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Martin Lowy

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  • How 2014 Could Be Like 1929 [View article]
    Thanks, Cam. Insightful, as usual.

    Does it not appear quite possible that the Chinese Govt/banks will use some form of extend and pretend so that even though 43% will come due in 2014, most of it will be rolled over even though it may not be creditworthy? That has been the pattern elsewhere in the world in such situations.

    If that is correct, then the denouement will not occur in 2014 but the amount of the risk will grow for the future. Will China eventually monetize the risk (while at the same time reforming the system, as it reduces its level of financial repression)? My guess is that the leaders understand all this and that they will get through two more years while they figure out the best policy combination.
    Feb 17 09:21 AM | 4 Likes Like |Link to Comment
  • These Charts Speak Louder Than Words [View article]
    You only used percentages. Don't you have to multiply percentages by numbers of people in the category? My understanding is that the number of people in the over-65 age group has been growing significantly as the boomers age. No?

    Most responsible estimates put the percentage of the decline in the participation rate due to retirements at around 40%. Some say 50%. That leaves plenty of room for the other factors as well. Why argue that the entire sky is falling? Isn't a piece of it sufficient?
    Feb 15 10:07 AM | 5 Likes Like |Link to Comment
  • Repo Markets Demand Taper Because Of Taper [View article]
    Nice. Isn't it wonderful that the over-leveraged might actually get caught again? The best thing that could happen to reduce the income of the 1%.
    Feb 13 10:02 AM | Likes Like |Link to Comment
  • Why The Next Global Crisis Will Be Unlike Any In The Last 200 Years [View article]
    The graph is indeed arresting. How big a crisis becomes, however, is likely to be based largely on the degree to which the debtors have borrowed in currencies that they are able to print. Although it is true that sometimes governments default on obligations in their own currencies (e.g., Russia after the breakup of the Soviet Union), that usually occurs only after a political upheaval. I wonder whether political upheavals are likely in, say, the U.S. or Japan.

    In most cases of overindebtedness in one's own currency, nations inflate their way out of the problem. That has its costs, but it does not necessarily entail crisis. Financial repression also can take other forms that also do not create crises.

    The indebted nations in the euro seem to me most likely to be at risk, and that will cause problems for all who have lent to them. But will that trigger a global crisis when most large investors do know the difference between borrowing in one's own currency and borrowing in something else.

    So, yes, slower growth, I agree. A discrediting of economic theories that exalt debt, I sincerely hope. But global crisis worse than 2008, I do doubt.
    Feb 11 04:14 PM | 2 Likes Like |Link to Comment
  • The Crisis Of Modern Economics [View article]
    Very thoughtful. Thank you. One of your points is, I think, that using GDP as the fundamental standard for economic policy has serious flaws. I have been wondering whether there might nor be a better standard based on middle class incomes, if we could define that. My guess is that such a standard would lead to more long-term policies rather than the short-term stimulus that governments find so tempting. What do you think?
    Feb 7 12:33 PM | 1 Like Like |Link to Comment
  • Bitcoin For Wal-Mart And Target [View article]
    Fine piece, Edward, but a couple of questions: (1) Are there not some regulatory issues that might stand in the way of issuing a private currency that is effectively denominated in dollars? And since the currency is a debt obligation of the issuer, might it not be a security? Maybe not; I just raise the issues. (2) I understand your tie to the min wage, which is clever, but why should the government not do this itself? It thereby maintains control of the money supply and eliminates the issues that derive from multiple payments media. If the government did it, I think it would fairly soon lead to a global system that would supplant banks in most transactions. A great boon to consumers, though bad for the banks. I am not worried about the banks myself.
    Feb 7 12:00 PM | Likes Like |Link to Comment
  • Gasoline Volume Sales, Demographics And Our Changing Culture [View article]
    Excellent commentary, Doug. Thanks.
    Jan 25 08:49 PM | Likes Like |Link to Comment
  • The Increasing Number Of Euro Fools [View article]
    Antonio, I agree with your last sentence. But it appears that some economists do not--e.g., Krugman seems to me to have suggested that the Fed could always keep rates low, no matter what else is going on. And the central bankers seem content for people to believe that they have such powers. Perhaps an article on that subject would be worthwhile.
    Jan 9 09:25 AM | Likes Like |Link to Comment
  • How To Save The Euro [View article]
    Great summary! Thanks. I will pass this along to friends.

