The Kocherlakota speech is important because he was a hawk earlier in the third easing campaign. See last August’s post “Kocherlakota: Statement on Dissenting Permanent Zero Policy.” Greg Ip writes in two insightful tweets, “Kocherlakota’s is the most important post FOMC speech yet; shows payoff to Bernanke’s consensus building https://t.co/C7MXwxwD” and “(Kocherlakota, cont’d) By waiting until he had won over hawk(s), odds rise Bernanke policy outlives Bernanke chairmanship“. I agree with those sentiments.
Right before the Fed’s third easing round last year where Kocherlakota dissented, I wrote that I thought the Fed would be aggressive but late:
David Rosenberg was also on Bloomberg and sees operation twist too. But he also says he doesn’t see how the Fed could prevent a US recession. His view is that the recession is already baked in. He goes further and says that Ben Bernanke is ‘always aggressive but never early’ meaning Bernanke will get the fed to do something – but it will be small beer until the economy collapses.
This is my view as well. The Fed has already begun its third easing campaign but they are not making asset purchases. But they will do in due course.
And now the Fed has finally moved. Will this aggressive move be early enough? I don’t now. I still don’t believe the US is in a recession yet so there is still the potential for the US to exit the slowdown without a double dip. But I tend to believe that a) the Fed is too late b) fiscal policy is more important and c) fiscal will be contractionary after the fiscal cliff. In 2013, this will come together in a bad way.
United States
Fed’s Kocherlakota Sounds More Dovish Tone – Real Time Economics – WSJ
Kocherlakota is a convert to the dovish cause and shows that Bernanke has really got people to move to a more dovish view on the FOMC. There are many fewer dissenters to policy now.
Fed committed to growth push despite internal discord | Reuters
“A string of speeches from top Federal Reserve officials on Tuesday suggested the U.S. central bank is willing to be aggressive in its drive to beef up economic growth, yet also highlighted a small but vocal minority opposing fresh stimulus.”
QE3 may have little impact on mortgage borrowers – The Washington Post
Do you believe this? I don’t. Banks need margin, that’s all.
“Banks say they are keeping rates high right now because lowering them any further would overwhelm them with customers. They say that over time, as volume thins out, rates could come down to attract new borrowers.”
Is QE3 Yet Another Stealth Bank Bailout? « naked capitalism
Just as I was thinking:
“No one on the planet can be surprised that mortgage rates are very low and refinancing is attractive (few bank executives should be surprised by QE3, plus they’ve all been banging on the table for it for the last few months).
Yet, for some reason, banks don’t have the staffing to originate loans faster, as if they were somehow unprepared for this environment. It’s preposterous.
The only explanation: lenders don’t want to originate any faster.
They want to capture more spread and, perhaps, they want fewer people to lock in at lower rates?”
Chart of the day, housing bubble edition | Felix Salmon
A chart showing expected annual rates of house price appreciation over a ten-year horizon juxtaposed to interest rates. Interestingly, the expected return fell before the actual return did during the housing bubble. Both expected returns and rates are coming down.
Freddie Mac: Mortgages back at record lows – Lansner on Real Estate : The Orange County Register
“From Freddie Mac’s weekly survey, the average 30-year fixed rate matched its all-time record low of 3.49 percent and .6 point. This is down from last week’s 3.55 percent and .7 point. The 15-year fixed rate mortgage broke through its all-time record low landing at 2.77 percent with .6 point, down from last week’s 2.85 percent. The 5-year ARM rose slightly to 2.76 percent from last week’s 2.72 percent.”
FT Alphaville » The BoJ’s feud-driven asset purchase extension
Sounds like competitive currency devaluation
“Japan’s finance minister Jun Azumi was pretty clear about how the country might respond after the FOMC’s decision last week threatened to push the yen higher against the dollar. Today the BoJ made good on the threat, announcing it would increase its asset-purchasing programme to ¥80 trillion ($1.01tn) from ¥70tn.”
BOJ eases policy as Japan’s recovery prospects fade | Reuters
“The Bank of Japan eased monetary policy on Wednesday by boosting its asset-buying program, as prospects of a near-term recovery in the world’s third largest economy faded due to weakening exports and a prolonged slowdown in Chinese growth.”
US Fiscal Drag is World’s Problem—Cliff or No Cliff – CNBC
“Ben Bernanke to the rescue? The Federal Reserve, aware of this fiscal drag, has stepped up with an aggressive stimulus plan intended to spur a private-sector pickup, or at the very least to cushion the impact of continued government cutbacks. But even its “unlimited” asset purchases will test the limits of monetary stimulus when it comes to boosting growth. Under the current plan, asset purchases totaling $40 billion a month are equal to an injection of roughly $480 billion a year — or 0.03 percent of America’s $15.6 trillion economy. One-hundredth the size, that is, of the fiscal drag.”
United States
Mitt and the Moochers by Simon Johnson – Project Syndicate
“First, most of the 47% pay a great deal of tax on their earnings, property, and goods purchased. They also work hard to make a living in a country where median household income has declined to a level last seen in the mid-1990’s.
CommentsSecond, the really big subsidies in modern America flow to a part of its financial elite – the privileged few who are in charge of the biggest firms on Wall Street.”
