Credit Writedowns

The important point is that returning to growth after the crisis may not be sufficient to facilitate political stability. The damage to the middle class is serious and Rajoy does not appear to appreciate that. The economic cost of…

This past week, I have been focusing on the US economy and the Fed’s reaction function. I would summarize my view as positive about the cyclical trajectory of the US economy but concerned about so-called secular stagnation due to high…

There is a legal concept called "odious debts." It can be traced back more than a century. The US helped create a precedent for it by denying Cuba's responsibility for the debt incurred under Spanish colonial rule. The concept took on…

Finnish society, like many other European ones, is in the throes of a major transition. More debate needs to be held on what to do to facilitate the transition, and in the meantime deficit spending to make investments in future productivity…

As I indicated yesterday, if the Fed is narrowly focused on the long-term path of inflation and arriving at a NAIRU-style full employment threshold, the data are relatively categorical that liftoff must begin this summer. However, I believe…

The biggest question facing the Federal reserve is whether their data dependency means looking through weak Q1 data and raising rates this summer anyway. Given the key elements of the Fed’s reaction function as I laid them out yesterday,…

The title of this post is what the Fed wants us to believe. It wants us to believe that it is prepared to raise interest rates this year but that it will increase them slowly by assessing the data, hiking once and re-assessing, and then…

The last post was an attempt to describe a reasonable worse case scenario for the US real economy as relatively benign compared to 1937, a comparison making the rounds these days due to a piece by Bridgewater’s Ray Dalio. My point is that…

The title of this post is a bit alarmist. But what I intend to write is more about reasonable worst case economic scenarios that the Fed is looking to avoid. While a 1937-style downdraft is something to consider down the line, in the…

Although the euro is now headed up after it overshot to the downside, I believe the European recovery has legs and will continue indefinitely as long as a calamity in Greece doesn’t pull Europe down.