Nouriel Roubini's Global EconoMonitor

RGE Monitor – Weekly Roundup

Greetings from RGE Monitor!

Check out all the great contributions that were published during the past week on RGE’s Nouriel Roubini’s Global EconoMonitor, RGE Analyst’s EconoMonitor, Finance & Markets Monitor, Peterson Institute for International Economics Monitor, Global Macro EconoMonitor, U.S. EconoMonitor, Emerging Markets Monitor, Asia EconoMonitor, Latin America EconoMonitor and Europe EconoMonitor.

This past week on Nouriel Roubini’s Global EconoMonitor, Nouriel provides detailed analysis suggesting that downside risks to sustained global growth recovery appear to be greater than upside.  Read more at: Green shoots or yellow weeds? A trifecta of risks to the early bottoming out of the recession and short-term economic recovery and to the medium-term actual and potential growth prospects of the global economy.

Nouriel also considers the real possibility of a world where the renminbi, and not the dollar, is the global reserve currency in The Almighty Renminbi?

Don’t miss Recent Bloomberg and CNBC Roubini Interviews.

On the RGE Analyst’s EconoMonitor, Ayah El Said and Rachel Ziemba analyze the latest potential tool in Kuwait’s tool box. On May 14th, the Central Bank of Kuwait, the Kuwait Investment Authority (KIA) and a number of private companies entered into discussions to establish a fund, or a “bad bank”, to purchase toxic assets from the country’s investment companies’ balance sheets. This comes less than a week after the central bank proposed a third round of stress tests.  Read more at: Will a ‘Bad Bank’ Provide A Solution To Kuwait’s Financial Woes?

In “Brazil and China: Moves Towards a New Economic order?” Rachel Ziemba assesses recent suggestions by Brazilian president Lula that Brazil and China shift away from the dollar in trade. She argues that it is the composition of their savings and not the currency in which trade is conducted that will have the greatest effect on currency markets.

Also on the RGE Analyst’s EconoMonitor:

CHILE – Going Into the Q1 2009 GDP Figures: Any Good News? by Bertrand Delgado and Italo Lombardi

Are Australian Banks Better Off Than Those in the U.S. and EU? by Mikka Pineda


On the Finance & Markets Monitor, Rick Bookstaber argues in The Flight to Simplicity in Derivatives that due largely to current market dynamics, most client firms trading in the OTC markets will choose to have their trades cleared on the new CCPs for a myriad of reasons, including greater safety, liquidity, transparency and so forth.

How NPR Mangled Geithner’s Plan For OTC Derivatives by Charles Davi deconstructs the reporting of NPR pertaining to the recent Treasury proposals with regard to the further standardizations in the OTC markets.  Davi goes on to show that the NPR show made many factual errors in reporting on this very important and not very well understood issue.

Asset classes and the inadequacy of labels by Alpha analyzes the current classification of investment strategies used by institutional investors, like Absolute Return, Private Equity, Equities and so forth.   The author goes on to propose that a better classification would be the following four buckets: Real claims, Fixed claims, Residual claims and Derivative claims.

Also on the Finance & Markets Monitor:

BankUnited’s Sordid History by Rolfe Winkler

Blackjack, Banking, and the Risk of Not Taking Enough Risk by Paul Kedrosky

Wherever the Fed goes, credit markets thaw by Rebecca Wilder

The Randomizer by Macro Man

Bankers Will Be Boys by James Kwak

Time to ditch the PPIP by Models & Agents

The Answers by Macro Man


On the Peterson Institute for International Economics Monitor, Adam S. Posen discusses whether the stress tests and PPIP are good policy that will lead to a good outcome and then offers ways to judge this policy exercise moving forward.  Read more at: How to Grade the Stress Tests and PPIP

Also on the Peterson Institute for International Economics Monitor:

A Green Recovery? Assessing US Economic Stimulus and the Prospects for International Coordination by Trevor Houser

Rules for a Bank Bailout by Anders Aslund

Temporary Nationalization Is Needed to Save the US Banking System by Adam S. Posen

On the Global Macro EconoMonitor, James Hamilton says that though the rate of contraction of industrial production has slowed, deterioration continues as economic recovery requires growth, not a slower rate of decline. Read The deterioration continues.

Rebecca Wilder mentions that housing bubbles have been extreme around the world. There is still downward price momentum left for many of these markets including the U.S., UK and Spain, whereas Ireland has experienced the biggest relative bubble as its price-rent ratio has risen since Q3 2008.  Read Housing bubbles around the world: looks pretty bad.

Prieur du Plessis says there has been impressive progress in the credit markets in the past few months with most indications showing substantial improvement since their “panic peaks”, thanks to the massive reflation efforts orchestrated by central banks worldwide. Nonetheless, it still has a way to go before confidence in the world’s financial system is restored and liquidity starts to move freely again. Read Credit Crisis Watch: Thawing – noteworthy progress.

