EconoMonitor

Nouriel Roubini's Global EconoMonitor

RGE’s Weekly Roundup

Check out all of the RGE Analysis and EconoMonitor contributions that were published this past week at roubini.com.

RGE Analysis: [Available only to RGE clients]

The Eurozone’s ‘Bay of PIIGS’ by Arnab Das, Elisa Parisi-Capone, Natalia Gurushina, Katharina Jungen and Jennifer Kapila Greece is the frontline of the battle to restore eurozone (EZ) fiscal solvency and discipline, improve and better align structural policies, reduce EZ divergences and sustain the euro. The battle encompasses Portugal, Ireland, Italy, Greece and Spain—grouped together as the “PIIGS” because they are at risk from the housing bust, the financial crisis or the ensuing deleveraging. RGE ranks 16 EZ members by domestic and external vulnerability, following the methodology in Gros/Mayer (2010). Their external index shows that Greece, Portugal, Ireland, Italy and Spain are the most vulnerable to external shocks, in that order. Applied to the domestic market, our analysis shows that Spain, Ireland, Portugal and Italy are most vulnerable on the home front (like unemployment and productivity).

February Payrolls: It’s the Economy, Not the Weather by Arpitha Bykere and Christian Menegatti Although the official unemployment rate remains unchanged, many job market indicators show that the economy is still shedding jobs and is likely to continue. The recent report showing a downturn in payrolls cannot be explained away by recent bad weather but rather is the result of persistent, poor economic conditions. Meanwhile, jobless claims data continue to support RGE’s view of a “jobless recovery.”

Who Will Buy the U.S. Treasurys? by Rachel Ziemba With the record levels of U.S. Treasury bonds and bills issued to finance the growing U.S. fiscal deficit, questions remain over who will purchase the debt and what premium they will require to do so. Demand for Treasurys remained strong in 2009, and auctions have tended to be oversubscribed, particularly at the short end of the curve. But now that risk appetite is back and the Federal Reserve has ended its Treasury purchasing program, yields may continue to inch up to maintain demand.

LatAm: What’s Coming Up? (Week of March 8, 2010) by Bertrand Delgado and Juan Lorenzo Maldonado The most relevant information this week will be Brazil’s retail sales for January and GDP growth data for Q4 2009, as both are likely to show that positive growth dynamics remain in place. Inflation related data and the central bank focus report will also be closely monitored to fine tune expectations on Brazil’s monetary policy decision. Moreover, markets will closely watch inflation and activity indicators in Mexico, where RGE anticipates inflation in February to move higher but start showing some stabilization, and industrial production for January to print a strong reading.

LatAm: Waiting on Hikes and Surveying Quake Damage by Bertrand Delgado and Juan Lorenzo Maldonado Inflation and inflation expectations in Brazil are continuing to deteriorate, though at a weaker pace than a few weeks ago. To keep medium- to long-term inflation expectations anchored, the central bank will likely initiate the tightening cycle in March or April 2010. Meanwhile, price dynamics in Mexico suggest that price contamination from higher taxes and fuel prices has been limited and that the monetary authority will stay put through H1 2010.

China: What to Expect from the February Data by Adam Wolfe and Rachel Ziemba Despite the distortion from the New Year holiday, China’s main economic indicators for February should continue to show an improving outlook. For the markets, the most important figures should be the trade and inflation data, given their key role in making the domestic case for further monetary tightening.

 

On Nouriel Roubini’s Global EconoMonitor, Nouriel discusses China’s cautious behavior when it comes to allowing the yuan to appreciate. See Bloomberg Reports Roubini Says Cautious China to Limit Yuan Gain to 4%.

 

On the RGE Analyst’s EconoMonitor, Michael Moran asks whether the “trans-Atlantic relationship” can still be reliably described with that comfortable old phrase, or has it evolved into a series of complex bilateral and multilateral conversations fated to wax and wane between partnership and rivalry? Please read Choppy Waters Rock the Trans-Atlantic Relationship.

