Wednesday, March 16, 2011

US Futures Slide After Major Move In The Yen

US Futures Slide After That Ridiculous Move In The Yen

Yen Makes Significant Surge

This Move In The Yen Is Simply Unreal

CHART: Correlation of Dow to Fukushima Headlines

CHART: The Dow Makes Huge Swings On Every Fukushima Headline

Chart of the Day: Stockmarkets after disasters: Market tremors

Stockmarkets after disasters: Market tremors | The Economist

Economist Eichengreen Sees Yuan As Dominant Global Currency

Economist Eichengreen Sees Yuan As Dominant Global Currency


David Wessel, Economics Editor for the Wall Street Journal, sits down with Barry Eichengreen, an economics professor at the University of California Berkley, to discuss how the yuan could be widely used within ten years.



Fight From Risk

Risk, the economy and markets: A flight from risk | The Economist

Portugal's warning after downgrade

YouTube - Portugal's warning after downgrade

CHART OF THE DAY: Sendai Earthquake vs Kobe Eartquake in 1995

CHART OF THE DAY: Sendai Earthquake vs Kobe Eartquake in 1995

Weighing the Economic Costs of Disaster

Economic consequences of disaster: Reduced expectations, panic, or uncertainty?

Moody's on impact of quake on Japan

YouTube - Moody's on impact of quake on Japan

Markets Misjudge Japan Risk

Markets Misjudge Japan Risk

Sanctions Debate For Weaker Countries in EU Could Be Last Straw

Doubts on Europe Plan

Perspective: When is a Black Swan a Grey Swan?


By Grant de Graf

The Black Swan Theory or Theory of Black Swan Events is a metaphor that encapsulates the concept that the event is a surprise (to the observer) and has a major impact. After the fact, the event is rationalized by hindsight.

The theory was developed by Nassim Nicholas Taleb to explain:

1] The disproportionate role of high-impact, hard to predict, and rare events that are beyond the realm of normal expectations in history, science, finance and technology

2] The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities)

3] The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs

In recent years, natural disasters are occurring at a much more rapid rate and have moved beyond the boundaries of their normal levels of distributions. Events such as the earthquake in Christ Church, in Haiti and New Zealand, the Middle East crisis and the earthquake in Japan, are happening at unprecedented rates. Clearly, events that may have previously been termed as "black swan" need to be viewed in a different light, and reclassified as grey swan.

New Housing Starts Collapse A Massive 22.5% In February

New Housing Starts Collapse A Massive 22.5% In February

UK unemployment rate rises to 8% | Finance Markets

UK unemployment rate rises to 8% | Finance Markets: "UK unemployment rate rises to 8%"

Euro-Zone Inflation Stays High

Euro-Zone Inflation Stays High

How a Tokyo Earthquake Could Devastate Wall Street [1989]

How a Tokyo Earthquake Could Devastate Wall Street [1989]

The Macroeconomic Aftermath of the Earthquake/Tsunami in Japan

The Macroeconomic Aftermath of the Earthquake/Tsunami in Japan

Wrong Models of the Great Recession

YouTube - IAS 107: Intermediate Macro: March 15, 2011 "Wrong Theories" Lecture

The economy has been bad to both public and private-sector workers

The economy has been bad to both public and private-sector workers

The Impact Of The Japan Crisis On China

What Is The Impact Of The Japan Crisis On China?

Homebuilder Perceptions May Be Better, But Conditions Are Really Worse

Homebuilder Perceptions May Be Better, But Conditions Are Really Worse

Five Things You Need To Know About Japan's Debt Crisis

Five Things You Need To Know About Japan's Debt Crisis

Japan asks EU for Help following Earthquake and Tsunami

YouTube - Japan asks EU for 'help in kind' following Earthquake and Tsunami

13% Of Japanese GDP Could Now Evaporate

13% Of Japanese GDP Could Now Evaporate

Fed Signals More Stimulus Unlikely as Recovery Gains Strength

Fed Signals More Stimulus Unlikely as Recovery Gains Strength

Black Swan Earthquake Catches Tim Geithner Naked

Black Swan Earthquake Catches Tim Geithner Naked: William Pesek

Portugal Downgrade Knocks Euro


Heat Map - GDP vs National Debt by Country -

GDP vs National Debt by Country -

Public Debt by Country | Global Finance

Public Debt by Country | Global Finance

Finance & Development, Getting Debt under Control

Finance & Development - Getting Debt under Control

Perspective: Portugal Faces New Economic Challenges

By Grant de Graf

WSJ reports:

Moody's Investors Service issued a two-notch downgrade on Portugal's long-term government bond ratings, citing subdued growth prospects and productivity gains over the near term until structural reforms are enacted.

Apparently, a contributing factor towards the downgrade is "implementation risks for the government's austerity plan, which has faced opposition from the center-right Social Democrats."

Portugal's government is facing political turmoil that threatens to derail its ambition to solve the crisis alone. The nation's Social Democrats are opposed to the minority government's new austerity measures announced Friday that called for further spending cuts and boosted state revenue by further tax increases.

This is the point where I loose it. In summary: with the country facing increasing debt levels, the government initiates austerity measures, in a belt-tightening campaign against public spending. A scheduled program of commitments to repay debt is fast approaching due date, so Portugal successfully issues a series of bond auctions in the open market. Investors are a touch nervous, so interest rates yields are a little higher. Actually, quite a lot higher, about 200 basis points above previous auction levels of 4%.

WSJ elaborates: The nation is at the center of a storm that has already hit Greece and Ireland, as it is struggling with a high budget deficit that must be brought down to 4.6% of gross domestic product this year and 3% in 2012, from around 7% last year.

Interestingly, this is paltry compared to Japan's percentage government deficit to GDP of 200% before the earthquake, Italy's of 120% and France's deficit to GDP of 85% - go figure.

Portugal's Prime Minister Jose Socrates believes that if the new austerity plan was voted down in parliament, his government would likely face early elections and that a "political crisis would inevitably cause the country to request external help."

The point however that needs to be made, is that even if Portugal appeals to the European Central Bank for an extended credit line in a post election scenario, that facility will come with stringent terms, calling for further austerity measures.

This would be no different than the position in which the Irish currently find themselves, with Government officials from Ireland trying to make a case for new terms for their credit line from the ECB, balanced against further demands from the EU for an increase in austerity. Certainly, nothing would really be achieved through an election in Portugal, other than an opportunity for the dog to bite its tail.

The predicament in which Portugal finds itself, is a function of the disparity between fiscal policy and monetary policy that is a challenge for all EU members. It is impossible to fiscally meet the demands of a local electorate, when monetary policy is being dictated centrally in accordance with interests that are very different from local needs. Both Ireland and Portugal may be compelled to opt out the confinement of the Euro, which is inhibiting growth, constraining domestic needs, and reducing political strength.

Portugal's Debt Rating Cut Two Notches

Portugal's Debt Rating Cut Two Notches