Emerging Issues (Part 1)

By |2017-07-17T12:35:03+00:00August 4th, 2011|Global Market Update|

Emerging markets are hot. Should you be jumping in? With the advent of Exchange Traded Funds and dedicated mutual funds, do-it-yourself investors can invest in Chinese index funds and Russian equities. Certainly emerging markets have a lot to recommend them: they’re typically running current-account surpluses, their fiscal budgets are in good shape, they have plenty of reserves, and technological innovation is allowing these countries’ productivity to grow by over 5% per year, whereas 2% growth is normal in the developed world. To top it [...]

Hitting the Ceiling

By |2017-07-17T12:35:03+00:00August 3rd, 2011|Global Market Update, Recession|

I feel like I must be the only person out there actually pleased with the outcome of the debt-ceiling debate. One of the hallmarks of a compromise is that nobody gets everything. A little bit of this, a little bit of that, and the deal goes through. But in this case, it seems like everyone is unhappy. Tea-partiers decry the phony accounting that calls previously scheduled troop draw-downs “savings.” […]

The Ratings Route

By |2017-07-17T12:35:03+00:00August 2nd, 2011|Global Market Update|

So even after the debt deal, the US is still likely to lose its Aaa rating. This is news? A few weeks ago Standard and Poor’s put the United States Federal Government on Creditwatch with negative implications. This is bond-geek speak for, “I’m gonna downgrade you unless you prove to me that I shouldn’t.” They noted in their comments that unless the government significantly alters the structure of the contractual payments that we call entitlements, they will downgrade us. The current deal doesn’t do [...]

Dueling Crises

By |2017-07-17T12:35:03+00:00August 1st, 2011|Global Market Update|

Back in the ‘70s there was a hit song entitled “Dueling Banjos.” What we’re seeing here are dueling crises. In Europe the monetary union that led to so many gains from trade is being challenged because they adopted a single currency without creating the necessary institutions to make it workable. But its short-run problem is political: German voters who have benefited from the Euro still don’t like it, because they feel like they’re being taxed to pay for spendthrift regimes in Greece, Ireland, and [...]