In RGE’s Arun Motianey Discusses the SuperCycles Theory with CNBC’s Squawk Box, Arun Motianey discusses his theory of supercycles, which are continuous long waves of boom and bust that undulate through the global economic and financial systems.

 

On the Finance & Markets Monitor, derivative regulation was fueling the discussion.

Don’t miss: Morgenson on Municipalities’ Swap Fiascoes by Yves Smith

‘Swap Tango’ – A Derivative Regulation Dance: Part 1 by Satyajit Das

‘Swap Tango’ – A Derivative Regulation Dance: Part 2 by Satyajit Das

Time to Regulate Derivatives (Like Every Other Financial Instrument) by Barry Ritholtz

Also on the Finance & Markets Monitor:

A New Index of Financial Conditions by James Hamilton

More on the Resolution Authority Headfake by Yves Smith

Happy Anniversary: Top and Bottom! by Barry Ritholtz

The Gold Bubble by Rick Bookstaber

Business Economists on the CFPA by James Kwak

 

On the Peterson Institute for International Economics Monitor, Simon Johnson and Peter Boone suggest that the U.S. should encourage an orderly resolution to problems in Europe, and press the Europeans to bring in the IMF in an appropriate fashion. Please see The Greek Tragedy That Changed Europe.

 

On the Global Macro EconoMonitor, Antonio Carlos Lemgruber comments on what he believes will be the major global macroeconomic themes of 2010 as the consequences of the different economic policy responses undertaken around the world begin to take shape. Please read 2010: BRICs, PIIGS, and the G-5 Countries.

In Vola-geddon Models & Agents looks for lessons from history to see if the fears of Armageddon are justified as monetary authorities around the world contemplate their exit strategies.

In Iraqi Elections Likely to Fuel Ethnic Tensions, Further Delay Access to Kirkuk’s Reserves Gareth Jenkins comments on what this past week’s elections in Iraq meant to the long-running dispute of the administration of the ethnically mixed and resource-rich province of Kirkuk in the north of the country.

 

On the U.S. EconoMonitor, Simon Johnson looks to explain why there has been no attempt from the top to push through the key message of the day, which is financial reform. Please read Does the Obama Administration Even Want to Win in November? and The Speech for Which We Have Been Waiting.

In Bail Out Our Schools, Robert Reich implores that over the long term we must shift incentives away from financial capital toward human capital.

Also on the U.S. EconoMonitor:

Employment Chart Roundup by Barry Ritholtz

Real Personal Income Less Transfer Payments by Tim Duy

 

On the Emerging Markets Monitor, Dominique Strauss-Khan argues that in the wake of the global financial crisis there is a fresh energy in Sub-Saharan Africa and claims that Africa Is Back.

In China’s Reserves – What Are They Good For – Not As Much As You Think China Economist agrees with a recent post by Michael Pettis but emphasizes the political importance of maintaining stability through jobs.

 

On the Asia EconoMonitor, Rajeev Mantri looks at India’s budget and believes that India’s potential remains untapped, as its political masters toy with the economy and important policy pronouncements. Please read India’s Finance Minister Plays It Safe with 2010 Budget.

 

On the Europe EconoMonitor, Rebecca Wilder considers the battle for exports in Europe and wonders what happens when export income does not provide the impetus for aggregate demand growth. Please read The End Game for Europe: Wage Cutting and the Battle of Exports.

In March Madness, Rob Parenteau argues that whatever relief rally shows up in eurozone equities or the euro itself on the good news that Greece is taking the bitter medicine is built on a mistaken or at best partial understanding of the dynamics that have been set in motion.

In Hanging in the Balance over at the ECB Edward Hugh considers Europe’s monetary leaders’ exit strategy.

