Home - Economics - Index A-Z - News

The Bond Market, ZIRP and QE - The Stock Market

My economic Gurus

Economic theory discredited

Global recession timeline BBC

Alan Greenspan




Martin Wolf

Other Economists


Staying sane when working from home

Inside Job
Trailer, Youtube

2011 (mostly in swedish)

Most important

Skuldfrågan/Who is responsible?

Moral Hazard
What this crisis is all about





The Shadow banking system

Minsky, Hyman



USD Dollar


EMU Collapse





Carry Trade


The Endgame

Fannie and Freddie


Glass-Steagall Act

Lehman Brothers



The Taylor Rule

Too Big to Fail

The Volcker rule

Interesting too


Bankinspektionerna - The Bank supervisors
"Det är svårt att vara olyckskorp när allt går som smort"


Central Banks injection



Rescue plans



Finanskrisen 2007 -

The Fed can't legally save the world financial system in another 'Lehman' crisis
Ambrose Evans-Pritchard 14 February 2018

U.S. Trade Deficit:
Causes, Magnitude and Consequenses
Rolf Englund 2001-05-21

Next Bubble: U.S. Government Bonds
Rolf Englund

How to solve the financial crisis?
Let me tell you a little secret, folks.
Play for time, pray for markets to turn.

Allan Sloan, senior editor CNN, August 18, 2008

Here is a recipe for disaster. Eurozone reformers act as if the crisis never happened
Wolfgang Münchau, FT 18 February 2018

You start off by taking the two most toxic financial instruments of the past 20 years, and then merge them.
The first is the collateralised debt obligation, the complex instrument at the heart of the US subprime crisis a decade ago.
Next, you take a much more innocent-looking instrument: a sovereign bond from a eurozone country
Wolfgang Münchau, FT 18 February 2018

Read more here

Vincent Deluard of INTL FCStone
I believe that 2018 will be the mirror opposite of 1999.
A triple squeeze will drain global excess savings: the U.S. will become the world’s largest oil producer,
Germany will abandon its policy of budget surpluses, and India’s economic growth will outstrip China’s.
The three gluts arose together, and together they will vanish.
Who will supply the world’s capital after the retirement of these massive hoarders?
John Authers, FT 7 February 2018

Top of page

2017 the U.S. trade gap leaped to a nine-year high of $566 billion.
The last time the U.S. ran a surplus was in 1975.
MarketWatch 6 February 2018

Is the 9-Year Long Dead Cat Bounce Finally Ending?
Charles Hugh Smith, 6 February 2018

I hate to admit this, but I think I have found a good historical parallel for what is happening in the markets.
And it is with spring and summer of 2007, on the eve of the credit crisis.
John Authers, FT 6 February 2018

During the first 20-years of the Greenspan-incepted era of Bubble Finance, household leverage ratios exploded.
Whereas wage and salary incomes rose by $4.2 trillion or 2.9X, household liabilities soared by nearly $12 trillion or 5.2X.
David Stockman 5 February 2018

The next global economic downturn – probably in 2019 – will be traumatic for everybody,
given that we have already used up our monetary and fiscal powder, and exhausted popular consent for globalisation.
Ambrose Evans-Pritchard 31 January 2018

Top of page

Fed was focused on unemployment and inflation during the 1990s and early 2000s,
they failed to do anything about the massive buildup of debt. This laid the groundwork for the financial crisis.
John Mauldin Lacy Hunt January 2018

In 2016, total corporate debt increased by $717 billion, yet investment in plant and equipment fell by $21 billion.
Where did the money go? Buybacks and dividend payouts
John Mauldin Lacy Hunt January 2018

What macroeconomists actually do
Problems can be traced back to two intellectual revolutions
Martin Sandbu 16 January 2018

Rethinking macroeconomics
The deepest effort to date to account for how economics failed us in the crisis
Martin Sandbu 15 January 2018

U.S. Trade Deficit Balloons to Widest in Almost Six Years
Bloomberg 5 January 2018

Top of page

Central banks have created the illusion of calm. It won't last.
Satyajit Das, Bloomberg 3 januari 2018

The current stable instability has its origins in the errors of 2008 and 2009, when leaders avoided painful but necessary actions, such as writing off unrecoverable debt and allowing corporate and bank failures.

The underlying problems of over-indebtedness, a financialized economy and expectations of unrealistic increases in living standards were allowed to persist, creating a weak and vulnerable recovery.

By boosting asset prices, policy makers aimed to buttress elevated debt levels and, via the wealth effect, increase confidence, consumption and investment. But rising values of financial instruments representing claims on productive assets don't create real purchasing power unless converted into cash or real enterprises producing earnings.

Any gain for a seller of such assets is contingent on somebody else buying and holding the security, frequently with borrowed money. The economy itself does not benefit from the transfer.

