Submitted by Jim Quinn via The Burning Platform blog, Any article that starts with a quote from Jim Grant is guaranteed to be a fact based, common sense, reasoned analysis of our warped, debt saturated, over-valued, Federal Reserve rigged financial markets. John Hussman starts his weekly letter with this quote from Jim Grant:
The World Bank cut its global growth forecast amid weaker outlooks for the U.S., Russia and China, while calling on emerging markets to strengthen their economies before the Federal Reserve raises interest rates.
The Washington-based lender predicts the world economy will expand 2.8% this year, compared with a January projection of 3.2%. The U.S. forecast was reduced to 2.1% from 2.8% while outlooks for Brazil, Russia, India and China were also lowered. The setbacks may be temporary: the 2015 estimate for world economic growth was unchanged at 3.4%.
BRUSSELS — Throughout Europe’s debt crisis, northern European leaders have often said they will not stand for taxpayers having to fork out for other countries’ problems, and the notion of “taxpayer-funded bailouts” has taken root.
Yet despite three-and-a-half years of debt and banking turmoil, with bailouts totalling more than 400 billion euros, northern eurozone taxpayers have not actually lost a cent.
Magicians at the ECB have temporarily convinced market participants that Europe is in some sort of recovery. It isn't.
All of Europe is now in recession, including Germany as noted earlier today in German Economy Shrinks Most in Three Years; Situation Significantly Worse Than Mood.
"Debt Doom Loop in Spain"
A decision by the FHFA requiring the GSEs to finally release detailed information on loans they acquired and guaranteed uncovers an ugly truth about the GSEs that many should be aware of (as we noted the exuberance here).
Yves here. This post summarizes a paper that argues that derivatives, specifically credit default swaps, exacerbated the severity of the European sovereign debt tsuris. This sort of analysis deserves a wider audience, precisely because the prejudice of both neoclassical and neoliberal economists is that markets are ever and always virtuous, and that prices are never wrong unless someone is interfering (with labor unions the preferred bad example).
From "The Global Financial Crisis: Explaining Cross-Country Differences in the Output Impact," IMF WP 09/280, by Pelin Berkmen, Gaston Gelos, Robert Rennhack, and James P. Walsh:
We provide one of the first attempts at explaining the differences in the crisis impact across
developing countries and emerging markets.