Debt Levels Archives - Page 16 of 16

August 31, 2011

When debt levels turn cancerous – Telegraph Blogs

The professoriat has been a little too cavalier in arguing that debt does not really matter for the world as a whole because we all owe it to ourselves. Debtors are offset by creditors (not always from friendly countries). Common sense suggest that this academic solipsism is preposterous, and so it now proves to be.

“As modern macroeconomics developed over the last half-century, most people either ignored or finessed the issue of debt. Yet, as the mainstream was building and embracing the New Keynesian orthodoxy, there was a nagging concern that something had been missing…..There are intrinsic differences between borrowers and lenders; non-linearities, discontinuities… It is the asymmetry between those who are highly indebted and those who are not that leads to a decline in aggregate demand.”

Creditors do not step up spending to cover the shortfall when debtors are forced to retrench suddenly. So the economy tanks.

via Ambrose Evans-Pritchard|When debt levels turn cancerous – Telegraph Blogs.

August 23, 2011

The Botox economy

Satyajit Das on the Botox Economy

August 10, 2011

Fire the Fed …… and replace them with a Rating Agency

On 1 November 2010 the Fed commenced QE2, purchasing US Treasurys with the stated intention of reducing long term interest rates. Over the next 4 months, 10-Year Treasury yields rose by 120 basis points (1.20%).

10-Year US Treasury Yields

Why do we need the Fed, who can’t punch their way out of a paper bag, when a rating agency (S&P) can send yields plunging 65 points in less than two weeks. 🙂

August 10, 2011

Did Standard and Poor’s Break SEC Regulations in Disclosing Its Downgrade to Select Parties? « naked capitalism

There is a much more straightforward basis for questioning S&P’s conduct, and it has nothing to do with how S&P arrived at its rating. There is compelling evidence that the ratings agency made selective disclosure of its downgrade decision before it made it public last Friday evening. A reader told us certain hedge funds were informed Tuesday and traded successfully on the information. A separate source had told me certain banks were briefed on Thursday and were told of the US downgrade but assured their ratings would be unaffected. On Friday morning, Twitter was alight with the news.

via Did Standard and Poor’s Break SEC Regulations in Disclosing Its Downgrade to Select Parties? « naked capitalism.

10-Year US Treasury Yield

It appears that some market participants were aware of the coming downgrade even earlier — on Friday [?] the previous week.