Higher asset values are neither permanent nor sustainable.

Full text

Satyajit Das is a former banker and author of Traders, Guns and Money: Knowns and Unknowns in the Dazzling World of Derivatives, and Extreme Money: The Masters of the Universe and the Cult of Risk

Do eerie parallels presage new crisis?
Falling oil, rising dollar and US rate rise fears also present in 1997-98
Satyajit Das, FT February 23, 2015

The very toxin that sparked the crisis is relied on to reboot economies in the Americas and Europe.
Pascal Blanque and Amin Rajan, FT 4 January 2017

How to explain the paradox of low market volatility, record highs on the world’s stock markets and reduced levels of investor anxiety despite rising political risk?
Axel Weber, former head of the Bundesbank, now chairman of UBS, FT 1 January 2018

Crisis and Response: An FDIC History, 2008–2013
FDIC December 2017

Full text

The Coming Financial Crisis
Bank deposits fell strictly into two classes, depending on the preference of the depositor and the terms offered by banks:
time deposits, and demand deposits.
Doug Casey 27 December 2017

Top of page

Heretics welcome! Economics needs a new Reformation
Steve Keen was one of the economists who knew there was big trouble brewing in the years leading up to the financial crisis of a decade ago but whose warnings were ignored.
Larry Elliott, the Guardian's economics editor, 17 December 2017

The Keynesian Fed economists who were dismissive of Reagan’s trickle-down theory
still don’t appear to see the irony in the fact that they applied trickle-down monetary policy
in the hope that by giving a boost to asset prices they would create wealth that would trickle down to the bottom 50% of the US population or to Main Street.
It didn’t.
John Mauldin 17 November 2017

“Shadow banking”
It's larger than the world economy. It poses risks to financial stability.
Bloomberg, 20 November 2017

Top of page

Olivier Blanchard and Lawrence H. Summers
Rethinking Macroeconomic Policy
“We’ve learned over the past 10 years that fiscal policy can have pretty powerful effects
in deep recessions when central banks have hit very low policy interest rates,”
Gemma Tetlow, FT 13 November 2017

Changes in broadly shared economic assumptions are far more likely to trigger a sell-off,
by prompting investors to reassess the likelihood of actually realizing projected cash flows.
Cristopher Smart, Project Syndicate, 8 November 2017

There might be a dawning awareness among investors that growth rates are slowing,
or that central banks have missed the emergence of inflation once again.
Or the change might come more suddenly, with, say, the discovery of large pockets of toxic loans that are unlikely to be repaid.

Full text

Top of page

Unfinished Business:
The Unexplored Causes of the Financial Crisis and the Lessons Yet to be Learned, by Tamim Bayoumi
Martin Wolf, 1 December 2017

Regulators, led by Alan Greenspan at the Fed, believed the efficient markets hypothesis, that bankers’ self-interest would avert excesses.

For Tamim Bayoumi this was the north Atlantic financial crisis.
Created jointly in the US and western Europe, it also had its worst effects in these areas.
Europe’s crisis dragged on because of flaws in the political structure of the eurozone;
but in essence it continued a crisis born of a bloated, perversely incentivised north Atlantic banking system.

Many call it the “Lehman crisis”, but Lehman Brothers did not fall until over a year after debt markets crashed,
or the “subprime crisis” (which implies that it was driven by lending to people with poor credit in the US).
It is mostly now known as the “GFC”, which stands for the great or global financial crisis.

Full text

About the book at Amazon

Martin Wolf

"I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms," said Greenspan.
The Guardian 24 October 2008

We’re in bubble territory again, but this time might be different
Martin Wolf, FT 10 November 2017

Favourable global economic prospects, particularly strong momentum in the euro area and in emerging markets led by China and India, continue to serve as a strong foundation for global financial stability.”
This statement opened the International Monetary Fund’s April 2007 Global Financial Stability Report.
Since this benign view was published on the eve of the most devastating financial crisis in nearly eight decades, it has to be viewed, in hindsight, as a spectacular misjudgment.
Martin Wolf, about IMF Global Financial Stability Report, FT 24 October 2017

FT Series Financial crisis anniversary

Economic theory discredited

Gordon Brown has described his failure to rally the nation round
the “necessary fiscal stimulus” following the financial crisis as
one of the biggest regrets of his time in office.

FT 30 October 2017

In a new book set to be published next week, the former Labour prime minister expressed dismay over his inability to convince the public that progressive policies “were the right and fairest way to respond” to the global recession.

“Taming globalisation and redirecting it to meet the interests of working people has been, and still is, the defining political challenge of our era.”

