James Dorn explains why low interest rates over a longer period could distort asset markets. Good article.
"Manipulating interest rates via central bank policy distorts the structure of asset prices and penalizes savers. Low nominal interest rates, even at low rates of inflation, can mean negative real rates. Pension plans are also harmed as promised benefits cannot be fulfilled."
Source: James Dorn
read the article here:
Keywords: Monetary Policy, Interest Rates
C.D. Romer does not think that manufacturing needs special treatment. She would prefer educating more people for jobs in sectors where they are needed or to invest in infrastructure:
Keywords: US Economy, Manufacturing
Inflation in the UK is now more than double that of France, but only one country has had its credit rating downgraded. This column argues that government credit ratings should be aided by a second rating measuring the potential loss of real value, whether by inflation or default. read more on Vox
Keywords: Sovereign Bonds, Credit Ratings, Inflation Risk, Default Risk
We usually don't think of the U.S. as a monetary union, but early in its history it essentially was. Unlike the crisis-wracked euro zone, the dollar zone survived its first few decades without a major crisis, providing the fragile young republic with a period of relative stability during which it began to congeal culturally, economically, politically and militarily. read more on Bloomberg
Keywords: Europe, US, European Crisis, European Monetary Union
The ECB's (in our view intelligently designed) LTRO transaction still did not bring the satisfactory results as December saw a large contraction in the provision of credit to non-financial corporates. The LTRO can only be judged positively once a sustainable rebound of the provision of credit can be observed in the coming months. However, this will also depend a lot on the next steps of EU politicians and whether they are finally able to implement steps which are credible for the real economy and bring back trust into the political institutions. Read more about the LTRO subject in the Telegraph:
Keywords: LTRO Program, Monetary Policy, ECB, European Crisis
Keywords: Government, Economic Liberty
Interesting insights on the "state of debt" in the UK and elsewhere! Particularly interesting is the analyses which also takes the financial debt of banks into account:
Britain has sunk deeper into debt. Three years after bubble burst, the UK has barely begun to tackle the crushing burden left by Gordon Brown. The contrast with the United States is frankly shocking. read more in The Telegraph
Keywords: United Kingdom, British Economy, Debt Crisis
Keywords: US Presidential Elections, Mitt Romney
A book about the divergence of the American society which might put the American success model at risk.
The conservative sociologist looks at the disintegration of America's white middle class. Is the welfare state to blame? read more in BusinessWeek
Keywords: US Economy, US Society, US Wealth
Great interactive chart of The Economist, showing the overall debt level as percentage of GDP. Click on the picture to get to the interactive graph.
Good article of BofA's chief economist Mickey Levy on European competitiveness. Unit labour costs seem to be a key element:
Keywords: Europe, European Competitiveness, Unit Labour Costs
Pascal Lamy, the head of the World Trade Organisation, has suggested that if trade statistics reflected true domestic content, America’s deficit with China might be more than halved.
Keywords: China, America, Trade Gap
..."Total government spending now exceeds 40% of GDP. Federal regulations now cost the private sector an astounding $1.7 trillion per year, or 12% of total output. That means that the governing elite now control more than 50% of the income produced by the American people to spend and distribute as they and lobbyists for powerful political and economic interests see fit." Source: Forbes
Keywords: Economic Freedom, Growth, US Economy
Keywords: China, Chinese Inflation, Yuan
NZZ am Sonntag had an article about a study of the German think tank "Stiftung für Marktwirtschaft". A study showing the effective obligations of countries towards debtors and citizens (mainly official debt, pension obligations and health care obligations). This study provides a different picture than the official debt statistics (which are the basis for the ratings of S&P and alike):
Looking at the long-term, would you rather invest your money in Italy or Luxembourg? In making such a decision, private sector strengths would be another important criteria. The north of Italy does not look so bad. Further research is needed. We will get back to this. For the moment, avoid doing long-term investments by just looking at the S&P ratings!
Find here the book which is a basis to understand a politician such as Ron Paul. He was an ardent reader of the Mises lectures, captured by the intellectual brilliance of this independent scholar:
Excerpts from the Preface to the English edition of the book, written in 1934(!), pages 19 and 20:
"Like all human creations, the gold standard is not free from shortcomings; but in the existing circumstances there is no other way of emancipating the monetary system from the changing influences of party politics and government interference, either in the present or, so far as can be foreseen, in the future. And no monetary system that is not free from these influences will be able to form the basis of credit transactions."
Excerpts from the Preface to the English edition of the book, written in 1934, page 21:
"All proposals that aim to do away with the consequences of perverse economic and financial policy, merely by reforming the monetary and banking system, are fundamentally misconceived. Money is nothing but a medium of exchange and it completely fulfils its function when the exchange of goods and services is carried on more easily with its help than would be possible by means of barter. Attempts to carry out economic reforms from the monetary side can never amount to anything but an artificial stimulation of economic activity by an expansion of the circulation, and this, as must constantly be emphasized, must necessarily lead to crisis and depression. Recurring economic crises are nothing but the consequence of attempts, despite all the teachings of experience and all the warnings of the economists, to stimulate economic activity by means of additional credit."
Mises: Gold Standard, Government Spending
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