Rogoff is one of the clearest thinkers out there when it comes to understanding the current western economic situation following the financial crisis of 2008.  If you don’t have the time to read “This Time is Different” or this paper (written early in 2008 before Lehmans), but want to understand why the US and Europe are in such rough shape a mere 3 years later, then read this interview transcript.  Understanding the Second Great Contraction – Rogoff Kenneth Rogoff: The historical experience gives a very clear view that the aftermath of a financial crisis brings  slow and halting growth, sustained … Continue reading This Time is Different–McKinsey interview with Kenneth Rogoff

Bank of America continues with apparently moves that can only be characterised as desperate.  This one involves some $70 Trillion in derivatives.  Yes that number is correct, with a “T”, and it could (to be confirmed) represent some 10% of all derivatives in the world.  This is astounding. BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit | Bloomberg Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation. As commented … Continue reading Bank of America looking increasingly vulnerable

Phase 2 of the banking crisis continues to circle.  We already know about the sovereign risk issues in Europe and now the soft employment and economy in the US is showing as deteriorating consumer credit signals warning of more bad debts for US Banks. Improvement in US mortgage delinquencies ends Citi cut bad loan reserves, but said that was due to improvement on credit cards rather than mortgages. “We haven’t been releasing reserves against the US residential mortgage portfolio,” said Mr Gerspach. “I would look at that as still being the most significant risk that any US bank currently faces.” Continue reading Signals of deteriorating bad debt trends for US Banks appear

The penny has dropped.  We are in a period where the only way out is deleveraging otherwise known as debt reduction.  Yes it will be painful but its more painful watching bankers whining to governments to protect themselves.  We are in a state of flux where the only solution is debt reduction.  This can happen in only one of a couple of ways.  One is debt write offs and the other primary one is inflation.  However all countries cannot inflate at the same time. EU banks could shrink to hit capital rules | ft.com Another top banker said: “It’s fundamentally … Continue reading The Great Unwinding is coming closer to the Endgame

Few were paying much attention to OccupyWallStreet including mainstream media until … the politicians and others stepped in with poorly timed and badly framed criticism. The oddest was surely Rand Paul, US Senator. “I see it as inflaming this Paris mob that I hope doesn’t result in a lawlessness where they say, ‘Well, gosh, those nice iPads through the window should be mine and why don’t I throw a brick through the window to get them because rich people don’t deserve to have them when I can’t have one,’” Paul said. He appears to believe the world will run out … Continue reading Krugman on the real point of OccupyWallStreet

It is assumed by many that China will automatically take over from US in time.  Well that may or not be the case.  In any event we can assume the direction being followed in China will be a rocky one.  Here is one of those quotes, relative to banking,  that makes you look twice about China. China realty goes BOGOF MacroBusiness In the epicentre, Wenzhou, QQ.com reports that 90% of families in Wenzhou are involved in underground banking in one way or another. And some more detail, including analysis by Credit Suisse. In the face of high inflation and low … Continue reading Shadow banking a significant problem in China

These announcements on the same day are telling.  (Note:  US population = 307 million/  Canada population – 34 million) US economy adds 103,000 jobs – ft.com The Canadian economy   churned out 60,900 jobs last month  (Globe & Mail / Stats Can) Put another way, if the US was creating jobs in this month at the Canadian pace their number would be 550,000. Continue reading Two telling announcements on jobs creation from US & Canada