Full text

My Life, Our Times by Gordon Brown


Gordon Brown told a US conference he had not realised the "entanglements" of global institutions
BBC 11/4 2011

Top of page

IMF Global Financial Stability Report
With market and credit risk premiums at decade-low levels, asset valuations are vulnerable to a “decompression” of risk premiums — in blunter words, a crash.
We cannot tell people they must remain stuck in a deflationary economy because it is the only way to stop the financial system from exploding.
Martin Wolf, about IMF Global Financial Stability Report, FT 24 October 2017

Zhou Xiaochuan, the long-serving and respected governor of the People's Bank of China,
raised eyebrows last week when he cautioned that the country could have a "Minsky Moment" if "we are too optimistic when things go smoothly."
Mohamed A. El-Erian, Bloomberg 23 October 2017

There is one economist whose name is on everyone's lips today.
It is this man, the late Hyman Minsky
The phrase "Minsky Moment" coined by the former Pimco economist Paul McCulley
John Authers, FT 29 October 2017

Financial Crises
The Economist Essay

Black Monday, October 19 1987, the US stock market fell by more than 20 per cent.
October has always been the month of highest crash risk — in addition to 1987, try 1929, 1997 and 2008
The big question is: could it happen again? 
John Authers, FT 17 October 2017

Lots of people were supposed to prevent the financial crisis.
But while a few warned about the dangers in real time, most policymakers, risk managers, and academics failed in their responsibility to protect the rest of us.
Matthew C Klein, FT 13 September 2017

These booms took the form of greater household borrowing, significantly faster inflation, and a big uptick in the size of the notoriously unproductive construction sector. Rather than encouraging worthwhile investments, easier lending standards only exacerbated the amplitude of the cycle:

After the fact, the common defence was that the crisis so complex and unusual that it would have been impossible to predict...
The aggressive form of this argument is that those who were worried during the go-go years of the 2000s were simply perpetual pessimists who had gotten lucky.

Full text

Economic theory discredited

How the dollar’s weakness is the rest of the world’s problem
Forex markets pose a threat to a synchronised recovery needed to validate stock prices
Mohamed El-Erian, FT 13 September 2017

One of the inescapable truths of the past 10 years is that
the central bank policies introduced to mitigate the crisis may be sowing the seeds of another one.
As in the run-up to 2007, ultra-low interest rates have been distorting the world’s finances.
Patrick Jenkins, FT’s financial editor, 31 August 2017

Full text

Själv brukar jag med en dåres envishet upprepa följande ord, första gången den 5 december 2009
Jag tycker det är skriande uppenbart att räntan världen över är för låg och att en större del av stimulanserna borde ske via finanspolitiken.
Rolf Englund

Top of page

Mr Draghi gave a brutally honest account of central bank failings before the Lehman crisis,
admitting that the orthodoxies of the day bore little relation to reality on the ground.
There was too much trust in the dogma of “rational expectations” and a chronic neglect of how capital markets really work.
Mario Draghi speaking at a forum of Nobel Prize economists at Lake Constance, Ambrose Evans-Pritchard, Telegraph 23 August 2017

Fannie Mae and Freddie Mac, government-sponsored enterprises which had historically guaranteed about half of all new mortgages,
were brought under a tightly-controlled federal “conservatorship” and propped up with $188bn of taxpayer funds.
FT 18 August 2017

Ten years ago on Tuesday the first ripples of what became the financial crisis hit the markets.
On the evening of Aug 8 2007, BNP Paribas, France’s largest bank, told clients that it was suspending three of its funds,
because of the “complete evaporation of liquidity”, which made it impossible to value its assets.
And yet, despite its bailout, many still believed it was a blip, with BNP Paribas calling its fund freeze a “technical issue”. *
It took more than a year and the dramatic collapse of Lehman Brothers to roughly shake the rest of the world awake to
the horrific realisation that the global financial system could implode.
Ashley Armstrong, Telegraph 7 August 2017

Full text

August 9 2007 was the day when BNP Paribas, the French bank, froze three investment funds.
Investors whose money was placed in suddenly toxic securities linked to US real estate,
were no longer permitted to cash out their investments
Martin Sandbu, FT 9 August 2017

The FT marks the anniversary witha chart-rich series on what the crisis did to the global economy

April 2006, when US house prices peaked, and an unprecedented — and unexpected — nationwide decline began.

Full text

Will the dam break in 2007?
Joseph Stiglitz, The Guardian 27/12 2006

Top of page

Why there was no New Deal after the Great Recession
Since the financial crisis there has been a lack of boldness in thought, as well as action
Martin Sandbu, FT 24 July 2017

Attractive outlines for the form of economic policy “regime change” they would like to see:
in Avent’s case, a central bank commitment to target stable growth in nominal national income (rather than stable prices);
in Kaletsky’s, a hope “that the ‘progressive’ economics of full employment and redistribution could be combined with the ‘conservative’ economics of free trade and labor-market liberalisation”. 

