The powers of the Presidency may wane as the President becomes more and more of a lame duck, but in the last year of his Presidency even the most unpopular and powerless President has one ability remaining: he can booby-trap the economy for his successor. In American history, there are a number of examples of […]

It is a well known mathematical axiom that stock markets and other markets are “persistent” – in other words, trends in those markets continue for longer than they would if price movements were truly random. However it has become clear in recent months that trader psychology is even more “persistent” than the markets themselves. Thus […]

It is now clear that the credit crunch was not due simply to bull market over-optimism, but resulted very largely from the failures of a number of the financial models that have been a staple of the last generation. As the crunch spreads its malign tentacles ever wider into every corner of global economic life, […]

It was revealed Thursday that the George W. Bush administration intends to present a budget showing deficits of $400 billion for each of the fiscal years to October 2008 and October 2009, at a time we are close to an economic peak. Given a normal recession, that means the next “trough” deficit will probably be […]

The Federal Reserve’s unexpected inter-meeting cut of 0.75% in the Federal Funds rate to 3.5% was accompanied by a sharp rally in the dollar bond market, as the 10-year Treasury bond yield dropped to 3.4%. With inflation well above 4% and rising, one can only ask: why? Why would anyone buy the obligations of a […]

President George W. Bush, Fed Chairman Ben Bernanke and the Democrats in both Congress and the Presidential campaigns agree that a fiscal stimulus is essential. It now appears that such a stimulus, of around 1% of Gross Domestic Product, $145 billion, will be enacted, perhaps by means of a rebate of around $1,000 per taxpayer. […]

As fourth quarter earnings numbers emerge for Wall Street, with analysts expecting a $15 billion write-off for Merrill Lynch and an $18 billion write-off for Citigroup, Wall Street’s denizens, anxious for the future of their bonuses and indeed their jobs, are asking: Where will it all end? The answer is: not close to here, not […]

Tata Motors’ emergence as front-runner to buy Jaguar and Land Rover from the ailing Ford brings one question uppermost to a commentator sitting at a wealthy Western desk: Precisely which economic sectors can be relied upon in the future to provide jobs for Westerners at wages higher than are obtainable in the Third World? Will […]

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 […]