The Martin Hutchinson Place
The Federal Open Market Committee meeting Tuesday is likely to be a difficult one. The political and economic pain from rising interest rates is beginning to bite, and it’s going to get worse. Meanwhile, there’s no sign of a decline in inflation, nor is there likely to be, as real interest rates remain near zero. […]
The advance second quarter Gross Domestic Product estimate, released by the Bureau of Economic Analysis Friday, showed the quarter’s growth at 2.5%, lower than expected while the price index for gross domestic purchases increased at a 4.0% annual rate, higher than expected. The market responded by soaring into the stratosphere, in the belief that the […]
John Locke’s 1690 “Two treatises on government” enumerated humanity’s fundamental rights as life, liberty and property, a formulation which was picked up by the First Continental Congress of 1774. Thomas Jefferson, no expert on economics and heavily influenced by dodgy French philosophers, changed it in the Declaration of Independence to “Life, Liberty and the Pursuit […]
Wall Street is an unforgiving place, and has the ability to defenestrate Fed Chairmen it doesn’t like – witness the sad fate of President Jimmy Carter’s Fed Chairman G. William Miller, ousted only 17 months into his 4 year term in 1979. Current Fed chairman Ben Bernanke gave a huge hostage to fortune with his […]
The decision by the Bank of Japan Friday to raise the Overnight Call Rate from zero to 0.25% marks the definitive end of Japanese recession, which has lasted more than 16 years. Its onset was caused by excessive monetary expansion, and a consequent tsunami of speculation in stock and real estate markets. Here in the […]
Vladimir Putin’s regime in Russia is corrupt and despotic. Mexico is a functioning democracy with an open economy and a well run recent election. They are roughly equally wealthy, both with large oil reserves. Yet it is Russia, not Mexico, whose economic potential inspires more confidence.
As interest rates rise, the stress increases on emerging markets, with tighter money producing higher risk premiums and decreased funds availability. At some point, one or other of the major Third World borrowers will spin into financial crisis, producing a “domino” effect on other indebted countries. In 1982, the first “domino” was Mexico; this time […]
The current market consensus has the world economy continuing to grow, with modest inflation brought under control by a modest further increase in interest rates, and the worst case scenario being a mild downturn like those of 1990-91 (outside Britain, where it was severe) and 2001-02. Anything worse is thought to be unlikely; central banks […]
Prognosticating for China is extraordinarily difficult; optimists and pessimists see an entirely different future for the country. China has neither political freedom nor a true market economy, and its economic statistics are as unreliable as those of the old Soviet bloc. Thus conventional economics is useless. Economic forces with the inevitability of gravity in a […]
Stock markets around the world were spooked last week by an apparent resurgence in inflation and central banks’ worldwide attempts to combat it. To a bearish observer, the current market jitters raise a quite different question: why, in the face of low interest rates and rapid money creation over an entire decade since 1995, didn’t […]