Posts from Wednesday Dec 4 2013

The Closer

FURTHER FURTHER READING

- How to fix Econ 101Read more

Is QE deflationary or not?

We first proposed the idea that QE could be (but wasn’t necessarily) deflationary a couple of years ago. It was dubbed a counter-intuitive idea by Tyler Cowen.

More recently, a similar proposition has been made by Stephen Williamson — though this time using models and proper math. His view is a little different to ours because it’s less focused on the safe asset squeeze and more on the conditions that generate a preference for cash over yielding paper in the first place. Hint: you have to think the purchasing power of cash will go up regardless. Read more

Should the US raise the minimum wage? (That’s not a hook. We actually don’t know.)

You can’t turn a virtual corner this week without tripping over a discussion about the US minimum wage.

The case in favour of raising it has been made by Arindrajit Dube, Paul Krugman, Ed Luce, and Kevin Drum. Arguing against have been Tyler Cowen, Scott Winship, and Adam OzimekRead more

Deflation and secular stagnation: the real threats to EM

This guest post is from Larry Brainard, Chief Economist and Co-Founder of Trusted Sources, an independent advisory firm specialising in emerging market macroeconomic and policy research.

……….

The continuing debate about the timing of Fed tapering has overshadowed two developing issues that have important implications for EMs in 2014. The first is the reappearance of deflation in the Eurozone and the other is the suggestion by former Treasury Secretary Larry Summers that the US economy is slipping into secular stagnation. Read more

Capital controls, Bitcoin edition

An interesting thing happened on the way to Sheep Marketplace — the online market for illicit goods which rose to prominence after Silk Road, the dominant site for illicit goods trading, was apprehended by the Feds in October.

The interesting thing is not that after a couple of months in the limelight the site closed down because a hacker allegedly made off with $5m worth of Bitcoins. Nor is it that the Bitcoin community failed to buy the story because they noticed that all withdrawals from the site were being blocked by the site’s operators — promptly branding the entire website a scam from the beginning.

What is interesting are the “capital controls” the community is now effectively enforcing on the Bitcoin wallet address they suspect is responsible for the theft. In fact, an entire community of Bitcoin vigilantes has sprung up on the Reddit website, dedicating themselves to chasing the money across the open peer-based Bitcoin ledger. Read more

Dear Dromeus Capital investor…

One-year total return of the Athens stock index, to the end of October 2013: +50%

One-year return of the Bloomberg Greece Sovereign Bond Index, same period: +134%

One-year net return of Dromeus Capital’s Greek Advantage Fund: +107%

Yep — FT Alphaville hears that the first-year performance of Dromeus Capital’s Greece-focused fund would make it one of 2013′s best-performing, having already made a strong start at the beginning of the year.

It’s another indicator of how much both Greek equities, and the sovereign’s restructured debt, have recovered this year… Read more

The value of blowing that whistle

However late you might decide to come clean, it pays to be first to ‘fess up.

Antitrust: Commission fines banks € 1.71 billion for participating in cartels in the interest rate derivatives industry Read more

Markets Live: Wednesday, 4th December, 2013

Live markets commentary from FT.com 

The (early) Lunch Wrap

Farewell to Australia’s debt ceiling || Bank of Ireland begins €540m fundraising || Bank of Japan policy board member plays down need for additional easing measures || EU to hit group of banks with heavy fines in Euribor antitrust case || Tesco hit by falling sales everywhere || Standard Chartered issues a profit warning || Tax dispute could see Nokia leave India behind in Microsoft sale || Strong growth for British Service sector Read more

The dwindling 10 per cent club

Remember the days when securitised products were toxic, complicated and for the recklessly brave only? Another year of rising asset values later and the only members of the “10 per cent club” left are slices of equity on new issue collateralised loan obligations.

Morgan Stanley’s credit strategists have had their binoculars out and, which ever way you cut it, there simply aren’t big returns on offer in 2014. Except for high quality debt exposed to interest rate risk, the price of pretty much everything has gone up this year as yields have fallen.

Compare and contrast the Novembers of 2012 and 2013: Read more

Australia’s debt ceiling, we barely knew you

From “noted” to gone in less than 2 months…

From Nomura’s Martin Whetton:

With just over a week before Australia was expected to hit its borrowing limit, the government reached a deal with the Green party in the Senate to abolish the Commonwealth debt ceiling, which is expected to pass Parliament sometime this week.

 Read more

Further reading

Elsewhere on Wednesday,

- Bullard on the gap between policy makers and academics.

- Count Anton-Wolfgang von Faber-Castell and his place in Germany’s trade surplus.

- DeLong gets lengthy on techno-stagnation. Read more

The 6am London Cut

Markets: Asian markets were mixed, with Japanese stocks dropping from a six-year high, while China stocks outperformed. Overall, most bourses weakened as investors stayed on the sidelines ahead of important data due out later this week, including Friday’s US jobs report from November. (Financial TimesRead more