Also on the Europe EconoMonitor:

German Responsible for Stability and Growth Pact Wants to Bail Out Greece by Edward Harrison

European Monetary Fund, Arriving Soon by Simon Johnson

Rain and Tears in Greece by Paolo Manasse

The Misleading Political Calm in Turkey by Emre Deliveli

The German Economy Is Essentially “Intact” by Edward Hugh


All rights reserved, Roubini Global Economics, LLC. Opinions expressed on RGE EconoMonitors are those of individual analysts and may or may not express RGE’s own consensus view. RGE is not a certified investment advisory service and aims to create an intellectual framework for informed financial decisions by its clients.

8 Responses to “RGE’s Weekly Roundup”

Guest.., no room at the inn?March 13th, 2010 at 1:15 pm

whoops..http://georgewashington2.blogspot.com/2010/03/if-we-cant-inflate-our-way-out-of-debt.html.ground control to major tom….put your helmets on..aside .. “we are a nation of sheep, run by wolves andowned by pigs”. mrs. steel..” the economy is science fiction.” rocco..and so much more. but i think , somethinghas changed as “the blog” seems to be in “liquidation”mode. is this correct? someone send a message ofclarification? my requests are few and meager, this beingthe first and only..change is very good. very good!congradulations on the sheer beauty and inspiredbrilliance! manifest.i can’t imagine “life” without it..peace.peas.

Little SaverMarch 13th, 2010 at 5:07 pm

Summers Finds ‘Considerable Satisfaction’ in Recovery Progresshttp://www.bloomberg.com/apps/news?pid=20601087&sid=aheALKb84LMk&pos=7Of course, what else could Summers pretend? Fake recovery and expect people to believe it. That’s what counts, isn’t it? Until reality says it isn’t. An then, Summers has already disappeared, with the sums he earned with his great wisdom which was not there when it was supposed to be there. Reality prevails in the end. Pretension cashes in well in advance.Laughter.Truth is a bitch.Few endure it.Nobody likes it.Fakers abuse it and thrive.Realists recognize it and sigh.That’s what they encounter, that’s what they know they’ll surrender to.Questions?Many.Answers?None that will do.Laughter.The natural response.Fortunately.Don’t be serious, play and thrive.Welcome to reality.

