U.S. to Foreign Officials: Stop Buying Treasurys!

Cassandras warn that the foreign appetite for US debt is satiated and wonder who is going to buy US Treasuries when the Federal Reserve stops. Not only are US officials not concerned about this, but the Department of Treasury continues its campaign to discourage foreign central banks from buying so many Treasuries. Foreign official purchases of […]

Where Are Real Interest Rates Headed?

By Andrea Pescatori and Davide Furceri In the past few years, many borrowers with good credit ratings have enjoyed a cost of debt close to zero or even negative when it is adjusted for inflation. In other words, realinterest rates, and, thus, the real cost of borrowing, have been about zero. The rate decline has been global—average global […]

Desperate Times, Desperate Measures

The selloff of emerging market currencies and equities continued last week. A Bank of America report noted that investors withdrew $6.4 billion last week from emerging market stock funds, while bond investors are also showing signs of retreating. Moreover, the declines in currency values have expanded outside the “Fragile Five” of Brazil, India, Indonesia, South Africa and Turkey to include Argentina […]

European Monetary Policy and the Yield Curve

From the Economist last week: Since the financial crisis the European Central Bank (ECB) has ploughed a solitary course, reflecting its unique status as a monetary authority without a state. While other big central banks, notably America’s Federal Reserve, adopted quantitative easing– buying government bonds by creating money– to stimulate recovery, the ECB relied mainly on lowering […]

Privatizations and Debt : Lessons From The Greek Fiasco

 In the midst of the European Debt Crisis, it is tempting to think that high-debt countries could alleviate the recessionary impact of the budget consolidation process by selling (poorly managed) assets and stakes in their state owned enterprises (SOEs), and by using the proceeds to buy back their debts. In addition to providing a cushion […]

Macro-Markets Risk Index: 12.2%

The US economic trend has rebounded in early November after slumping during the past two months, according to a markets-based profile of macro conditions. The Macro-Markets Risk Index (MMRI) closed at 12.2% on Wednesday, Nov. 6—a level that suggests that business cycle risk remains low. One interpretation of the benchmark’s revival is that it reflects […]

Argentina and Elliot, Again

On October 7 the Financial Times published an article by Jay Newman, a senior member of Elliot Management Corporation, the vulture fund that has a long-standing dispute with Argentina, criticizing this country for what he argued was its unwillingness to negotiate with them. A couple of days later the FT published a letter from Danny […]

The Aftermath of the Shutdown Showdown

After the failure of the Republican effort to defund the Affordable Care Act, what is the net macro effect? According the IHS-Global Insight, and S&P [1], 0.6 ppts were shaved off 2013Q4 GDP growth (SAAR). S&P puts a dollar figure to this impact — $24 billion in lost output. As IHS-Global Insight notes [not online], while […]

The Return of Europe’s Debt Crisis

Since mid-2012, the European financial crisis has been in remission, with the symptoms of the underlying disease temporarily suppressed. As treatment is discontinued and drugs lose efficacy, there is a high probability of a relapse. Taking the Waters… A combination of austerity programs, debt write-downs, the European Central Bank’s (“ECB”) commitment to “do whatever it […]