Thursday, January 7, 2016

OMG CHINA DOOM DOOM DOOOOOM: also it's the news

This semester at school is going to be tough: we finally are studying from grown-up economics textbooks. So e.g. I'm apparently going to be learning to do Lagrange optimizations to develop a microfounded macro model, etc.

Here's some news:

Calculated Risk - ISM non-manufacturing DECREASED to 55.3%. OMG! I just saw the word "decreased" in bold italic all-caps! Sell! Sell!

Calculon's Frisk - FOMC minutes show decision to raise rates was a close call. Detailed minutes for all those non-FOMC clowns out there who want to second guess a group of America's most experienced monetary economists. The meat:
Members stressed the potential need to accelerate or slow the pace of normalization as the economic outlook evolved.
I.e., they recognize the need to be empirical and prudent.
Some members emphasized the importance of confirming that inflation would rise as projected and of maintaining the credibility of the Committee's inflation objective.
I.e., they also recognize the need to be prudent and empirical. I wish Larry Summers and Brad DeLong would just fucking accept this instead of assuming that Yellen is dumber than them.

The Economist - our evolving understanding of the liquidity trap. It really boils down to something simple: there is far more savings in the world than there is potential capital investment. Or rather:
a proper, sustainable long-run solution would require a fix to the global savings-investment imbalance. That, in turn, might mean dramatic reforms around the world, much higher rates of immigration to rich countries with shrinking workforces, and heavy borrowing by safe-asset issuing governments.
A zero interest rate environment is a panacea, as long as governments borrow that 0% money to finance the next leg in worldwide growth. Everybody harps on about government capital investment (human and physical), but this guy brings up a good point: why not also invest in transporting ~50 million third-world peasants a year into the developed world? That's also got a positive economic rate of return, and will also create a better world. Zero interest rates are what you always wanted, paleoconservatives: now what are you going to do with them?

FT Alphaville - who woulda thunkit that China would extend its share sale ban? Well, at least it's good sarcasm. But the big story apparently is:

FT Aphidville - CNH sale bomb. CNH-CNY spreads aren't supposed to be a thing, but they're now becoming quite a big thing. I see this and I'm wondering if this is going to be another one of those "the market always wins" currency conflicts along the lines of Soros' breaking of the pound. It's not theoretically impossible for the yuan to get smashed: you just need enough speculative capital lined up against it to be certain of an eventual win.

Gavyn Davies - more on the CNY devaluation threat. It's not so much a "devaluation threat" as it is a "complete loss of central bank control of a currency's value".

But with all that in mind, I'd like to remind you that I'm now on my fifth "China Doom [insert year here]?" tag, and the past four tags all turned out to have been unjustified.

BBC - Donald Trump questions whether Cruz can be president. OK, now I suddenly like Donald Trump. Quote:
Republican presidential front-runner Donald Trump has questioned whether rival candidate Ted Cruz is eligible to become his party's nominee because he was born in Canada.

Mr Trump called it a "very precarious" issue for the party and said that Mr Cruz's nomination could be challenged in court.
Damn! How can I hate this guy now?

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