GuestMarch 14th, 2010 at 3:15 pm

http://www.youtube.com/watch?v=T_KgKysrDaE&NR=1.thanks again and for playing..”dead enders”. donald rumsfeld. (us)..”damn it all anyhow!” …mary….http://wallstreetpit.com/16803-the-impossible-math-­o­f­-­d­e­b­t­-­b­a­c­k­e­d­-­m­o­n­e­y..Next question:“In a system in which money is backed by debt, what happens to the supply of money if you decrease the quantity of debt?”Of course the supply of money would fall! Do you see the dilemma that is created when you back your money with debt? We can’t pay back our debts without decreasing the supply of debt backed money, and if we do that, then the economy will suffer. But if we continue to pile on debt, then more and more of our money will go to pay interest and our economy will suffer. Those are the choices we are presented with in our current Federal Reserve Debt based system.Thus we are damned if we do, and damned if we don’t. And it’s not just us who are damned. The entire world is built around the same clearly unsustainable system.This begs the question, “Why is our system built like that, and to whose benefit was it made that way?”I think you know the answer to that question – this current system was built around the Federal Reserve Act that was passed in the year 1913, and it took the money power from Congress and moved it to the private banks and bankers.The very same interests that created this monetary conundrum are telling us “consumers” that we need to spend more to get their credit (debt) flowing again! LAUGH OUT LOUD, that is hilarious! Then they use the money created and the tax dollars that flow to them from us CITIZENS to buy the political and judicial systems! Talk about irony of ironies, the money system doesn’t even belong to them, it belongs to us! We don’t have to pay anyone for the right to use our own monetary exchange system, that notion is simply ludicrous, yet we have all been living under that system our entire lives!Simply put, our money system was stolen from us. We can either take it back or we can continue to swim in the manure, the choice is ours, not theirs.The globe is saturated with debt. Adding one dollar of debt now subtracts 15 cents from GDP……http://www.rayservers.com/blog/the-roots-of-the-current-global-crisis.http://www.rayservers.com/the-law.The Law Defends PlunderBut it does not always do this. Sometimes the law defends plunder and participates in it. Thus the beneficiaries are spared the shame, danger, and scruple which their acts would otherwise involve. Sometimes the law places the whole apparatus of judges, police, prisons, and gendarmes at the service of the plunderers, and treats the victim — when he defends himself — as a criminal. In short, there is a legal plunder, and it is of this, no doubt, that Mr. de Montalembert speaks.This legal plunder may be only an isolated stain among the legislative measures of the people. If so, it is best to wipe it out with a minimum of speeches and denunciations — and in spite of the uproar of the vested interests.How to Identify Legal PlunderBut how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.Then abolish this law without delay, for it is not only an evil itself, but also it is a fertile source for further evils because it invites reprisals. If such a law — which may be an isolated case — is not abolished immediately, it will spread, multiply, and develop into a system.The person who profits from this law will complain bitterly, defending his acquired rights. He will claim that the state is obligated to protect and encourage his particular industry; that this procedure enriches the state because the protected industry is thus able to spend more and to pay higher wages to the poor workingmen.Do not listen to this sophistry by vested interests. The acceptance of these arguments will build legal plunder into a whole system. In fact, this has already occurred. The present-day delusion is an attempt to enrich everyone at the expense of everyone else; to make plunder universal under the pretense of organizing it.Legal Plunder Has Many Names…..http://www.rayservers.com/blog/generating-power-from-stupidity—the-harsh-truths-of-the-world-financial-system.The US constitution is constructed as a trust and ever since Lincoln bankrupted the treasury of the organic united States of America, the country has been run by a corporation, the UNITED STATES OF AMERICA.Are you one of the people or are you a citizen?6If you claim you are a citizen of the United States, then it is strongly implied (though not necessarily true) that you are subject to the laws of the United States. On the other hand, if you are one of the People, then it is legally implied that you are a legal king, with a sovereignty superior to that of the United States, and subject only to the common law of the other kings (your peers). In short: the People are superior to the government, the government is superior to the citizens. That is the hierarchy.PEOPLE —> GOVERNMENT —> CITIZENSAs a king you “are entitled to all the rights which formerly belonged to the King by his prerogative.” You can do what you want to do when you want to do it. You have your own property and your own courts. There is no limit as to what you may do other than the natural limits of the universe, and the sovereignty of a fellow sovereign. You should treat the other sovereign in accordance with the Golden Rule, and at the very least must never harm him. Your sovereignty stops where the other sovereignty begins. You are one of the owners of the American government, and it is their promise that they will support your sovereignty (i.e. they have promised to support the Constitution and protect it from all enemies). You have no allegiance to anyone. The government, your only [public] servant, has an allegiance to you.As a citizen, you are only entitled to whatever your sovereign grants to you. You have no rights. If you wish to do something that would be otherwise illegal, you must apply for a license giving you special permission. If there is no license available, and if there is no specific permission granted in the statutes, then you must apply for special permission or a waiver in order to do it. Your only allegiance is to your sovereign (the government), and that allegiance is mandated by your sovereign’s law (the government, though not absolutely sovereign, is sovereign relative to you if you claim to be a citizen of the sovereign).The above analysis is true for any republic.Further analysis is available by consultation.What is Legal Plunder?It has long been shown that creation of “new money” out of nothing “to balance new wealth” is plunder.Legal Plunder is the act of a State and its co-conspirators to take through force or deceit the property of individuals – “we the people”.7“They (the banks) control the credit of the nation, direct the policies of governments, and keep in the palm of their hands the destinies of the peoples.”………

GuestMarch 14th, 2010 at 3:19 pm

and this too.http://www.rayservers.com/blog/the-roots-of-the-current-global-crisisHumanity is at a crossroads, mostly due to its failure to distinguish between a liability for a good and the good itself; as well as its failure to distinguish between what is lawful and what is legal.What follows is a chain of deductive reasoning based on observable events in the markets and other information and disinformation that leaks out.Physics Drives Finance, Finance Drives Politics[ see above .. people,> government,> citizen. ]Physics is a little teasewho puts his lover finance ill at ease.

