Stabilisation is uneven and recovery will likely be sluggish.

The IMF’s World Economic Outlook Update is subtitled Contractionary Forces Receding But Weak Recovery Ahead. Their Global Financial Stability Report Market Update is subtitled Policies Have Reduced Systemic Risks But Vulnerabilities Remain. While capital injections have helped staunch the bloodletting, financial systems remain impaired and will remain a drag on economic recovery. More than that, …
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The problem with optimism.

Some readers might be turned-off by my insistence on identifying risks.  But if we assume everything is alright and do not focus on the problems, we are acting out the same folly that fed the economic crisis.  We engender moral hazard and have no incentive to fix the system. I reiterate these concerns now because …
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Losses of $ 4 Trillion (that’s 12 zeroes).

The IMF has warned that potential losses from the credit crunch could reach $4 trillion and damage the financial system for years to come. It says that even if urgent action is taken to clean up the banking system, the process will be “slow and painful”, delaying economic recovery. It says that banks may need …
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A monumental failure of management.

Another piece by a respected analyst describing the cause of the economic crisis – moral hazard. Of course, it is not just America’s failure, but one that has been made globally. America’s monumental failure of management. by Henry Mintzberg in The Globe and Mail “If you always do as you always did, you will always …
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12 year lows are rare

I don’t think that the economic contraction has ended yet, but there are signs of a bottoming out of some markets. The US market has been cleaning itself out for six months, though moral hazard remains as do some big skeletons (like the Madoff, Stanford …). The Fed Chairman is concerned about stagflation too. But …
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Madoff’s successful pyramid scheme is just another symptom of greed.

This recent story of a $ 50 billion pyramid scheme that duped supposedly competent investors and banks is just another symptom of the moral hazard that has dominated economics for the past decade. All of these banks and investors that lost millions fooled themselves.  They are supposed to be competent fiduciaries, and were paid for …
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US interest rates – how low can you go

Well not much lower.  US interest rates were cut from 1.5% to 1.0% today.  Soon they’ll be emulating Japan’s interest rate environment – hovering around 0.5%.  And Japan’s economic reputation for the past decade or so has not been good. As we’ve said before, the interest rate level is not the problem.  This reduction may …
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Come clean and admit it – there’s a recession.

Why don’t the reulators, policy makers, players and pundits just admit there’s a problem. I find it extraordinary that Bernanke and co won’t admit there’s a recession.  If they think that they can talk their way out of this downturn, how we can we believe that they will be able to re-engineer the financial system …
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It’s looking like a bad week for the world of money, or is it?

Stock markets have dropped severely over the past day after the announced bankruptcy filing of Lehman Brothers. Lehman was not bailed out because it is an investment bank and only has under $ 300 billion in assets.  But its demise despite its long history and prime reputation has been a wake up call for those …
Continue reading It’s looking like a bad week for the world of money, or is it?