Full text

Kaletsky, Anatole

Top of page

Fed's Yellen expects no new financial crisis in 'our lifetimes'
That’s an unusually bold statement for any Fed leader, much less the chair.
Patrick Watson at John Mauldin 3 July 2017

It sure would be nice if Yellen were right. We’d all go to our graves (hopefully not too soon) without ever having seen another financial crisis.

Not so fast, though. Let’s see exactly what Yellen meant, and what it means for your investment strategy.

"Would I say there will never, ever be another financial crisis?" Yellen said at a question-and-answer event in London.
"You know probably that would be going too far, but I do think we're much safer, and I hope that it will not be in our lifetimes and I don't believe it will be," she said.

This was a head-scratcher to me. While it wasn’t a prepared text, Yellen would still never say anything like this by accident.

Full text

Janet Yellen

Top of page

For investors scrambling to keep pace with a hawkish shift in the world’s biggest central banks,
the second half of 2017 just got a lot more interesting.
Bloomberg 29 June 2017

Populism and immigration
The financial crisis and consequent economic shocks not only had huge costs.
They also damaged confidence in — and so the legitimacy of — financial and policymaking elites.
These emperors turned out to be naked.
Martin Wolf FT 27 June 2017

Full text

Economic theory discredited

Top of page

The global economy is caught in a permanent trap of boom-bust financial cycles.
This deformed structure is becoming ever more corrosive and dangerous as debt ratios rise to vertiginous levels, BIS has warned.
Ambrose Evans-Pritchard, 25 June 2017

“Minsky moment,” the point at which excess debt sparks a financial crisis.
The late Hyman Minsky said that such moments arise naturally when a long period of stability and complacency eventually leads to the buildup of excess debt and overleveraging.

At some point the branch breaks, and gravity takes over. It can happen quickly, too.
John Mauldin, 17 June 2017

Can We See A Bubble If We're Inside The Bubble?
Charles Hugh Smith via zerohedge, 16 June 2017

Full-Time Jobs Tumble By 367,000, Biggest Drop In Three Years
Tyler Durden, zerohedge 2 June 2017

US consumers’ behaviour is altered by seismic events — Americans now save more and spend less
Rana Foroohar, FT 26 May 2017

The lack of trust among the general population in what the future will look like, and the ability of elites to manage it.

Economists such as Robert Shiller have speculated that decreased demand in the economy reflects “vague fears” about long-term employability

Full text

Secular Stagnation

Markets Don't Trust Banks, and They're Right
The financial crisis should have led to fundamental change. It hasn’t happened.
Mark Whitehouse, Bloomberg 30 maj 2017

Central banks response to the crisis almost a decade ago is still the key driver of markets
FT 26 May 2017

This summer marks a decade since the first stirrings of the global financial crisis. A lot of water has flowed since two hedge funds backed by Bear Stearns collapsed in July 2007 because of their exposure to US subprime mortgages.

The steady expansion of central bank balance sheets via quantitative easing is still keeping the now-familiar show of equities at record levels and negligible risk premiums firmly on the road.

Full text


Top of page

Ten years on: When the music stopped
How the 2007-08 crisis unfolded
The Economist 6 May 2017

In February 2007 Britain’s HSBC shocked markets by raising its bad-debt provisions to $10.5bn because of failing American subprime mortgages.

During that summer two hedge funds run by Bear Stearns, an investment bank, collapsed after losing money on soured subprime investments.

As banks started to worry about exposure to subprime lending and the piles of complicated derivatives connected to it,
credit markets began to seize up, causing BNP Paribas, a French bank, to suspend withdrawals from three funds in August.

In November 2007 the music stopped even for Mr Prince: he resigned.
That quarter Citi took subprime-related write-downs of $18.1bn.

Full text

Top of page

A decade after the crisis, how are the world’s banks doing?
For too many, leverage was the path first to profit and then to ruin.
The Economist 6 May 2017

Revised international rules, known as Basel 3 (still a work in progress),
have forced banks to bulk up, adding equity and convertible debt to their balance-sheets.

The idea is that a big bank should be able to absorb the worst conceivable blow
without taking down other institutions or needing to be rescued.

Full text

Top of page

Only one-third of American home values have recovered pre-recession peaks
MarketWatch 3 May 2017

Soaring Trump dollar risks global trade war and China currency crisis, warns Posen
Donald Trump will succeed in ramming through radical tax cuts and fiscal stimulus, causing US federal borrowing to balloon.
The Peterson Institute thinks the current account deficit could rise to 5pc of GDP.
Ambrose Evans-Pritchard, 11 April 2017

If something cannot go on forever, it will stop.”
This is “Stein’s law”, after its inventor Herbert Stein, chairman of the Council of Economic Advisers under Richard Nixon.

Rüdiger Dornbusch, a US-based German economist, added:
“The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.”

