Meanwhile, in Japan…

Back in September, I wrote: What I expect to happen is this:  The Bank of Japan will be forced into outright monetization at some point; a soft default in the form of higher inflation will occur.  And dramatically higher inflation, I fear.  Japan has not had inflation for two decades.  I suspect they will experience all that […]

Ecuador: Bank Spreads, Taxes, Executive Compensation and Growth

(Cross Posted at One of the distinctive features of banking in scores of developing nations is the very large spreads between the rate of interest they pay their depositors and the rate they charge borrowers.  Academics have frequently focused on the exceptionally high spreads in Latin America in articles published over the last three […]

Can You Find Opportunity in Thanksgiving?

We have a very interesting week ahead.  Despite the gravity of the issues, not much will be happening.  Congress, after convening for a few days, will be back on vacation recess.  There is not much news coming on the economic front.  Equity markets will be closed on Thursday and open only for the morning on Friday. In […]

QE3 Will Work if it Shifts Expectations That the Fed Will Tolerate More Inflation

Beyond the straightforward mechanics of QE3 (i.e., the Treasury and MBS purchases), the Fed’s impact on expectations is key. The guidance indicated that support would remain in place until the economy is well in their clear. By aggressively pushing on bond yields, and more importantly, promising to maintain that effort, Bernanke and Co. definitely had […]

QE3: Buoying the GCC

The Economonitor’s QE3 week is perfect timing as we’ve been thinking a lot about the effects of the latest bouts of global monetary stimulus on the Middle East and North Africa – as summarized in part of our omnibus MENA quarterly presentation. We argue there that even though EMs and to a lesser extent frontier […]

Greeks Get Time but Not Money

Yves here. This post by Delusional Economics continues with his cataloguing of the slide of the Eurozone into an economic and political abyss. What is striking is the contrast between his matter of fact tone (which at this point is fully warranted, these self destructive actions have become depressingly routine) and the horror of what […]

Bond Vigilantes to the Rescue

Paul Krugman claims that should the much-dreaded bond vigilantes show up, they actually would be good for the economy.  He notes that unlike Greece, the United States has its debt denominated in its own floating currency.  Consequently, the appearance of bond vigilantes would lead to an expansionary decline in the value of the dollar, not a […]

Three Key Developments

The US dollar is generally offered today.  There does not seem to be a major catalyst.  Rather technical factors, and in particular, the euro’s inability to fall through the $1.2880 area despite repeated tests appears to have encouraged the move to the upside, as the path of least resistance. Month-end flows are difficult to anticipate […]