News: 12-12-2013
Some of the links have a view I disagree with fairly strongly so read with caution. Links do not equal endorsements.
Markets
Have you noticed? Equities are the new bonds | FT Alphaville
Canada, Belgium Top Ranks of Overvalued Housing Markets – Deutsche – Canada Real Time – WSJ
Dan Fuss Joins Bill Gross Shunning Long-Term Debt Before Taper – Bloomberg
Risk from bubble trouble is overblown – FT.com
“It is close to five years since the US Federal Reserve introduced quantitative easing. Since then, global equities have returned more than 16 per cent a year on average, and US high yield credit 18 per cent. Such gains have vastly outstripped growth in gross domestic product and corporate earnings.”
Fed
Who Is Stanley Fischer? – Real Time Economics – WSJ
Potential Fed Nominee Fischer on QE: ‘Dangerous’ but ‘Necessary’ – Real Time Economics – WSJ
Young Stanley Fischer and the Keynesian Counterrevolution – NYTimes.com
“Stanley Fischer, who may join Janet L. Yellen atop the Fed, is now a respected elder among monetary economists, but he began his career as an insurgent.
As with all successful revolutionaries, success has obscured the revolution. Consider the 1977 paper for which he is most famous. It helped to transform the practice of monetary policy, creating the world in which Ben S. Bernanke has operated, but its opening lines sound like conventional wisdom, which now it is.
“This paper is concerned with the role of monetary policy in affecting real output,” Mr. Fischer wrote, “and argues that activist monetary policy can affect the short-run behavior of real output, rational expectations notwithstanding.””
Quantitative Easing: Lessons We’ve Learned
This is from 2012 after QE 2
“How Does QE Work?
Most economists agree that the interest rate that matters for stimulating investment and consumption is the medium- to long-term expected real interest rate. Medium- to long-term expected real interest rates are a function of three components: average expected overnight interest rates, a term and/or risk premium, and expected inflation. All else equal, the expected return from buying a U.S. Treasury or other bond must equal the expected average overnight interest rate over the lifetime of the bond; otherwise, the investor would be better off rolling over daily loans. But since all else is not equal, the investor also demands premiums for holding the risk that the value of the bond will decrease due to unexpectedly high interest rates (the term premium) and for holding the risk that the bond issuer will default (default risk premium). Finally, since investors are ultimately not concerned with the dollars that their investment will yield but only with the quantity of goods that those dollars will buy, the expected real return on the bond subtracts expected inflation.
QE does not directly impact future short-term rates, but it may signal to markets that economic conditions are worse than previously thought and that, as a result, low short-term rates will be warranted for longer than expected. Moreover, the central bank can use QE to signal its commitment to hold interest rates down for longer than previously believed or to meet a stated inflation rate target. Effects on future short-term rate expectations are generally referred to as the signaling channel. “
Quantitative easing doesn’t cause inflation or deflation
A note to New York Fed President William Dudley | MuniLand
Europe
Fans of ECB Quantitative Easing Gain a Strong Friend – MoneyBeat – WSJ
Statement by the President of the Eurogroup on Slovenia – Eurozone
Italy’s establishment shaken by ‘Pitchforks’ protests – FT.com
“After two years of grinding recession with rising taxes and unemployment, few in Italy are surprised at this latest outbreak of social unrest.
But what has exposed the “panic and unreadiness” of the government, as argued by Il Giornale – a rightwing newspaper owned by the Berlusconi family – is that they are confronted by “a protest which you don’t know where it is coming from or going to, who is leading it and how spontaneous it is”.”
Spain Expects Primary Budget Surplus in 2015 – WSJ.com
North America
U.S. retail sales rise 0.7% in November – MarketWatch
Budget Deficit in U.S. Narrows as Job Gains Bolster Revenue – Bloomberg
“Receipts rose 12.8 percent to the highest ever for the month, while spending fell 4.8 percent. “
U.S. Consumers’ Holiday Spending Intentions Remain Modest
Americans Say Dream Fading as Income Gap Hurts Chances – Bloomberg
U.S. poised for stronger growth in 2014, Fed to taper by March: Reuters poll | Reuters
“The poll of more than 60 economists taken this week forecast GDP growth stepping up to a 2.5 percent annualized rate in the first quarter of 2014, and reaching 3 percent by year-end.
Growth in the final three months of this year is forecast at a pedestrian 1.5 percent pace, largely because businesses are expected to unwind some of the third-quarter’s massive inventory build-up, which pushed GDP growth to 3.6 percent.”
Tea Party Favorability Falls to Lowest Yet
Canada’s postal service ending home mail delivery over five years | The Verge
Economics
What Is Post Keynesian Economics? | LARS P. SYLL
The Safe Asset Share – Gary Gorton, Stefan Leweleen, Andrew Metrick
This interesting piece was pointed out to me by John Carney. Basically, the writers have found out that the safe assets have remained a constant third of all assets for the last 60 years in the US. That is remarkable. They say this constancy needs to be explored because it could represent “an underlying transactions technology that is not well understood.” Good stuff.
Krugman, Helicopters, and Consolidation | New Economic Perspectives
Here, Fulwiler and Kelton say that consolidating the Fed and government balance sheets as Krugman does makes sense. People like Cullen Roche and Marc Lavoie take issue with this.
Helicopters Don’t Help (Wonkish) – NYTimes.com
“David Beckworth has a good piece on a point I’ve also tried to make: the irrelevance of “helicopter money”, and in particular the irrelevance of the decision to finance budget deficits by printing money as opposed to selling bonds.”
Potential Misunderstandings – NYTimes.com
“If you want to claim that an economy has grown unsustainably above potential, you need to show me the accelerating inflation. In particular, if the Great Moderation era of rising debt was a case of growth above potential, it should be an era that ended with inflation well above where it started. It wasn’t”
Technology
Why a Nokia-built Android phone might make sense for Microsoft — Tech News and Analysis
What Yahoo Didn’t Want Investors to Know – Bloomberg
Synology DiskStation DS1813+ Review & Rating | PCMag.com
France steps up internet surveillance – FT.com
“France is to significantly expand its powers of digital surveillance just weeks after protesting against allegations of extensive US spying on its citizens.
Internet business groups, the employers’ federation and the country’s own data protection watchdog have strongly objected to a new law that extends the scope of telecoms and internet surveillance by the state well beyond existing provision for antiterrorism probes.”
LG G Flex Review: An Engineering Concept You Can Actually Buy, Not That You Necessarily Should
If you’re anything like my wife, you’ll love Amazon’s Kindle Fire HDX 8.9 — Tech News and Analysis
Yahoo Mail Is a Consumer Disaster, But Company’s Response – Kara Swisher – Media – AllThingsD
Android Device Manager arrives in Play Store to track missing gadgets | The Verge
Spotify Goes Freemium On Tablets, Launches Free Shuffle Product On Smartphones | TechCrunch
Norway Decided to Digitize All the Norwegian Books – Alexis C. Madrigal – The Atlantic
What is being digitized? – Nasjonalbiblioteket
Why Microsoft probably won’t go through with Nokia’s Android plans — Tech News and Analysis
Crypto weakness in Web comment system exposes hate-mongering politicians | Ars Technica
The End Of Subsidized Phones Could Be Near | TechCrunch
TextSecure Encrypts SMS Messages, No Root Required
Google releases desktop Chrome App Launcher to all Mac users | 9to5Mac
Spotify announces free streaming on Android and iPhone, but only in Shuffle mode | The Verge
Bizarre
Sign language interpreter at Nelson Mandela’s memorial was a fake | The Verge
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