It’s the macroeconomy, stupid!

It’s the macroeconomy, stupid.
Fri Oct 03, 2008 at 09:33:30 AM PDT

Tell me again how borrowing 10B/wk from China to fight the war in Iraq, with money on the ground in Iraq, was a good idea? With the world facing credit swaps in the high trillions, and no liquidity, banks and agencies globally are addressing the problems of It’s a Mad, Mad World.

Stateside, as this whole macroeconomic Gordian knot begins to unravel, the vultures are circling. From Bloomberg comes tales of deals with Wachovia. Check out their site for more information. Does the right hand know what the left hand is doing? Get it together, people!

After the financial crisis, institutions will be reducing their leverage.

The process is rapid and painful – and has global effects. However, economists are unsure as to what the effects will be.

Hang on to your coats and hats. Incidentally I love the new depressionware fashion. Reminds me of Paper Moon, Ry Cooder “Into the Purple Valley”, Woodie Guthrie, and railroad tracks. Special thanks to Craig Ferguson: Schadenfreude? Sigmund Freudy!!!

Calling Elliot Ness to the IRS!

From, just in case you need more coffee: Radio DaDa tells me

“The world is undergoing a period of serious ‘debt deflation’– asset-price destruction — and the United States is a particular sufferer”.

…and… dit dit dit da da da dit dit dit

“The Fed and US Treasury have signalled that they will act speedily to prevent the failures of institutions that might precipitate a systemic collapse, but allow other large banks and broker dealers to go to the wall. The immediate market fallout is likely to be severe, as renewed uncertainty about which institutions the government deems ‘too big to fail’ accelerates painful de-leveraging, with companies scrambling to pay off their debt. Over the longer-term, the credit crisis is unlikely to abate until the US housing market stabilises — an improbable prospect before next year”.

…oh really? no magic bullet there…

“Moreover, the financial distress on Wall Street has spread to the global economy, with economists lacking a model of how it will be affected:

The ‘international economy’ school argues that the best solution is to provide country-level descriptions of individual macroeconomies, and argues that the world economy comprises an aggregation of country-level data.

An alternative approach — the ‘global macroeconomics’ theory — instead posits that the world economy is one very large economy on the global level and that it can be described using the tools of macroeconomics.

However, there is no consensus over which global model is correct. There is also no set of competing theories that would provide different answers or models. The next decade will see a continuation of theoretical innovation and debate about interpreting global phenomena. Pricing global risk, in this context, will remain very tenuous.

In other words, there is a good chance that the global economy will avoid a systemic collapse. But it is difficult to envisage how the developed economies will avoid a painful period of contraction, structural adjustment and regulatory reform.”

Thanks for the memories, BushCo.


One Response to “It’s the macroeconomy, stupid!”

  1. […] Leane Roffey Line wrote an interesting post today onItâ??s the macroeconomy, bstupid/b!Here’s a quick excerptIt’s the macroeconomy, bstupid/b. Fri Oct 03, 2008 at 09:33:30 AM PDT. Tell me again how borrowing 10B/wk from China to fight the war in Iraq, with money on the ground in Iraq, was a good idea? With the world facing credit swaps in the b…/b […]

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