Martin Wolf, FT 11 april 2017

Staggeringly high UK house prices may only be corrected by a market crash,
according to economists from the University of Reading.
Bloomberg 11 April 2017

Top of page

The smart money is record ‘short’ in stocks, and the dumb money is record ‘long’
hedgers have racked up more short positions than at any other time in history
Simon Maierhofer, MarketWatch 6 April 2017

It feels like 2008 again
In 2017 total household debt will reach its previous peak of $12.68 trillion,
which it reached in the third quarter of 2008.
MarketWatch 3 April 2017

Full text

Top of page

Homeowners are pulling cash out again
Fast-rising home prices gave homeowners more equity than many expected,
and they are now tapping that equity at the fastest rate in eight years.
Diana Olick, CNBC 3 April 2017

The problem with cocos more broadly is that nobody knows if they work.
Lloyds Bank of the UK issued the first coco as part of a big capital restructuring in 2009.
Over $153bn of the securities have been issued since
FT 21 March 2017

Postmortem plans for banks under threat of exinction
If there was one big realisation to come out of the financial crisis
— alongside the fact that banks were riskier than believed —
it was this: policymakers did not know how to wind up a bank without causing chaos.
FT 6 March 2017

Today, there is worrying evidence on both sides of the Atlantic that the resolution idea could be in jeopardy before it has been fully implemented, let alone tested.

Full text



Top of page

Banks globally have paid $321 billion in fines since 2008
for an abundance of regulatory failings from money laundering to market manipulation and terrorist financing,
according to data from Boston Consulting Group.
Bloomberg 2 March 2017

The global financial system is no safer today than it was in 2007.
If those who use overnight mortgage pools receive priority over other creditors, as is the case today...
Mark Roe, professor at Harvard Law School, Project Syndicate, 31 January 2017

Top of page

Explanations for the Financial Crisis
Barry Ritholtz, Bloomberg 18 January 2017

Discussions of causation frustrate those who seek to oversimplify the complex as they pursue a political agenda
(see Peter Wallison at the American Enterprise Institute).

Any theory that claims to explain the financial crisis should be able to answer these 10 questions


I’ll stop at 10. How did your model do in explaining these issues? If you can adequately answer these questions and have the data to back them up, you may be on to a successful model of the financial crisis.

Full text

Top of page

Moody’s in $864m settlement over subprime mortgage bonds
The settlement is smaller than the $1.375bn that rival rating agency S&P Global reached in February 2015
FT 14 January 2017

Full text

Top of page

The latest Economic Report of Obama’s Council of Economic Advisers
Mr Obama’s presidency began amid the worst financial crisis since the 1930s.
If we consider the disaster he inherited
and the determination of the Republicans in Congress to ensure he would fail,
his record is clearly successful. This does not mean it is perfect.
Martin Wolf, FT 10 January 2017

The latest Economic Report of the President analyses the Obama record.
It is also the brief for the defence. But Mr Obama’s Council of Economic Advisers does first-rate analysis.
This report is no exception to that rule.

As the report notes, perfectly correctly:

“It is easy to forget how close the US economy came to an outright depression during the crisis. Indeed, by a number of macroeconomic measures... the first year of the Great Recession ... saw larger declines than at the outset of the Great Depression in 1929-30.”

Full text

Top of page

Do Central Bankers Know A Bubble When They See One?
From its March 2000 peak to its October 2002 bottom the NASDAQ declined 80%.
In August 2002 Greenspan gave a speech at the Fed’s conference in Jackson Hole.
Ben Bernanke, gave a speech titled, “The Great Moderation.”
zerohedge 3 January 2017

Just over $6.6tn
Global debt sales reached a record in 2016
led by companies gorging on cheap borrowing costs
breaking the previous annual record set in 2006
FT 27 December 2016

Top of page

How policymakers plan to solve a long-term global debt crisis
Bill Gross, 6 December 2016

Full text

Top of page

The Bank of England’s chief economist has admitted his profession is in crisis
having failed to foresee the 2008 financial crash and having misjudged the impact of the Brexit vote.
So what can the dismal science do to regain the trust of the public and politicians?
Guardian 6 January 2017

Full text

Economic theory discredited

Top of page

The return of Keynesianism
Martin Sandbu's Free Lunch, FT 24 October 2016

A speech given by Federal Reserve chair Janet Yellen 10 days ago has received a lot of attention in the economic community
and deserves an even broader hearing.

Its modest focus — it is titled “Macroeconomic research after the crisis” — is deceptive.

Beyond useful research recommendations, Yellen’s words carry more profound implications,
including an admission of the extent to which central bankers are navigating in the dark,
and a return to much more aggressive policies for demand management than modern macroeconomic theory had until recently admitted.

