Category ‘Economic Recovery’

A Simple Guide to the Ongoing Crisis

Here is a simple guide to the ongoing financial crisis. Wanting to do more, to print more is exactly the wrong thing to do. Here is the way it goes (this is a threat – you will look very clever in a cocktail talking to an economist):

• Low interest rates fuel capital goods/bubble sectors (housing, internet stocks…)
• Government revenues are inflated (from housing, construction,etc)
• New government spending programs (and we know how those are hard to repealed)
• Bubble burst (credit tightened) – Revenues disappear
• Banking/financial crisis
• Governments step in – save banks, well connected companies (TBTF), new programs
• Result: more government debt / less revenue
• Sovereign Debt Explose …

Friday, November 11th, 2011 Category: Economic Recovery No Comments

When one trillion dollars is not enough…

The 85 billion euros bailout of Ireland is starting to send chills down the spine of Mr. Market (at last!). Portugal and Spain just stated they do not need a bailout which means a bailout is needed big time. Remember Greece? Ireland? Please note that this 85 billion euros rescue for Ireland is a drop in a bucket because the Irish Banks owe more than US$600 billion to foreign banks (UK, Germany, France, US).

Now the big one: Spain. Ironically, Spain is too big to fail and too big to bailout. The EU AAA rescue fund of 440 billion euros …

Monday, November 29th, 2010 Tags: Euro, European Economy, Irish Economy, Spain economy, spanish economy, world economy
Category: Economic Recovery, European Debt Crisis No Comments

Looks like the Fed did not buy the NBER “end of recession” news…

Yesterday the Fed indicated that they would keep their rate stable. No news there as they said since the beginning of the crisis that they would keep their rates low for an “extended period”. But what is interesting (but not surprising) is their indication that, fearing deflation like the plague, they are prepared to provide additional support to the economy via large-scale purchases of Treasuries (QE). They had already done it on a smaller scale last month using their proceeds from mortgage backed securities to buy Treasuries.

I know it’s not customary to find people like central bankers very funny but …

Wednesday, September 22nd, 2010 Tags: Bank of Canada, Canadian Economy, debt, Financial Crisis, recession, world economy, world recession
Category: Economic Recovery, Monetary Policy No Comments

How many saw the housing bubble in the US? No housing bubble in Canada?

When you hear people say that there will be no housing bubble in Canada because we are different, please remember that the vast majority of economists, government officials, and financial pundits could not see the disaster coming as it was staring them in the face in the US. It may come as a shock to you but people have agendas when there are cheerleading home prices. Politicians want to keep voters confidence, businesses want consumers to keep shopping, networks want to keep ratings high with optimism, banks and real estate brokers want to continue making money on fees and interest. …

Wednesday, September 1st, 2010 Tags: Canadian real estate, debt, Financial Crisis, Home sales, real estate market, U.S. Economy
Category: Economic Recovery No Comments

Homes: have we hit the bottom?

Homes sales in the US plunged, sorry crashed, by 27.2%. With real unemployment rate at 17%, 40 million on Food Stamps in the US and 15 million Americans looking for a job – why would that surprise anyone is, well, surprising. Come back to me in 2013 and we can talk about a bottom in the US housing market. You can put the interest rates as low as you want, add all the tax credits you can dream of, when you don’t have a job or are afraid of losing the one you have, the last thing on your mind …

Wednesday, August 25th, 2010 Tags: debt, Financial Crisis, Home sales, real estate market, U.S. Economy, Unemployment
Category: Economic Recovery 1 Comment

$202 What?

There is an interesting study by Larry Kotlikoff, professor of economics at Boston University, which states that the US is indeed bankrupt. How?

Thursday, August 19th, 2010 Tags: Financial Crisis, U.S. Debt, U.S. Economy
Category: Economic Recovery, General No Comments

Some recovery! – Fed preparing for “QE Lite”?

There are a lot of talks about the Fed’s meeting next week, especially about some money printing – QE Lite as some have called it (instead of full throttle QE2).

Wednesday, August 4th, 2010 Tags: Canadian Economy, Canadian stimulus, Financial Crisis, Inflation and deflation, Money printing, printing money, stimulus package
Category: Economic Recovery, Monetary Policy No Comments

Waiting for the V-Shape Recovery

V-Shape recovery, where are thou? If Obama listens to Paul Krugman he will have a debt crisis on his hands sooner than he thinks. One thing that escapes most people is that the ones you think are in charge are not really (not even the G20? Shocking!).

Tuesday, July 6th, 2010 Tags: debt, Financial Crisis, recession, world economy, world recession
Category: Economic Recovery No Comments

Recovery? What recovery?

What? No recovery? Well it would be hard to end a recession if one has never gone away in the first place. Yes a correction is a very nasty thing but it actually comes as surely as death and taxes after a major credit expansion. Investors are slowly realizing that there was no recovery – just more debt – and here are the signs: Dow is down, consumer confidence in the US is down, foreclosures and houses are still on a downhill slope, China had less growth than expected in Q1 of 2010 (is that a surprise?).

Now over in …

Wednesday, June 30th, 2010 Tags: debt, Financial Crisis, recession, world economy, world recession
Category: Economic Recovery No Comments