Unidentified Financial Objects

[FRED]

Re: Unidentified Financial Objects

Sounds like this is assuming decoupling, or at least "currency decoupling" where countries outside the US devalue their currency slower than the US devalues it.

The iTulip position on "decoupling" is that with respect to trade that Asia and Europe are more independent than during previous recessions but not 100% decoupled. If they were 20% decoupled before they are, say, 50% now. With respect to currencies, we (global central banks) hang together or hang separately, as they say.

[FRED]

Re: Unidentified Financial Objects

EJ,

I believe that you missed mentioning rent/house payment besides gasolene and food. Media claims that spending over 50% of family income towards housing is kind of a bubble, whereas we are spending over 40% of family income towards renting an apartment.

Asset price deflation (numerator) will help reduce rent and house payments where the denominator (the global purchasing power of dollars) does not matter; at least until the credit markets begin to price in inflation risk and mortgage rates rise along with long bond rates.

Governments can reduce rents relative to income via the debt markets.

Now readers are starting to see how we arrived at the Frankenstein Economy: one non-market, politically motivated, government band-aide heaped on top of the last, with entrepreneurs asked to bail out these errors each time.

[Chris Coles]

Re: Unidentified Financial Objects

Asset price deflation (numerator) will help reduce rent and house payments where the denominator (the global purchasing power of dollars) does not matter; at least until the credit markets begin to price in inflation risk and mortgage rates rise along with long bond rates.

Governments can reduce rents relative to income via the debt markets.

Now readers are starting to see how we arrived at the Frankenstein Economy: one non-market, politically motivated, government band-aide heaped on top of the last, with entrepreneurs asked to bail out these errors each time.

I had posted this on the London Times yesterday. The final indignity being the UK the government nationalising Vapour-ware production. http://business.timesonline.co.uk/to...cle3386895.ece

"High streets are full of shops selling mortgages. Not one provides access to equity capital with a firm commitment to see an inventor safely capitalised for the long term development of his or her business vision. £100 billion invested in new entrepreneurs and inventors would have transformed our industrial base. In concentrating upon a failed bank, the government shows that it has no interest in the difficulties the British inventor faces with no access to capital from reliable LONG TERM national sources. Venture capital takes control of inventions so they can be rolled forward as fast as possible into a Merger or Acquisition, M&A. The VC refuses to invest for the long term so that the VC’s exit strategy can work fast and profitably as also the M&A. It has been precisely this that has driven the creation of the unstable financial condition of the “Northern Rocks” who create vapour-ware funds to keep the whole thing going. Nationalising vapour-ware production is the final stupidity."

[vinoveri]

Re: Unidentified Financial Objects

Originally Posted by FRED
Asset price deflation (numerator) will help reduce rent and house payments where the denominator (the global purchasing power of dollars) does not matter; at least until the credit markets begin to price in inflation risk and mortgage rates rise along with long bond rates.


What will cause this to happen; seems to me it should already have happened?

Maybe I'm missing something, but the 10yr treasury is yielding < 4% while headline (by the U.S. gov's own metrics) CPI > 4%. The bond buyers are either in it for another reason, or they think inflation will recede dramatically.
The other reason: the result of foreign nations with account surpluses recycling their net savings into the U.S.?

Does anyone have any stats on who the buyers are of US bonds (e.g. % foreign vs % domestic)?

[FRED]

Re: Unidentified Financial Objects

[/INDENT][/COLOR]A .86 correlation is strong, but it shouldn't surprise anyone that newspapers publish stories about recessions during recessions. The time dimension of Theissen's graph isn't fine enough to allow me to identify his "noticeable jump" in the number of 'recession stories' in the Wall Street Journal in March 2007." Presuming it's at the extreme right, it isn't as noticeable as mini-spikes in 1988, 1995, and 1998. These are increases in "newspaper chatter," but they don't correspond to the shaded "recession" bars.

It may be worth pointing out that the top line in the Google Trends graph indicates the number of Google searches on "recession," while the bottom line indicates the number of news references (an extension of Theissen's analysis). The two lines are nearly parallel.

To see how "chatter" about recession compares to other economy-related concerns, iTulip readers can enter multiple terms, separated by commas. For example, try entering recession, gold, oil, global warming. I used recession, fashion, climate. Search volume shows far greater interest in fashion than climate and somewhat greater interest in global warming over recession. The news reference volume shows that volumes for fashion and global warming have been higher since January 2004; however, there was a sharp spike in early 2008 in references to recession, with recession far surpassing the other two topics.




Another problem with the howstuffworks explanation is that it supposes that the consumer is the pivotal factor in the economy and that all other factors are static, ignoring the dynamic role of governments, currency rates, trade relations, wars, natural disasters, and so forth.

Yet another problem in this explanation is the centrality of confidence. The current consumer may not lack confidence at all, but the combination of falling home equity and tightening lending standards, inflating prices, and stagnant incomes may well have left the consumer without the means to continue consuming at high levels.

“There is the dangerous cliché in the financial world [that] everything depends on confidence. One could better argue the importance of unremitting suspicion.” - J.K Galbraith