Full text

By reducing the incomes of retirees and terrifying near-retirees,
the Fed successfully reduced economic activity.
John Mauldin 9 October 2016

Ray Dalio Warns A 1% Rise In Yields Would Lead To Trillions In Losses
zerohedge 8 October 2016

Globally, the stock market is about $69 trillion in size,
trading about $191 billion in shares per day.
The bond markets are well north of $140 trillion,
and trade about $700 billion in volume per day
zerohedge 4 October 2016

More than nine years after the start of the global financial crisis,
worries over the health of the financial system remain significant, especially in Europe.
Martin Wolf. FT 4 October 2016

This should not be surprising. But it should be disturbing.

Full text

Top of page

We are still groping for truth about the financial crisis
It has been eight years since Lehman Brothers went bankrupt and still it defines the calendar.
For anyone in the financial world, time is divided into Before Lehman, and After Lehman.
John Authers, FT 16 September 2016

And yet, even after eight years, the crisis’s lessons are controversial. Anger is as intense as ever.
And when it comes to making the financial system proof against another Lehman, every day seems to bring further proof that we do not know what we thought we knew.

Full text

Lehman Brothers


Senator Elizabeth Warren wants law enforcement officials to tell her
why none of the individuals referred to them by the Financial Crisis Inquiry Commission
for potential law-breaking related to the crisis were ever prosecuted.
MarketWatch 15 September 2016

On the eighth anniversary of the Lehman Brothers bankruptcy on Thursday, the Massachusetts Democrat asked the Inspector General of the Department of Justice and FBI Director James Comey
for an investigation into the lack of individual criminal prosecutions for potential law-breaking related to the 2008 financial crisis.

Full text

Top of page

All told, the primary effect of monetary policy since 2008 has been to transfer wealth
to those who already hold long-term assets — both real and financial — from those who now never will.

John Kay, Financial Times 9 September 2016

Echoes of 2008 as danger signs are ignored
Tett, FT 1 September 2016

In 2013 economists at the IMF rendered their verdict on these austerity programmes:
they had done far more economic damage than had been initially predicted, including by the fund itself.
What had the IMF got wrong when it made its earlier, more sanguine forecasts?
It had dramatically underestimated the fiscal multiplier.
The Economist print 13 August 2016
Highly Recommended

Since August 2007 the 471 financial companies that form Datastream’s financials equities sector
lost over one trillion euros in market value.
FT 8 August 2016

Full text


The 2007-08 episode clearly demonstrated that financial crises, particularly when they involve the banking sector,
can be enormously expensive both in terms of direct fiscal costs and associated costs for the real economy.
Over the period 2008-14 accumulated gross financial sector assistance by euro area governments amounted to 8% of euro area GDP,
of which, so far, around 3% has been recovered
Lecture by Vítor Constâncio, Vice-President of the ECB, 7 July 2016

Full text

Here We Go Again — August 2007 Redux
If this is beginning to sound like August 2007 that’s because it is.
David Stockman 5 July 2016

After reaching a peak of 1550 on July 18, 2007, the S&P 500 stumbled by about 9% during the August crisis, but the dip-buyers kept coming back in force on the one-off assurances of the sell-side “experts”. By October 9 the index was back up to the pre-crisis peak at 1565 and then drifted lower in sideways fashion until September 2008.

Upon the Lehman event the fractures exploded, and the hammer dropped on the stock market in violent fashion. During the next 160 days, the S&P 500 plunged by a further 50%.
Altogether, more than $10 trillion of market cap was ionized.

The claim that you can capitalize the stock market at an unusually high PE multiple owing to ultra-low interest rates,
therefore, implies that deep negative real rates are a permanent condition, and that governments will be able to destroy savers until the end of time.

The truth of the matter is that interest rates have nowhere to go in the longer-run except up

Full text

Frozen withdrawals in 2007 and 2015

Three UK real estate funds halt selling
"Redemptions have now reached a point where M&G believes it can best protect the interests of the funds' shareholders by seeking a temporary suspension in trading. This will allow the fund manager time to raise cash levels in a controlled manner, ensuring that any asset disposals are achieved at reasonable values," M&G said in a statement.
CNBC 5 July 2016

Top of page

The Brave New Uncertainty of Mervyn King
Paul Krugman, The New York Review of Books, Issue 14 July 2016

Although The End of Alchemy is more a book of theory inspired by recent economic crises than an account of those crises,
it does, inevitably, tell a story about what went wrong.

First, as many people have noted, the run-up to the global financial crisis that struck in 2007–2008 was a two-decade era of unusual economic calm, at least in wealthy countries,
commonly referred to as the Great Moderation — although for some reason King calls it the Great Stability instead.
This long era of stability may have encouraged complacency, both in the private sector and among policymakers,
so that evidence of an increasingly fragile financial system was ignored.

Traditionally, banks had a substantial “cushion” of equity — there was enough difference between their loans and their debts that they could absorb significant losses on loans without going bankrupt.