see no evil, chattering monkey #2.March 22nd, 2010 at 7:02 pm

http://onlinejournal.com/artman/publish/article_5714.shtml.Policing thought in America: Why can’t we discuss the events of 9/11?By Jim FetzerOnline Journal Guest WriterMar 22, 2010, 00:25….”Does this look remotely like a “pancake collapse” to you? A set of 9/11 photos were recently released which, when they are temporally sequenced, provide a glimpse of what was actually going on, which was no “pancake collapse.” Every American deserves to see that the “official account” cannot even accommodate the gross appearance of the Twin Towers as they were destroyed even below ground level.”…comment: revealing and almost no one can see. so?where are the pancakes? dust. vaporized pancakes, overcooked.”what do you see”???????????????????????????????????????????????.

see no evil, chattering monkey #2.March 22nd, 2010 at 7:02 pm

http://onlinejournal.com/artman/publish/article_5714.shtml.Policing thought in America: Why can’t we discuss the events of 9/11?By Jim FetzerOnline Journal Guest WriterMar 22, 2010, 00:25….”Does this look remotely like a “pancake collapse” to you? A set of 9/11 photos were recently released which, when they are temporally sequenced, provide a glimpse of what was actually going on, which was no “pancake collapse.” Every American deserves to see that the “official account” cannot even accommodate the gross appearance of the Twin Towers as they were destroyed even below ground level.”…comment: revealing and almost no one can see. so?where are the pancakes? dust. vaporized pancakes, overcooked.”what do you see”???????????????????????????????????????????????.

see no evil, chattering monkey #2.March 22nd, 2010 at 7:02 pm

http://onlinejournal.com/artman/publish/article_5714.shtml.Policing thought in America: Why can’t we discuss the events of 9/11?By Jim FetzerOnline Journal Guest WriterMar 22, 2010, 00:25….”Does this look remotely like a “pancake collapse” to you? A set of 9/11 photos were recently released which, when they are temporally sequenced, provide a glimpse of what was actually going on, which was no “pancake collapse.” Every American deserves to see that the “official account” cannot even accommodate the gross appearance of the Twin Towers as they were destroyed even below ground level.”…comment: revealing and almost no one can see. so?where are the pancakes? dust. vaporized pancakes, overcooked.”what do you see”???????????????????????????????????????????????.

see no evil, chattering monkey #2.March 22nd, 2010 at 7:02 pm

http://onlinejournal.com/artman/publish/article_5714.shtml.Policing thought in America: Why can’t we discuss the events of 9/11?By Jim FetzerOnline Journal Guest WriterMar 22, 2010, 00:25….”Does this look remotely like a “pancake collapse” to you? A set of 9/11 photos were recently released which, when they are temporally sequenced, provide a glimpse of what was actually going on, which was no “pancake collapse.” Every American deserves to see that the “official account” cannot even accommodate the gross appearance of the Twin Towers as they were destroyed even below ground level.”…comment: revealing and almost no one can see. so?where are the pancakes? dust. vaporized pancakes, overcooked.”what do you see”???????????????????????????????????????????????.

see no evil, chattering monkey #2.March 22nd, 2010 at 7:02 pm

http://onlinejournal.com/artman/publish/article_5714.shtml.Policing thought in America: Why can’t we discuss the events of 9/11?By Jim FetzerOnline Journal Guest WriterMar 22, 2010, 00:25….”Does this look remotely like a “pancake collapse” to you? A set of 9/11 photos were recently released which, when they are temporally sequenced, provide a glimpse of what was actually going on, which was no “pancake collapse.” Every American deserves to see that the “official account” cannot even accommodate the gross appearance of the Twin Towers as they were destroyed even below ground level.”…comment: revealing and almost no one can see. so?where are the pancakes? dust. vaporized pancakes, overcooked.”what do you see”???????????????????????????????????????????????.