"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen


"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister


"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont


"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister


"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Monday, November 14, 2011

Get Ready For A Bigger ‘Global Savings Glut’ by Yglesias
Remember the “global savings glut” of the mid-aughts? This was Ben Bernanke’s explanation for the large U.S. current account deficit as of 2005. It’s also an important part of the backdrop for the housing boom and the financial crisis. What happened is that in the late-1990s, many East Asian countries suffered from a classic financial panic. The international investment community, once bullish on places like Thailand and South Korea, suddenly turned pessimistic. Currencies collapsed, and borrowers were left awash in debt. The IMF stepped in to prevent the global financial system from falling apart, but in exchange for liquidity assistance, it imposed tough austerity conditions on the states in need of rescue.
The imposition of austerity is in part supposed to avoid moral hazard problems. And in the case of Asia, it worked. Arguably it worked a bit too well. The entire region became obsessed with amassing foreign exchange reserves to ensure that it would never again need to go hat in hand to the IMF. That created an unusually large level of global demand for AAA-rated dollar-denominated financial assets which helped kick off all manner of events in the American economy.
The IMF qua IMF seems to have decided that this was a mistake, and under Dominique Strauss-Kahn and now Christine Lagarde has largely been pushing a non-austere agenda. But Angela Merkel, European Commissioner Olli Rehn, and the European Central Bank seem to be re-inventing the late-’90s IMF prescription for economic recovery. They’re afraid of creating a situation in which poor economic management isn’t adequately punished, so they’re determined to make sure that troubled European states enact unpopular austerity packages in order to get help even if they need to remove democratically elected governments from office to get the job done. Whatever else this does, it should certainly succeed in persuading European governments that stockpiling foreign exchange isn’t just for Asians anymore. If the world succeeds in coming out through the other side of this crisis, you should expect to see even more countries joining the perpetual surplus brigades leading to even more demand for safe dollar denominated financial assets. That, in turn, means either big U.S. budget deficits or else some bold new innovations in financial engineering to meet the demand.

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