On the eve of the crisis, however, much of the financial system had enormous leverage — the ratio of debt to equity was 25 to 1 or more — leaving it extremely vulnerable to panic.

And the panic came.

Full text

Skuldfrågan/ Who is responsible?

In spite of the “biggest monetary policy stimulus in the history of the world” the results have been anaemic.
“Central banks have thrown everything at their economies, and yet the results have been disappointing,” he notes.
“Whatever can be said about the world recovery since the crisis, it has been neither strong, nor sustainable, nor balanced.” The End of Alchemy: Money, Banking and the Future of the Global Economy by Mervyn King – review John Kampfner, The Guardian 14 March 2016

Full text

Marian Radetzki, unemployment and Stall Speed

David Stockman's Conspiracy Theory
Along with Goldman’s plenipotentiary at the US Treasury, Hank Paulson,
Bernanke stampeded the entirety of Washington into tossing out the window the whole rule book of
sound money, fiscal rectitude and free market discipline.
In fact, there was no extraordinary crisis.
The Lehman failure essentially triggered a self-contained leverage and liquidity bust in the canyons of Wall Street
13 April 2016

2016: The End Of The Global Debt Super Cycle
ZeroHedge, 1 April 2016

The day after the 1987 crash (Oct. 20, 1987) Alan Greenspan, Chairman of the Fed, announced to the world that
The Fed stood ready to provide whatever liquidity was needed by the banking system
to prevent the crash from turning into a systemic financial crisis.

That was the day the Fed “put” was born.

Fed Funds Rate drop from 6.5% to 1% from 2000 to 2003.
This in effect morphed the tech stock bubble into a housing bubble.

The world economy is in no position to absorb another big deflationary shock.
The possibility of another big deflationary shock from China over the next several years is real.
Martin Wolf, FT 29 March 2016

Why I am reading Stockman and Varoufakis
Englund blog 26 March 2016

Money, Banking and the Future of the Global Economy, by Mervyn King.
Review by John Plender, FT 3 March 2016

Fed is now 87 months into its grand experiment with the lunacy of zero interest rates.
David Stockman 16 March 2016

Atlanta Fed's gauge of "sticky-price" inflation in the US
soared to a post-Lehman peak of 3 pc
Ambrose 2016-03-16

The subprime crisis, the euro crisis, the China slowdown, the oil bust.
But surely these events are connected.
Justin Fox, Bloomberg View 10 March 2016

I’m confident we would see improvement on all fronts
if we got GDP growth back up to 4% for a few years.
John Mauldin, March 7, 2016

Top of page


Baltikum Swedbank SEB och Bolånen
Andreas Cervenka, SvD 3 mars 2016

7 big risks are now plaguing the U.S. and global economies
Nouriel Roubini, MarketWatch Mar 2, 2016

It is widely agreed that a series of collapsing housing-market bubbles triggered the global financial crisis of 2008-2009, along with the severe recession that followed.
Now, five years later, signs of frothiness, if not outright bubbles, are reappearing in housing markets
Nouriel Roubini, Project Syndicate, 19 november 2013

The next global financial crisis could start with U.S. stocks.
Satyajit Das, MarketWatch 2 March 2016

Now, despite evidence that the world economy is near to another recession, a similar survey shows that
not one of the 40 leading economists believes there will be a US downturn this year.
Ruchir Sharma, FT February 29, 2016

All told, however, a sharp decline in the S&P 500 has signalled a recession nearly 60 per cent of the time.
By contrast, the consensus view of economists has an accuracy rate of zero per cent.

The writer is head of emerging markets and global macro at Morgan Stanley Investment Management

Full text

Economic theory discredited

Top of page


Eight years after triggering a crisis that nearly brought down the global financial system, the United States remains plagued by confusion about what reforms are needed to prevent it from happening again.
What Americans are sure about is that they are angry with the financial sector.
This is reflected in the success of recent Hollywood movies such as The Big Short
Jeffrey Frankel, a professor at Harvard University, Project Syndicate 24 Febr 2016

At the center of Sanders’s campaign is a proposal to break up the big Wall Street banks into little pieces, thereby ensuring that no bank is so big that its failure would endanger the rest of the financial system.

The first bank that was declared “too big to fail” was Continental Illinois, which received a bailout in 1984 from President Ronald Reagan.

Attacking banks is emotionally satisfying. But it won’t prevent financial crises.

In fact, the financial industry’s biggest problems lie elsewhere:
hedge funds, investment banks, and other non-bank financial institutions that face less regulatory oversight and restrictions (such as on capital standards and leverage) than commercial banks.

Recall that Lehman Brothers was not a commercial bank, and AIG was an insurance company.

the Dodd-Frank Wall Street Reform and Consumer Protection Act

Dodd-Frank was far from complete. Making matters worse, many in Congress have spent the last six years chipping away at it, such as by exempting auto dealers from the CFPB and restricting the budgets of the regulatory agencies.

