News: 2014-03-26

North America

Food Prices Surge as Drought Exacts a High Toll on Crops – WSJ.com

Grad Students Driving the Growing Debt Burden – WSJ.com

“The surge in student-loan debt in recent years has been driven disproportionately by borrowing for graduate school amid a weak economy and an open spigot of government credit, according to a report that raises questions about the broader debate about how to resolve Americans’ growing burden.”

Calculated Risk: Comment on House Prices: Graphs, Real Prices, Price-to-Rent Ratio, Cities

A Look at Case-Shiller by Metro Area – Real Time Economics – WSJ

There’s No Housing Bubble, but Places Like California Starting to Look Frothy – Real Time Economics – WSJ

U.S. New-Home Sales Fell 3.3% in February – WSJ.com

Detroit’s wildly accelerating bankruptcy process | MuniLand

Rate rise only when Fed certain U.S. recovery well under way: Fisher | Reuters

Fed’s Lockhart sees rate hike at least six months after QE3 end | Reuters

Financial stability: Leaning, then toppling | The Economist

“IF YOU want to know why the Federal Reserve is undershooting both its inflation target and its maximum employment mandate, cast your eye toward Jeremy Stein. Mr Stein is a Harvard economist and Fed governor. And since assuming his role at the Fed in 2012, he has led the intellectual charge within the Federal Open Market Committee to place more emphasis on financial stability as a monetary policy goal. For a glimpse of Mr Stein’s handiwork, have a look at his most recent speech”

U.S. consumer confidence hits six-year high in March | Reuters

For The First Time Walmart Annual Report Cites Changes To Food Stamps ‘And Other Public Assistance Plans’ As A Risk Factor

” Walmart for the first time in its annual reports acknowledges that taxpayer-funded social assistance programs are a significant factor in its revenue and profits. This makes sense, considering that Walmart caters to low-income consumers. But what’s news here is that the company now considers the level of social entitlements given to low-income working and unemployed Americans important enough to underscore it in its cautionary statement.”

Europe

Le Pen grows stronger amid disillusion as FN surprises in French elections | World news | theguardian.com

Bundesbank hawk signals backing for QE – FT.com

“In a radical change of stance, Jens Weidmann, the Bundesbank president who is viewed as the ECB’s policy hawk, said a QE programme was not “generally out of the question”. “

Ukraine

The Case Against Russia – Barrons.com

Globe in Kiev: Yatsenyuk’s precarious balancing act – The Globe and Mail

“He has been Ukraine’s Prime Minister for barely a month, but already Arseniy Yatsenyuk doubts anyone will vote for him again. That’s not surprising, given that his agenda includes raising taxes, slashing spending, cutting subsidies, stamping out corruption, and transforming nearly every government institution. And all while the economy stagnates and the country faces a possible military confrontation with Russia.”

Crimeanomics favours the West | FT Alphaville

“In sum, when it comes to ‘Crimeanomics,’ it is clear that the US and the EU hold most of the cards. It is in the geopolitical arena where Russia’s leverage is greatest. This, as well as Europe’s reliance on Russian energy in the short term, may ultimately prove to be a limiting factor in the West’s response to the country’s actions in Ukraine and elsewhere. But in this economic “cold war” Russia would be unwise to underestimate the US and the EU’s economic arsenal and underappreciate its own economic vulnerabilities.”

Ukraine and Russia: Why is Ukraine’s economy in such a mess? | The Economist

Ukraine’s new leaders begin search for missing billions | World news | theguardian.com

Harry Reid to drop IMF from Ukraine bill – Seung Min Kim and Burgess Everett and John Bresnahan – POLITICO.com

Putin TV in chaos – Reliable Sources – CNN.com Blogs

FYI: This is what CNN is reporting about RT. You’ll have to make up your mind whether this is slanted propaganda or news about the news journalism.

associated with a rise in the demand for money from positive trend real GDP growth, not lower interest rates.”

Putin Announces Historic G-1 Summit : The New Yorker

“The summit, which Putin has set for June in Sochi, is expected to be attended by the G-1 member nation Russia.”

Finland Seeks to Temper Austerity as Russia Weighs on Growth (2) – Businessweek

“Finland’s government started talks to set spending limits for the next four years, seeking to temper austerity as turmoil in Russia adds to the northernmost euro member’s economic woes. “

Ukraine Seeks to Wrap Up IMF Talks as Crisis Hits Economy – Bloomberg

Emerging Markets

Another Bloomberg Editor Explains Why He Has Resigned, Over Its China Coverage – James Fallows – The Atlantic

Pimco sees Brazil valuations ‘attractive’ in fixed income | Reuters

Brazil at risk of recession as S&P downgrades debt to near junk – Telegraph

Venezuela Lets Bolivar Depreciate 88% on New Sicad II Market – Bloomberg

“Venezuela allowed the bolivar to weaken 88 percent on a new currency market after loosening controls, a move to increase dollar supplies needed to alleviate a record shortage of imports including medicine, food and toilet paper. “

Markets

Higher Rates A Natural Consequence Of Economic Expansion

“we should 1) expect higher rates as the economy expands and 2) we should also expect credit spreads to widen which historically expands bank lending and economic activity. Economic activity slows with contracting credit spreads for which we have a historical minimum of 24mos of warning. “

Absolute return funds near record correlation to equities

“New money pouring into the absolute return sector may not provide the protection investors are seeking, as data shows near-record correlations with long-only equity funds. “

Do Big Banks Have Lower Operating Costs? – Liberty Street Economics

NY Fed finds big banks enjoy taxpayer ‘subsidy’ – FT.com

“According to a paper published on Tuesday by João Santos, a New York Fed vice-president, the biggest US banks enjoyed an extra $60m-$80m of cost savings per average new bond sale over their smaller competitors until 2009.”

Economics

IS-LM vs. Minsky | LARS P. SYLL

TheMoneyIllusion » Reply to Frances Coppola

“Low interest rates are usually indicative of weak growth, as both real and nominal interest rates are procyclical. Barsky and Summers showed that under the gold standard, when the economy slowed interest rates tended to fall. This increased the demand for gold (the medium of account) and was deflationary. The “good deflation” was a secular phenomenon. It was