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FT.com / Markets - Insight: Survivor’s guide to navigation
First, how far will the balance shift from markets to governments? Industrial nations’ governments are getting more involved in modes of production, exchange and distribution – see the US, long committed to minimum state involvement. The drivers of more government involvement in markets are primarily non-commercial. Entry is dictated by a desire to offset market failures; and exit is often delayed by the lobbying of those favourably impacted by such interventions.
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First, how far will the balance shift from markets to governments? Industrial nations’ governments are getting more involved in modes of production, exchange and distribution – see the US, long committed to minimum state involvement. The drivers of more government involvement in markets are primarily non-commercial. Entry is dictated by a desire to offset market failures; and exit is often delayed by the lobbying of those favourably impacted by such interventions.
Paul Krugman's fear for lost decade | Business | The Observer
As analysts and media hailed the tentative emergence of green shoots last week, Nobel Prize-winning economist Paul Krugman caused international shock with a prediction that the world economy would stagnate just as badly, and for just as long, as Japan's did in the 1990s. In an exclusive interview, he talks to Will Hutton about his anxiety for the future - and how Gordon Brown might have saved Britain from the blight that hangs over the West
Government debt: The good, the bad and the ugly | The Economist
THE government debt of the ten richest countries attending the G20 summits will hit 114% of GDP by 2014, up from 78% in 2007, according to a new IMF study. To measure how much fiscal pain would be required to bring gross debt ratios to a sustainable level, the IMF looked at demographic pressures and assumed that long-term interest rates exceed economic growth rates by a percentage point (the long-term pre-crisis average) and then calculated by how much primary budget balances would have to improve. The economists define this level as 60% or, for Japan, half of today’s figure (ie, 85%). Their results suggest that Ireland and Japan have most to do. Both would need to boost their primary balances by more than 12% of GDP, compared with what is forecast for 2014. Britain would need an improvement of close to 6%. The gap in America is 3.5% and in Germany just under 2%.
Cash in on the war between inflation and deflation
Harvard professor Niall Ferguson has spoken of a “clash of the titans” between the competing forces of inflation and deflation — or Godzilla versus King Kong — and, on balance, thinks inflation is the bigger risk due to the “double danger of printing money and excessive \ deficits”.
Now the hedge fund advised by best-selling author Nassim Nicholas Taleb is launching a fund that seeks to profit from the return of hyper-inflation.
Taleb’s 2007 book The Black Swan warned of the impact of highly improbable events on world markets. US hedge fund Universa, with which he is associated, is now launching the Black Swan Protection Protocol-Inflation fund.
FT.com / Comment / Opinion - How economists can misunderstand the crisis
On Wednesday last week, yields on 10-year US Treasuries – generally seen as the benchmark for long-term interest rates – rose above 3.73 per cent. Once upon a time that would have been considered rather low. But the financial crisis has changed all that: at the end of last year, the yield on the 10-year fell to 2.06 per cent. In other words, long-term rates have risen by 167 basis points in the space of five months. In relative terms, that represents an 81 per cent jump.
Interest Rates
Grossly Misunderstood Debt
The often cited chart, by Bill Gross and others, reflecting a surge in Total Credit Market Debt as a % of GDP is distorted by a number of factors. One of the most significant reasons is that many families have substituted mortgage payments for rents and, without changing their costs, increased the debt ratio. Ironically, the shift built significant equity value. Further, when the long-term series is viewed on a standard logarithmic scale to show percentage gains over time, the chart becomes much less dramatic. On a real basis, adjusting for inflation, the rate of growth has been relatively constant over the past 50 years.
UPDATED THROUGH 2008
Bond Yields:
Reasonable Expectations
Is 4% on the 10-year Treasury bond high, low, or just about right? The Fed appears now--and may explicitly state soon--to be targeting inflation between 1% and 2%. By adding a 2% inflation-risk spread, 4% or lower may be just about right for the 20-year bond. As for the 10-year Treasury bond, we may soon see a yield that starts with a "3".
FT.com / Columnists / Martin Wolf - ‘Helicopter Ben’ confronts the challenge of a lifetime
Central banks may soon resort to their most powerful weapons against deflation: the printing press and the “helicopter drop” of money. It is a time for which Ben Bernanke, chairman of the Federal Reserve, has long prepared. Will this weaponry work? Unquestionably, yes: used ruthlessly, it will eliminate deflation. But returning to normality thereafter will prove far more elusive.
Bubblegeneration Strategy Lab
But the game's up. That was yesterday. Not only can this trade not work in a world where the balance of market power is shifting to consumers - this trade never really worked at all.
No value was ever created. It was a shell game; a deception; a masquerade of value creation.
FT Alphaville » Blog Archive » M&A surge on horizon for Europe
Classic | But FT Alphaville thinks at least some of the 160 CEOs and senior managers of publicly listed European companies surveyed by UBS are in a state of denial.
reportonbusiness.com: Low rates, high spending? It could just be a recipe for more economic woe
“Obama's a poker player,” Prof. Navarro said. “Here we've got a new president coming in who is basically going to bet the entire administration on a fiscal stimulus hand that is at best two jacks.”
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