Guest post: Toby Nangle on the end of the “Goldilocks slump”

In this guest post, Toby Nangle, the Global Co-Head of Multi Asset & Head of Asset Allocation, EMEA at Columbia Threadneedle, wonders whether rising wages caused by changes in demography could ultimately end the productivity slump.

Weak productivity growth has puzzled economists and policymakers but it doesn’t seem to have hurt investors: the period 2009-2016 might even be called “the Goldilocks Slump”. Ample slack in job markets ensured little bargaining power for workers, whilst central banks battled deflationary impulses with a combination of low (or negative) rates and asset purchases. The net effect has been falling real yields and tight risk premiums.

But productivity growth does matter. And we are nearing the point where its absence will be of overwhelming importance to financial market investors. Read more

Financial plumbing and the choice of balance sheet(s)

This guest post from Manmohan Singh warns that while QE created excess reserves, removing those reserves from the system will have an important impact on the markets’ financial plumbing – and that will need to be incorporated in monetary policy decision making. Singh is the author of Collateral and Financial Plumbing and a senior economist at the IMF. Views expressed are his own and not of the IMF.


Expanded central bank balance sheets that silo sizeable holdings of US Treasuries, UK Gilts, Japanese Government Bonds (JGBs), German Bunds and other AAA eurozone collateral have placed central bankers in the midst of market plumbing. It’s now going to be very difficult for them to walk away from that role. Read more

On HM Treasury’s Brexit analysis…

A guest post by Peter Doyle, economist and former IMF staffer


I very much hope—and expect—that Brexit will be rejected.

But the 200-odd pages of HMT density on trade theory are intended to intimidate, not illuminate. They distract from the key issue; the impact of Brexit on the Euro. Read more

Guest post: Helicopter drop? Just drop the idea

This post is from Gerard MacDonell, an economist at Point72 Asset Management, formerly SAC, from 2004 through 2015…


With the risk of recession and a return to the zero bound now prominent, there is renewed discussion of the Fed and Treasury coordinating to deliver a helicopter drop of money.

This would not work in the US because the inflationary implications of it would be too dire and because the Fed would predictably renege on its side of the bargain. Here’s why, as I see it. Read more

Guest post: Buffett’s climate certainty

From Kate Mackenzie, former Alphavillain and current climate-finance think-tanker


Warren Buffett’s annual letter last week badly lets down any reader hoping to understand the implications of climate change for the general insurance and reinsurance sector.

If Buffett had said climate change impacts are not a problem for ‘his’ insurance companies, because his managers are managing the risks thusly, that would be fine. It’d also be a fascinating read, if it went into some detail — unlikely though, because that would reveal competitive information.

Unfortunately he chose to apply it to all of the insurance sector: Read more

Guest post: (Episode VII) The Mob Awakens

This is a guest post by Timothy R. Ferguson founder and president of The Institute for Anacyclosis, a non-profit advancing the study of Polybius’s cyclical theory of political evolution.

According to the original version of Polybius’s theory of Anacyclosis, society begins as tribal monarchy, develops into royal monarchy, then degenerates into tyranny. This in turn is overthrown by aristocracy, gets corrupted by oligarchy, and is later succeeded by democracy, which itself is perverted into ochlocracy (mob-rule) — finally opening the door (once again) to the chaos that makes autocratic rule palatable, thereby restarting the cycle.

The base cycle being referenced over and over again is thus one-few-many.

While political evolution does not rigidly conform to any fixed sequence, a sufficient duration of time seems to average out the occurrences of chance. For example, England in the beginning was ruled by kings, then by an aristocracy, which quickly became oligarchic. Now it fancies itself democratic, even if in truth it has become rather more plutocratic.

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Guest post: The emotional pari passu rollercoaster

By Rodrigo Olivares-Caminal, Professor in Banking and Finance Law at Queen Mary University of London and an expert and consultant in sovereign debt restructuring.

The Fed is not ready for the next recession

By David Beckworth

An increasing number of observers believe that the United State is inching closer to a recession. They see the stock market rout, plummeting oil prices, and falling inflation expectations as an ominous sign for the economy. Some also worry that the Fed’s raising of interest rates in December may have gotten ahead of the recovery. They fear this tightening of monetary policy could intensify these other dire developments and be the tipping point that pushes the economy into recession. Read more

Guest post: Re-electing Madame Lagarde

A guest post by Peter Doyle, economist and former IMF staffer

An election with only one candidate? Doesn’t sound competitive. But with nominations just closed for Managing Director of the IMF, the one candidate, Madame Lagarde, will be reelected regardless. Read more

Guest post: How to think about the Capital of China

By George Magnus, an associate at Oxford University’s China Centre and senior economic adviser to UBS

Ok you guessed: we are not talking about Beijing. Read more

Guest post: Argentina’s debt offer — don’t pop the champagne just yet

Charles Blitzer, an economist, former senior IMF staffer, and expert on sovereign debt management and restructuring, analyses Argentina’s recent offer to its debt holdouts — and advises a course correction for the government.

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Guest post: Best practices to resolve Argentina’s debt dispute

Charles Blitzer, an economist, former senior IMF staffer, and expert on sovereign debt management and restructuring, says that talks between Argentina and its holdouts should start with signing a non-disclosure agreement.

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Guest post: The Fourth Industrial Revolution and the dollar dilemma

This guest post is from Lutfey Siddiqi, managing director at UBS Investment Bank, and Simon Smiles, chief investment officer for ultra high net worth at UBS Wealth Management. It’s on the back of a UBS white paper for Davos, which you can read here.

