The Mess That Greenspan Made - Part 5

The IMF’s latest report on slowing growth in the global economy makes it easy for a skeptical reader to connect a few dots regarding the latest round of central bank sponsored malinvestment in general (a word that clearly doesn’t exist in the modern economists’ lexicon) and the shale oil boom/bust cycle in particular.

From this Reuters story we get the following summary about what’s ailing the world::

“New factors supporting growth, lower oil prices, but also depreciation of euro and yen, are more than offset by persistent negative forces, including the lingering legacies of the crisis and lower potential growth in many countries,” Olivier Blanchard, the IMF’s chief economist, said in a statement.

The IMF advised advanced economies to maintain accommodative monetary policies to avoid increasing real interest rates as cheaper oil heightens the risk of deflation.

If policy rates could not be reduced further, the IMF recommended pursuing an accommodative policy “through other means”.

Left unsaid was that cheap money gushing from the Federal Reserve in Washington and big banks on Wall Street was a major factor driving the shale oil boom that played a key role in recently plunging energy prices that, now, are raising the specter of world wide deflation that – you guessed it – should be countered by even more cheap money.

Vicious cycle anyone?

It seems former Bank of England governor Mervyn King is on to something in this report at the Telegraph when he notes the following:

We have had the biggest monetary stimulus that the world has ever seen … The idea that monetary stimulus after six years is the answer doesn’t seem (right) to me.

Why is it that central bankers suddenly seem to make much more sense when they are no longer central bankers? King joins suddenly lucid former Fed Chief Alan Greenspan who has recently been famously fond of a barbarous relic and makes you wonder where the heck central bankers still employed by central banks are steering the ship.

Tuesday Morning Links

MUST READS
China’s growth slows to weakest in 24 years – BBC
Pay No Attention to That Slower Growth Figure, China Says – WSJ
IMF cuts global growth outlook, calls for accommodative policy – Reuters
Global Economy Faces Strong and Complex Cross Currents – IMF Direct
More QE will not help the world, says Mervyn King – Telegraph
The IMF Downgrade: Two Questions for a Souring Global Economy – WSJ
One sentence explains why the middle class has to care about inequality – Vox
The Rich Get Richer: 80 Billionaires Control Most of World’s Wealth – Vice News
Dangerously in denial on climate change – Washington Post
How Obamacare Will Impact Your 2014 Taxes – Fiscal Times
Republicans target Social Security disability – Politico
Does marriage make you healthier? – voxeu

MARKETS/INVESTING
Global stocks rise, Shanghai steadies – AP
Where to Exit the Market Herd – WSJ
Oil steady after IMF cuts growth forecast – Reuters
The Dangers Of Leverage – Alhambra Partners
Crude reality: Oil prices are going to stay low — for now – MarketWatch
Big Trouble Ahead For Bakken Oil Production – SRSrocco Report
Treasuries Gain as Outlook for ECB Buying Drives Hunt for Yield – Bloomberg
Gold hits 4-1/2-month high on worries over Europe – Reuters
Gold Demand Explodes as Volatility and Fear Stalk Market – GoldCore

ECONOMY/WORLD/HOUSING/BANKING
Human-Like Robots Are Getting Jobs – Forbes
On to Plan B as Oil Work Stalls in Texas – NY Times
Americans’ Personal Financial Assessments Up Sharply – Gallup
Falling oil prices hit Venezuela, Iran and Russia hard – Washington Post
Winners and losers in China’s deepening economic slowdown – AP
The New Normal in China’s Big Cities – Project Syndicate
German survey data improves ahead of ECB decision – AP
Demand for home loans jumps in euro zone – Reuters
Markets Restrain Bank Fraud, But Central Banks Enable It – Mises
How Darwin Would Solve Too Big to Fail – Bloomberg
Fed’s Bullard Eager to Raise Rates Soon – WSJ

 

Americans, Religion, and Evolution

A reminder of how different we, as a nation, are as compared to the rest of the developed world when it comes to the things we believe in (or don’t believe in) comes via this story at Vox where they found someone who thought it might be a good idea to create a scatter plot to demonstrate just how much of an outlier we really are.

Reports such as Among Wealthy Nations U.S. Stands Alone in Its Embrace of Religion from Pew Research and the sortable results of this Gallup poll about the importance of religion in countries around the world provide added context to the West’s heightened tensions with other religions around the world while, at the same time, add weight to the argument that Devo may have been right all along about our collective future.

MLK Day Morning Links

MUST READS
Richest 1% to own more than the rest – BBC
China shares plunge, Europe eyes crunch ECB meeting – Reuters
Hollande: ECB will pull trigger on QE this week – MarketWatch
The ECB’s QE Is Coming, Too Small, Late And Might Well Fail – Forbes
Swiss Franc Wiped Out Everest’s Main Fund – Bloomberg
Swiss brace for ‘dramatic’ impact of franc’s 15-per-cent jump – AFP
What the Swiss FX shock says about risk models – voxeu
The Swiss currency bombshell – cause and effect – Financial Times
Humans Destroying Environment at Rate Unprecedented in 10,000 Years – Vice News
State of the Union: Obama Will Focus on Wealth Inequality—Not Just Income – Atlantic
Five things about Barack Obama’s Robin Hood tax plan – Politico
QE and the ECB: “Authorize” is a Slippery Word – Hussman Funds

MARKETS/INVESTING
China shares dive as regulators clamp down on margin – AP
China stocks suffer biggest one-day tumble since 2008 – Reuters
Hedge Funds Cut Oil Bets After Worst Drop Since 2008 – Bloomberg
Oil prices fall as JPMorgan is  latest to slash forecast – MarketWatch
How bull and bear markets fight and co-exist – FP
It’s Time to End Financial Advisers’ 1% Fees – WSJ
German Bonds Outperform Italy’s Amid ECB QE Bets – Bloomberg
Gold edges off 4-month high but haven appeal lends support – Reuters
Gold Price Exploding In All Currencies Worldwide – GoldSilverWorlds
Germany Repatriates 120 Tonnes Of Gold In 2014 – BullionStreet

ECONOMY/WORLD/HOUSING/BANKING
The minimum wage economic recovery – MyBudget360
Percentage of Poor Students in Public Schools Rises – NY Times
Americans Kick Off 2015 Feeling Good About Their Finances – WSJ
How Target’s reveal of store locations contributed to its demise in Canada – FP
China’s shipyards brace for leaner times as oil slump slows rig building – Reuters
China December housing prices fall – Marketwatch
$100 Million One57 PH Officially Closes, Breaks NYC Record – Curbed
Fed’s Bullard: Current Low Inflation Doesn’t Support Zero Rates – WSJ
Will The Fed Take a Dovish Turn Next Week? – Fed Watch
The Big Banks Are Back – Project Syndicate

 
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