catastrophe and military conflagration, it makes quite a bit of sense for Americans today to be concerned.
Despite hope (and talk) that Greece is on the path back to recovery, our recent discussion of the record deflation the nation is undergoing (and record unemployment) suggests Stournaras propaganda is just that. As Bloomberg's David Powell writes, the embattled nation continues to push further into depression and a state of insolvency and appears highly unlikely to be able to reduce the domestic price level in order to restore competiveness and simultaneously avoid a second restructuring of its sovereign debt. Perhaps that is why Troika delayed its appearance in Athens as it is easier to ignore the truth that way? Especially as beggars, once again, will become choosers in the "grexit" debate.
As a distant but interested observer of history and investment markets, Marc Faber is fascinated how major events that arose from longer-term trends are often explained by short-term causes.; and more often than not, bailouts (short-term fixes) create larger problems down the road, and that the authorities should use them only very rarely and with great caution. Faber sides with J.R. Hicks, who maintained that “really catastrophic depression” is likely to occur “when there is profound monetary instability — when the rot in the monetary system goes very deep”. Simply put, a financial crisis doesn’t happen accidentally, but follows after a prolonged period of excesses (expansionary monetary policies and/or fiscal policies leading to excessive credit growth and excessive speculation). The problem lies in timing the onset of the crisis.
Recently, newspaper headlines declared that Greece would have a balanced budget for 2013 as a whole. The news came as quite a shock: Recall that when Greek officials came clean about the true state of their country’s public finances in 2010, the budget deficit was more than 10% of GDP – a moment of statistical honesty that triggered the eurozone debt crisis. It seemed too good to be true that the Greek deficit would be completely eliminated in just three years. In fact, it is too good to be true.
It would likely also deal another blow to the U.S property market and the fragile U.S economy. JP Morgan, Bank of America and Wells Fargo appear to be most exposed - meaning that either taxpayers will again be asked to bail out banks or more likely the coming bail-in regime will confiscate cash from depositors.