January 2013 archive

Eurozone sovereign debt – dancing in a room where the clocks have no hands

The strong rally in world stock markets in January 2013 appears to be based on three premises. Firstly, that the Chinese economy has successfully avoided a “hard landing”. Secondly, the threat of a fiscal cliff in the USA has been averted. And thirdly, that the Eurozone crisis is now behind us. With these three impediments …

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Towards a new international monetary framework

Yesterday, I participated in what was, for me, a very stimulating meeting of the Joint Task Force on International Monetary Reform at the Institute of Economic Affairs in a snow-bound London. It started with a debate over the origins of the financial crisis. Charles Dumas set out his “savings glut” theory, which states that the …

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How long will Mr Market’s Euphoria Last?

Mr Market has started 2013 in euphoric mood. The FTSE 100 has soared above 6100 for the first time in almost five years. The Dow Jones Industrial Average is also close to a five-year high at 13,500. And elsewhere across the world stock markets are rising. So is Mr Market’s optimism justified? Only if you …

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The US, Britain and the EU

According to the headline article in the Financial Times of January 10, “US warns Britain against leaving EU”, Philip Gordon, assistant secretary for European affairs, has warned Britain against renegotiating the terms of its EU membership with a possible view to playing a lesser role in Brussels. Greatly though I admire the can-do pioneering spirit …

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The American fiscal deficit in simple terms

I am indebted to an old and wise colleague for the following, which puts the American fiscal crisis in easy-to-understand terms: “US Tax Revenue = $2,170,000,000,000 Federal Expenditure = $3,820,000,000,000 New debt (being the difference between the two) = $1,650,000,000,000 Total National Debt = $14,271,000,000,000 Recent budget cuts = $38,500,000,000. Now let’s remove 8 zeroes …

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Why averting the fiscal cliff isn’t such good news

Mr Market, the manic-depressive spirit of Wall Street, jumped for joy yesterday at the news that a last-minute deal had been cobbled together between the President and Congress to stop the United States falling off the fiscal cliff. But has anything fundamentally changed? No, it hasn’t. In fact, the last-minute deal, by simply putting off …

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