Also on the Global Macro EconoMonitor:

Can The US Save The World? (House Testimony) by Simon Johnson

Law, Economics, and Regulation by James Kwak

Economics Students: Join “Toxic Textbooks” by Steve Keen

A look at the temperature record of Alaska – any sign of global warming? by Fabius Maximus

Some New Macroeconomic Challenges by Antonio Carlos Lemgruber

Second Lesson of the GFC: Whatever It Takes! by Satyajit Das

“Paul Romer’s Many Hong Kongs” by Mark Thoma

When Doing Nothing Equals Increased Aid by William Easterly

Economics of Sick Days by James Kwak

On the Emerging Markets Monitor, Brad Setser discusses the possible outcomes of a global financial order and the balancing role that China will play: ‘Different conceptions of China’s future role in the global financial system’.

Marcus Svedberg writes about the relationship between market performance and the real economy and how markets will behave from now on when the flow of negative economic news continues to emerge: ‘Converted Bulls or Convinced Bears?’.

Finally, Edward Hugh discusses the prospects for the Russian economy, the risks in the financial system, and the government assessment of the crisis: ‘The Russian Government Forecasts A Possible 8% GDP Contraction For 2009’.

On the U.S. EconoMonitor, Rolfe Winkler recollects that Geithner Admits: Easy money did us in. Frustrated “that the government is engaged in the same disastrous policy today,” Winkler claims that Bernanke’s low rates enables a credit-driven “ponzi system” and that “de-leveraging is coming, whether we want it to or not.”

In  Who’s Afraid of a New Reserve Currency?, Mark Thoma deconstructs “the irrational fear” surrounding a dimming of the “international role of the dollar.”

Robert Reich warns of “the big step sideways” in The Health Care Cave-In if Big Pharma and Big Insurance convince lawmakers to set aside “a public plan” option to buy into government-backed healthcare.

Revisiting policies that are often considered political suicide, Jeffrey Frankel proposes twists that allow for Slipping Out of the Political Handcuffs on Energy Taxes.

Also on the U.S. EconoMonitor:

Don’t expect government jobs to hold on by Rebecca Wilder

The Truth Behind the Social Security and Medicare Alarm Bells by Robert Reich

Additional Reflections on the March Trade Release by Menzie Chinn

Fed Watch: Not So Green Wednesday by Mark Thoma

Yet Another Greenspan Housing Bottom Call by Barry Ritholtz

Why are we fighting in Pakistan? by Fabius Maximus

The Resilience (?) of the American Consumer by Models & Agents


“Stay the Course” by Mark Thoma

More Bank Balance Sheets for Beginner by James Kwak

My Own Private Stimulus by Emanuel Derman

FRBSF: U.S. Household Deleveraging and Future Consumption Growth by Mark Thoma


Dubious Indicators: Continuing Jobless Claims by Jeffrey Miller

Did you know that the unemployment rate is 8.9%? by Rebecca Wilder

In Search of … Hyperinflationary Expectations by Menzie Chinn

Bailout Nation: Where Are the Bloggers? by Barry Ritholtz

Consumer Protection When All Else Fails (Written Testimony) by Simon Johnson

Can Consumers Realistically Expect Their Governments to Protect their Interests? by Ethan S. Burger

On the Asia EconoMonitor, Edward Hugh asks, Is The Indian Economy Heading For Its Finest Hour?  After the recent elections, there are many encouraging signs that India’s economy is ready to grow, which will contribute to restoring global demand, Hugh argues.

China Economist looks at plans to expand health care coverage in China, and argues that education spending would do more to increase Chinese consumption.  Read: “Sickness of Savers in China”

On the Latin America EconoMonitor, William Easterly points out that by reversing conditional probabilities it is common to make mistakes either in the day to day life as well as in policy making.  Please read: “How ethnic profiling explains Dani Rodrik’s fondness for industrial policy”.

Then, Antonio Carlos Lemgruber suggests that central banks should include an “asset inflation” measure in the Taylor rule in order to control for financial bubbles.  Please read “Stopping Financial Bubbles through Taylor’s Rule

On the Europe EconoMonitor, Edward Hugh reviews the boom-bust cycle in Latvia that has led to a devastating contraction in GDP. Read: The Agony Continues – Latvian GDP Falls By 18%.

Then, in British consumers: down but not necessarily out, David Smith comments on how private spending must fall in the short term due to rising unemployment and tight credit, but that citizens will likely prove themselves to be instinctive spenders, not savers in the long term.

Finally, China Economist believes that China’s often unreliable statistical office can learn a lot from the UK’s Office of National Statistics’ recent admission that their retail sales figures were overshot by 56%.  Read: UK’s ONS gets retail figures wrong.

Also on the Europe EconoMonitor:

Bank: The only certainty is uncertainty by David Smith

Slovakia Takes The Biscuit – GDP Drops 11.2% In Three Months by Edward Hugh

A big fall in inflation by David Smith

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