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Guest post: Puerto Rico — debtor, heal thyself

Mitu Gulati and Bob Rasmussen — members of the law faculties of Duke University and the University of Southern California, respectively — argue that Puerto Rico has another route to restructuring its debts…

The federal courts have declared that Puerto Rico does not have the authority to enact an insolvency regime applicable to its public sector borrowers. Read more

Guest post: Peter Doyle on China

By Peter Doyle, former IMF official and economist.

The line of China Bulls is that “things really aren’t that bad or surprising, and there’s considerable willpower and ammunition left in Beijing should it be necessary”. Read more

How petrostates may solve their fiscal woes

by Evan Soltas

Guest post: It really is different this time

In this guest post, Erik Weisman, the chief economist of MFS Investment Management, explains why past Fed hiking cycles aren’t a good guide for predicting what will happen this time.

As the Federal Reserve prepares to raise interest rates, perhaps as early as the December meeting, many investors are looking at past rate hiking cycles for clues about how markets will react this time. Often we turn to the familiarity and convenience of what we’ve seen in the past to try to predict the future.

But that can make us look in the wrong place – and Fed tightening cycles over the last 30 or so years are simply not a good guidepost for what lies ahead. Read more

Mayfairer than you might think: look to your own “goons”

This guest post from credit strategist William Porter was provoked by the Goon Watch series on FTAV. Have a glance at that, if you haven’t already, then come back to read this considered smackdown…

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How oil can get back to triple digits by 2017

With Goldman raising the spectre of a $20 crude price, here’s an alternative scenario from Ecstrat strategist Emad Mostaque…


After years of being too high, oil forecasts now appear too low. As supply rolls over we could see prices back at $100, with decade-high geopolitical risks shocking it higher. Read more

Guest post: Sizing up NPL risk in China

By Christopher Balding, Professor of Economics at Peking University, HSBC Business School, and blogger at Balding’s World.

One of the major questions facing investors and analysts of the Chinese economy is how to size up credit… or more specifically the non-performing loan risk lurking in the system.

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Guest post: What Chinese rebalancing? Cash flow edition

By Christopher Balding, Professor of Economics at Peking University, HSBC Business School, and blogger at Balding’s World. The TL;DR of this post might be that rebalancing the Chinese economy without a hard landing will be… difficult. Read more

Why the outrage over Carney’s climate speech?

This guest post is from Kate Mackenzie, a former Alphavillian who now works with The Climate Institute in Australia.


Anytime a public figure mentions climate change, you can guarantee a fierce response — and, sure enough, it happened again with Mark Carney’s speech on climate risk. Read more

How to choose the IMF’s next Managing Director

This guest post is from Peter Doyle, an economist and former IMF staffer.


As the International Monetary Fund readies itself for its Annual Meetings in Lima next week, perhaps the key issue in its governance—the end of Christine Lagarde’s term as Managing Director in mid-2016—remains largely off the radar screen. It deserves prominence now. Read more

The investment drought: Why football clubs aren’t alone in focusing on short-term goals

This guest post is from Simon Smiles, chief investment officer for ultra high net worth at UBS Wealth Management, and his strategist colleague Christopher Swann.


The latest transfer season in the UK was another record-breaker for the Premier League, with clubs shelling out £862m on players from other teams. That was over 10 times the annual sum that clubs have committed to the youth Elite Player Performance Plan – which aims to develop homegrown talent. This underinvestment may help explain why the Premier League is forced to import 67 per cent of players from abroad while the English team hasn’t won a World Cup in almost 50 years. Read more

Guest post: Trying to throw our arms around the (sick) Chinese economy

By Christopher Balding, Professor of Economics at Peking University, HSBC Business School, and blogger at Balding’s World.

Throughout the Chinese stock market run up and subsequent collapse, the most fundamental question revolved around the robustness of the overall economy. Read more

Guest post: The importance of credibility in capital markets, China edition

By Christopher Balding, Professor of Economics at Peking University, HSBC Business School, and blogger at Balding’s World.

The job of the modern economic and financial policy maker is a difficult one. Markets are being created at breakneck pace to trade incredible varieties of financial products and the complexity of major modern economies is dizzying. Considering the constraints of managing enormous economies and financial products, the most important asset of the economic regulator is not perfect decision making but credibility.

As China has battled a variety of financial pressures this year — from a falling stock market to capital outflows pressuring its US dollar peg — Beijing’s lack of a credible coordinated policy response worsened their public reception. Rather than articulate a clear vision of how to address a falling stock market and slowing economy and proceed to methodically execute that plan, Beijing swerves between conflicting announcements and less than credible positions that the market discounts. Read more

How will the Fed react to contrasting domestic and international developments?

By Mohamed El-Erian

Data out of China, Europe and the United States highlight contrasting influences on Fed officials as they prepare for their September policy meeting. Domestic indicators are consistent with a September hike but international indicators are not. That tug of war makes this Fed much harder to predict than its predecessors. Read more

Why life insurers haven’t escaped the spectre of negative rates

This guest post is from Camp Alphaville speaker Themis Themistocleous, who is head of the European Investment Office at UBS Wealth Management

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El-Erian: Reaction to an insightful ECB press conference

The writer is Mohamed El-Erian, chief economic adviser to Allianz and chair of US President Barack Obama’s Global Development Council.

Here are three quick takeaways from today’s press conference by the European Central Bank: Read more

IMF Debt Sustainability Assessments of Greece (and others)

In this guest post, former IMF staffer Peter Doyle castigates the institution’s flip-flopping over Greece…

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