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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.

On Nouriel Roubini’s Global EconoMonitor, Nouriel discusses the rally of the markets, which he believes is occurring too fast and too soon, and is diverging from the underlying economic fundamentals.  Recognizing the frothy markets, and the fact that it is not the time for the Fed to raise rates, Nouriel offers regulation as another tool to prevent an asset bubble.  For more on this discussion, see the following interviews WSJ Item/Interview and BBC Video Interview.

Don’t miss Nouriel’s clarification on why the U.S. lost its top spot as the global financial center of the world to the UK at My Latest CNBC Interview Regarding the WEF Report, as well as detailed analysis written by Nouriel and RGE’s Ayah El Said on the global financial crisis’ effect on emerging markets as part of the World Economic Forum’s Financial Development Report 2009.  See Roubini and El Said: The Transmission of the Financial Crisis to Emerging Markets .

 

On the RGE Analyst’s EconoMonitor, Bertrand Delgado presents a preview of the Latin American Outlook, where he analyzes global and domestic economic and financial conditions affecting that region’s economic growth, inflation, monetary policy, external accounts, fiscal accounts, and currencies.  He concludes that Latin America is well positioned to rebound in 2010 but the expansion will likely be below potential.  Please read: Latin America Economic Outlook.

In Quick Thoughts on Germany, 20 Years Later, Michael Moran reminds us of some of the hopes and fears that Germany and its neighbors were experiencing 20 years ago with the fall of the Berlin wall, and compares it to the sentiments of today.

Rachel Ziemba asks Are Sovereign Funds Back?  Several Sovereign wealth funds, especially the China Investment Corporation, have returned to acquisition mode in Q3 2009 and the revival in commodity and equity prices allowed many funds to make back at least some of the losses sustained in 2008. Yet, she notes that future growth in their assets might be more muted.

 

On the Finance & Markets Monitor, Rick Bookstaber points out some of the issues with the contracts being awarded to companies to provide analytics for the New York Fed’s trillion dollar mortgage-backed purchase program, and urges “that if we want to go down the path of standardized valuation and comparability in these complex portfolios, We Need Open Derivative Models.”

In Who Needs Big Banks?, James Kwak picks apart the seemingly plausible argument that global companies need massive banks.

In Pay No Attention to the 140 Behind the Curtain! , Rich Hartmann – Miss America speaks about the gap between the DOW hitting 10,000 and the fundamentals.

Also on the Finance & Markets Monitor:

The Problem with Financial Services Compensation (AIG/Pay Czar Edition) by Yves Smith

Reducing Incentives for Risk-Taking by Lucian Bebchuk

 

On the Peterson Institute for International Economics Monitor, Edwin Truman, in remarks given at the Inaugural Symposium of the US-Japan Research Institute, presents his thoughts on where we have been, where we are, and where we may be going with respect to the global financial crisis.  Please read How Quickly Can We Recover from the Global Financial Crisis?

In The Ruble as a Global Reserve Currency? No! Anders Aslund discusses why it is a bad idea to consider the ruble as a global reserve currency.

 

On the Global Macro EconoMonitor, Mark Thoma presents a piece that speaks of Elinor Ostrom’s important contribution to economics and how she expanded the economic understanding of human preferences to better reflect observed behavior.  Thoma points out the relevance of her work with regards to implementing appropriate regulation.  See Skyhooks versus Cranes: The Nobel Prize for Elinor Ostrom.

In Ostrom & Williamson Win “Ironic” Nobel in Economics, Barry Ritholtz points out some of the irony in ‘behaviorists’ edging out the father of the efficient market hypothesis for the Nobel in Economics.

In Asset Bubbles and Economic Activity, Charles Davi offers an answer to why on balance, both booms and busts involve the reallocation of resources, yet only busts seem to produce mass unemployment.

 

On the U.S. EconoMonitor, Fabius Maximus provides interesting fodder for discussion on what the potential consequences are for the falling value of the dollar.  Read The Falling US Dollar – Bane or Boon?

In The Audacity of Greed: How Private Health Insurers Just Blew Their Cover , Robert Reich continues to argue for the necessity of a public option to contain prices.

In One Way Out, James Picerno considers the medium and long term effects of the absence of low and falling rates, as a general proposition, on investing.

Also on the U.S. EconoMonitor:

Labor Markets Need More Help by Mark Thoma

Empty Hands on the Climate, and What Obama Needs to Do by Robert Reich

Economists Discuss the Impact of the Stimulus on our Recession by Fabius Maximus

 

On the Emerging Markets Monitor, Ismail Dalla and Heiko Hesse note that as the financial crisis has curtailed the ability of borrowers in emerging markets to find funds abroad, they have turned to raising capital in domestic markets. Local-currency bond markets had already grown tremendously since the crises of the 1990s. Dalla and Hesse say that deepening local-currency bond markets should now be a top priority for emerging economies.  See Rapidly Growing Local-Currency Bond Markets Offer a Viable Alternative Funding Source for Emerging-Market Issuers.

In Currency Depreciation and Global Imbalances, Michael Pettis provides interesting analysis on the options for reducing global imbalances, but they all include sacrifices that no country wants to bear, and thus it appears that an increase in trade disputes is inevitable.

 

On the Asia EconoMonitor, Ajay Shah considers the falling value of the dollar’s impact on the rupee and urges the RBI to take the necessary steps to be able to move forward to greater flexibility of the rupee.  See Interpreting Recent Movements of the Rupee-Dollar Rate.

 

On the Europe EconoMonitor, Marshall Auerback offers his thoughts about the difficult situation Latvia finds itself in, and offers his suggestions to fix things in a weekend’s time.  Read Latvia – the Insanity Continues.

David Smith shares Good News on Unemployment in the UK.

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