January 2012

The Fed has come out 9-1 in favor of rate easing i.e. capping medium-term treasury rates. The interesting bit is that while the Fed did the exact same thing in August out to two years, this announcement takes permanent zero out to nearly…

Given what we see as a basically hands off policy with regards to the exchange rate when MXN is appreciating, we see more potential upside for MXN compared to, say, BRL, where Brazilian authorities are clearly going to work against further…

I am not at all optimistic about the euro zone in terms of policy makers fashioning a solution to the problem. The euro leaders have the diagnosis all wrong. They keep harping on government debt and deficits as if that's the problem. And…

The dollar's downside momentum has faded since the start of the week and short-term momentum traders have to adjust. There does not seem to be a precipitating factor. The German IFO was mostly better than expected and while the UK Q4 GDP…

News links for 24 January 2012

I am glad to say that the overinvestment thesis is much more widely acknowledged today than it was even two or three years ago, but one myth, I think, is that most of the overinvestment excesses in China are concentrated in the real estate…

Many observers will posit the euro's resilience today to the flash PMI reading for January where both the manufacturing and service sector readings were above expectations. The flash manufacturing diffusion index stood at 48.7 vs 47.3…

News links for 23 January 2012

Watch gold as it pushes up against the downtrend line. Any hints from the Fed of QE3 could send it “to the Moon, Alice!” The Fed rejoining the party and the LTRO2 coming next month could be an explosive mix.

Last week we examined Milton Friedman’s version of Functional Finance, which we found to be remarkably similar to Abba Lerner’s. The only problem with Friedman’s analysis is that he did not account for the external sector: he wanted a…