“The reason this matters is that this situation belies on of the Administration’s pet claims, that its hands were tied as far as addressing the foreclosure mess was concerned because it had no leverage over servicers. As we’ll discuss, in fact the Administration has a nuclear weapon in its hands that it is simply refusing to use.
The reason the Borden and Reiss piece is noteworthy is it’s the first time I’m aware of that experts have chosen to comment at length on the REMIC issue, suggest that there is likely a BIG problem here, and politely point out that the REMICs may have committed fraud, which would allow the statute of limitations to remain open indefinitely, giving the IRS plenty of time to investigate and litigate.”
Europe
Dutch parties face mortgage mountain – FT.com
“Total Dutch mortgage debt stands at 111 per cent of the gross domestic product, up from about 50 per cent in 1995. The European Commission warned in February that the Netherlands’ high household debt levels exceeded safe limits. Some economists warn the mortgage problem could ultimately destabilise the Dutch economy much as housing bubbles did in Ireland and Spain.”
Portugal’s austerity measures: The tipping point | The Economist
“A FORTNIGHT is a long time in the euro crisis. In two short weeks Portugal has gone from being a model pupil, praised in Brussels and Frankfurt for steadfastly pressing ahead with a reform programme tied to a €78 billion ($101 billion) bail-out to a cautionary example of the dangers facing governments which attempt to push austerity beyond the tolerance of long-suffering voters.”
München: Zum Oktoberfest steigen Hotelpreise um 850 Prozent – Nachrichten Wirtschaft – DIE WELT
Germany is booming compared to the rest of Europe. Prices for hotels for Oktoberfest are up as much as 850%. This article goes through how crazy the price increases are, even at downtrodden places. This is testament to the fundamentally better economy in Germany.
Deposit Flight From Europe Banks Eroding Common Currency – Bloomberg
““Capital flight is leading to the disintegration of the euro zone and divergence between the periphery and the core,” said Alberto Gallo, the London-based head of European credit research at Royal Bank of Scotland Group Plc. “Companies pay 1 to 2 percentage points more to borrow in the periphery. You can’t get growth to resume with such divergence.””
Technology
Apple criticised over new iPhone Maps app – Telegraph
You have to read the comments section here to understand the anger. Outside of the US, getting rid of Google Maps will be a disaster for user experience for Apple. This is a big mistake. They will regret it.
“Apple faces a barrage of criticism over omissions and errors in its new Maps app for the iPhone, which it created to replace Google Maps in the newly-released iOS6.”
Apple Patents Universal Battery Charging System
“You could use the same battery to power your iPhone, iPod, wireless mouse and so forth. In case your iPhone battery goes low, you could switch it with a battery from another device.
Of course, various gadgets have various power requirements, but Apple has thought of that too. From the patent application: “a rechargeable battery may be adapted to negotiate with the coupled electronic device for an agreed range of power parameters at which power will be transferred to the device and to configure the rechargeable battery to provide power at the agreed range of power parameters.”
We like the idea, and obviously Apple does too, but currently, many of Apple’s gadgets — including the iPhone and the Retina MacBook Pro — have non-removable batteries. What Apple plans to do with this patent remains a mystery, but it’s definitely different from the route the company has recently taken.”
Apple’s Wozniak Hopes IPhone Photos Beat His Samsung Galaxy’s – Bloomberg
““I am always excited about every iPhone product because there are always good advances,” Wozniak said in an interview in Shanghai today. “A better quality on the pictures will mean a lot, because when I show people pictures on my iPhone 4 and my Galaxy S III, they always say the Galaxy S III, or even the Motorola Razr, pictures look better.””
Elsewhere
China, Japan and the world’s Agadir Crisis (1911) – Telegraph Blogs
“It is eerily familiar to anybody who has studied the escalating spat between Wilhelmine Germany and the Franco-British Entente in the lead-up to the First World War. The rise of a new global power is always fraught with risk, and usually mishandled by both sides.
If you think this is a storm in a teacup – the urbane reflex – listen more carefully to US defence secretary Leon Panetta, who warned that China and Japan risk provoking each other into war, drawing in other countries. He meant the US, of course.”
The Aleph Blog » Blog Archive » Neoclassical vs Austrian Economics
“I don’t have much sympathy for those that reject Austrian economics because we don’t have a mathematical means of expressing it. Paraphrasing the Buffett quote, “I would rather be approximately right than precisely wrong.” There are many things that I don’t have an exact economic model for that I know a decent amount about. Qualitative knowledge is valuable, and should not be disrespected by those that do not have a better model, such as the broken model of the neoclassical economists.”
India hit by national strike over economic reforms | Reuters
“Schools, businesses and government offices were shut in many parts of India on Thursday as protesters blocked roads and trains as part of a one-day nationwide strike against sweeping economic reforms announced by the government last week.”
BBC News – Zara owner Inditex profits rise 32%
I like this retailer. Despite troubles domestically, you can see their international breadth has meant good things.
Jesus’ Wife Mentioned on Fourth-Century Papyrus Fragment – Bloomberg
very interesting historical analysis
High-flying S&P 500 actually down last three years? Investors think so – InvestmentNews
“Out-of-touch clients oblivious to stock performance, running out of time to ride bull market”