    One of the areas that I have been working on includes the German banks' loans to periphery entities. One of the phenomena is that the euros from German banks (and French, Swiss, Dutch and UK banks) created the local wherewithal for Irish and Spanish banks (at least) to pump up their real estate markets. The German banks might well have become insolvent if the countries involved had not bailed out their own banks that owed the money to the German banks. This complicity by the German banks in the problems of the periphery countries should, I think, get more exposure because it seems to me that it counters the German position that Germany and German institutions did not create the problems. Whether the German public could be convinced of that, I do not know. But as far I know, little has been written about the role of German (and other non-periphery) institutions in the flow of funds that created much of the current problem of periphery debt.
    Jan 8 09:39 AM | 2 Likes Like |Link to Comment
  • What Happened To The Money Americans Borrowed Before The Crisis? [View article]
    The excess debt probably is about matched by the losses suffered by holders of mortgage securities, perhaps half of which, in volume, was held by foreign banks and their affiliates. In one sense, that is where the money went. I do not have a handle on this number. But probably it is in the neighborhood of $1 trillion.

    In Another sense, about $1 trillion of the borrowed dollars were spent by American families on things other than buying or financing their houses. Such expenditures seem to have been for a variety of goods and services. It seems likely that those goods and services were American or foreign (incl Chinese) about in proportion to purchases of non-housing goods and services in the economy in general.

    Krugman recently called on economists to tells tories behind their graphs and pronouncements. That seems like a good idea. In that sense, the story of what happened to the money is that it was lent and lost by many kinds of institutions, but prominently including foreign banks, and that consumers spent the money on the usual things that consumers desire when they are a bit flush, including cars, TVs, vacations and other major and minor things that make people feel good.

    When the music stopped in 2007-2008, both the indebted consumers and the profligate foreign banks that had lent money without doing sufficient diligence started to feel bad rather than good. It was the kind of hangover that lasts past the morning after.
    Dec 21 02:09 PM | 1 Like Like |Link to Comment
  • Debt And Secular Stagnation [View article]
    Need to look at MEW. Bootless to ask whether debt is too high or not. MEW fully accounts for the 2% Krugman estimated--and maybe a little bit more--in the 2002-2006 period. What caused the recession--and what caused it to be so deep was that MEW reversed, as it had to do. See calculated Bill has a good MEW graph. If you want my own way of getting there, pls contact me thru seeking alpha.
    Dec 11 01:54 PM | Likes Like |Link to Comment
  • Saving Glut Or Investment Dearth? [View article]
    This is very interesting. But the shift of the investment curve cannot "explain" anything. It is merely an assumption that falls out of the data. It makes the pictures compatible. But why did the investment curve shift? Why did people's behavior change? What factors influenced that shift?
    Nov 21 10:11 AM | 1 Like Like |Link to Comment
  • On Money Demand And QE [View article]
    Cullen, you write in English. I understand what you say, though not always every underlying principle. But Ramanan's post is written in some other language.
    Nov 21 10:02 AM | Likes Like |Link to Comment
  • The Economy Is Not Going To Grow Faster! [View article]
    John, I agree there are structural issues that have created weak demand since at least 2000--except when people borrowed more than they could repay--equity extraction. But what would you do about the structural issues? Bargain harder with China about its currency?

    I do not see any good short-term solutions.
    Nov 19 02:12 PM | 1 Like Like |Link to Comment
  • Scott Sumner Declares Keynesianism Dead [View article]
    Cullen, please read your two posts of today carefully. and think about them: In the Obama/Reagan post you said the "credit crisis was devastating." In this post you say the TARP did not work even though the financial system is far more stable.

    Are you saying that there is currently a credit crisis? Or if its was the credit crisis that was devastating, when did it end?

    I contend that it was not the credit crisis that was devastating. It was the underlying lack of demand that the credit boom masked that has been devastating all along.

    I agree that Keysianism does not properly address that problem. But is there any possible monetary policy that can address that problem?
    Nov 12 04:50 PM | 1 Like Like |Link to Comment