Full text

Too Big to Fail


World economy stands on the cusp of another crash,
warns Lord Mervyn King. Telegraph 26 Febr 2016


It’s different this time.
The actions of governments and central banks should make a difference during a crisis - this time, they may not
Ben Wright, Telegraph 18 Feb 2016

Investors are often derided for having memories like goldfish. But the scar of the 2008 financial crisis is still raw.
Many were blindsided by the credit crunch and vowed not to be caught out again

If fiscal and monetary policy is supposed to be the last defence against market worries,
then it’s not ideal when the market’s biggest worries are inspired by fiscal and monetary policy.

Full text

Top of page


Faced with the most severe economic downturn since the Great Depression, the U.S. Federal Reserve did the only thing it could: flood the financial system with liquidity.

The move to so-called easy money arguably saved the world from a worse fate and radically changed the economic backdrop as well as the landscape for financial markets.

Bloomberg via englundmacro.blogspot.se/2016/02/these-are-things-that-correlate

Top of page


China's own version of 'The Big Short'
Rolf Englund blog 9 Febr 2016

The Bank of Canada admits easy money can inflate debt bubbles
FT Alphaville 8 Febr 2016 via Rolf Englund blog

The lunatic valuation of the FANGs (Facebook, Amazon, Netflix and Google)
100X+ PE multiples are always and everywhere a deformed artifact of central bank driven Bubble Finance
David Stockman 30 January 2016

Full text

Top of page

AMZN and its three other FANG amigos had accounted for a $530 billion gain in market cap
while the other 496 stocks in the S&P 500 had declined by even larger amount.

That is, the apparently flat S&P 500 index of 2015 was hiding an incipient bear—–owing to a market narrowing action like none before.
Compared to the Fabulous FANGs (Facebook, Amazon, Netflix and Google)
David Stockman, January 13, 2016


The $29 Trillion Corporate Debt Hangover That Could Spark a Recession
The seven-year-old global growth model based on cheap credit from central banks is running out of steam
Bloomberg 28 January 2016

In the past 30 years, there have been only three 20 per cent falls in the S&P that did not overlap with a recession.
All involved financial accidents.

So the argument that the damage should not be bad if we avoid a recession is reasonable. But why exactly did markets rebound?

In all three cases, the Federal Reserve eased monetary policy, when it had intended to tighten.
In 1987, there were three rate cuts, not reversed for almost a year. Rates ended that cycle two percentage points higher than they were on the eve of Black Monday.
LTCM also triggered three rate cuts.
In 2011, with rates already at zero, the Fed responded with “Operation Twist” to try to push down bond yields.

Full text

RBS has advised clients to brace for a “cataclysmic year” and a global deflationary crisis,
warning that major stock markets could fall by a fifth and oil may plummet to $16 a barrel.
Ambrose Evans-Pritchard, 11 Jan 2016

“Fangs” — Facebook, Amazon, Netflix and Google
As with the first Shanghai Surprise, the stark reaction to this week’s Chinese events reveals deep lack of confidence in the health of the western corporate sector.
Even if the situation now stabilises — as it did for several months back in 2007 —
the message of concern, in both west and east, is clear.
John Authers, FT 8 January 2016

One of the (many) fascinating things about this latest global financial crisis is that there’s no single catalyst.
Unlike 2008 when the carnage could be traced back to US subprime housing, or 2000 when tech stocks crashed and pulled down everything else,
this time around a whole bunch of seemingly-unrelated things are unraveling all at once.

zerohedge 7 January 2016

Submitted by John Rubino via DollarCollapse.com

Interest rates, for instance, were high by current standards at the beginning of past crises, which gave central banks plenty of leeway to comfort the afflicted with big rate cut announcements.
Today rates are near zero in most places and negative in many.

Full text

Top of page


A Year of Sovereign Defaults?
Carmen Reinhart, Project Syndicate 31 December 2015

Like so many other features of the global economy, debt accumulation and default tends to occur in cycles. Since 1800, the global economy has endured several such cycles, with the share of independent countries undergoing restructuring during any given year oscillating between zero and 50%

The most recent default cycle includes the emerging-market debt crises of the 1980s and 1990s. Most countries resolved their external-debt problems by the mid-1990s, but a substantial share of countries in the lowest-income group remain in chronic arrears with their official creditors.

Read more at https://www.project-syndicate.org/commentary/sovereign-default-wave-emerging-markets-by-carmen-reinhart-2015-12#z8IKDElycECkDZ8Q.99

Welcome, then, to what Carmen Reinhart, senior fellow at the Peterson Institute for International Economics in Washington,
and Harvard’s Kenneth Rogoff call “the second great contraction” (the Great Depression of the 1930s being the first).

Top of page