The Japanese public has dubbed 2007 the “Year of Deception.” Expected Japanese GDP growth for the year has been revised down from 2.1% to 1.3% and the stock market has fallen by 10%. I’ll return to whether the Japanese are right later, but the concept itself appears more generally applicable. There has in recent years […]

Observers of the credit crunch that has been bedeviling financial markets since August were mostly highly relieved this week when the European Central Bank injected some $500 billion into the world’s banking system via low cost funding and the Fed followed up with $40 billion of its own. This sharply lowered the premium that interbank […]

In the spirit of the endless year-end speculations about developments in 2008, I thought it worth looking at which markets – debt, equity, commodities or real estate — were most overvalued in December 2007 and hence could be expected to provide the best “bear food” for the year ahead. After all, for us bears picking […]

This column has since 2000 been calling for the Federal Reserve to institute a policy of much tighter money. In a sense, events since August have justified it; old fashioned consumer price inflation hasn’t reappeared, but the beginnings of a gigantic global asset price deflation are appearing. At this point, sudden adoption of the Bear’s […]

While the Chinese stock market, as measured by the China Securities Index 300, is down 18% since October 16, that follows a period of almost two years during which the CSI 300 had soared 535% since January 1, 2006. Chinese economic growth is currently running at over 11% and the big money is convinced that […]

Close observers of the US housing finance disaster in recent months will have noted a curious phenomenon. Companies such as Countrywide that were in late August regarded as rock solid have recently passed clearly into the danger zone while those like Fannie Mae and Freddie Mac that were regarded as potential market saviors have come […]

As the US political season moves into high gear, a full year before it will blessedly end, the thought inevitably occurs to an economy-minded person: how much do all these politicians cost? Not simply the cost of their endless and annoying campaigns, but the money diverted to economically inferior uses by political pressure, the mistakes […]

It is already clear that one of the great election issues of 2008 will be the relative impoverishment of the American middle class, defined in the American rather than the British sense to include well established blue collar workers with families and mortgages. Republicans who ignore this problem will find themselves talking only to the […]

The last quarter century has seen the explosion of a profession, financial engineering, that has provided innumerable lucrative opportunities for otherwise indigent mathematicians — it was thus welcomed by a former mathematician like myself! Nevertheless the turbulence in the bond markets in the last couple of months, at a time when the world economy’s prospects […]

There’s a mystery on Wall Street. Merrill Lynch last week wrote off $8.4 billion in its subprime mortgage business, a figure revised up from $4.9 billion, yet Goldman Sachs reported an excellent quarter and didn’t feel the need for any write-offs. The real secret of the difference is likely to be in the details of […]