Global Crisis ‘Vastly Worse’ Than 1930s, Taleb Says

 Let's Call What It Is - DEPRESSION, Political Chaos, TARP fruit loops, The End of American Capitalism As We Know It? - Discuss, The Financial Elite, The Global Economy, The Importance of Strategic Planning  No Responses »
May 072009
 

From Bloomberg:

May 7 (Bloomberg) — The current global crisis is “vastly worse” than the 1930s because financial systems and economies worldwide have become more interdependent, “Black Swan” author Nassim Nicholas Taleb said.

“This is the most difficult period of humanity that we’re going through today because governments have no control,” Taleb, 49, told a conference in Singapore today. “Navigating the world is much harder than in the 1930s.”

The International Monetary Fund last month slashed its world economic growth forecasts and said the global recession will be deeper than previously predicted as financial markets take longer to stabilize. Nouriel Roubini, 51, the New York University professor who predicted the crisis, told Bloomberg News yesterday that analysts expecting the U.S. economy to rebound in the third and fourth quarter were “too optimistic.”

“Certainly the rate of economic contraction is slowing down from the freefall of the last two quarters,” Roubini said. “We are going to have negative growth to the end of the year and next year the recovery is going to be weak.”

Federal Reserve Chairman Ben S. Bernanke told lawmakers May 5 that the central bank expects U.S. economic activity “to bottom out, then to turn up later this year.” Another shock to the financial system would undercut that forecast, he added.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=avf2KVFwU8xQ

Posted by Brian Schuettler at 5:01 am  

Stress Test Mess

 Stress Test Mess  No Responses »
May 072009
 

I don’t think there’s an outcome here that is all that helpful. If banks pass the test, for the most part – as government officials are assuring us they will – people will argue the test was too easy, or biased, or invalid for some other reason. If many banks fail (an unlikely event given the rosy talk from Fed and Treasury officials), that will cause even more fear and uncertainty in markets and the tests, which were supposed to bring certainty and calm to financial markets, will backfire (a reason to avoid this outcome as you are scoring the stress test results). I hope I’m wrong and Treasury can, in fact, convince people that the tests are credible, and the outcome is optimistic, but with all the uncertainty surrounding this process, that won’t be easy to do.

Geithner: How We Tested the Big Banks

Timothy Geithner explains how the stress tests were conducted.

Posted by Brian Schuettler at 4:56 am  

Global Trade is collapsing

 Global Trade, US Trade Imbalance  No Responses »
May 072009
 
Global trade is collapsing at an unprecedented rate, but not evenly across the globe. This column argues that ‘vertical specialisation’ – the internationalisation of manufacturing supply chains – accounts for the amplification of Japan’s drop in trade. The good news is that once OECD countries start to recover, the amplification should work in reverse, boosting Japanese exports and imports at an accelerating rate.

The US subprime mortgage crisis inflicted high capital losses for domestic and foreign financial firms that had invested in securities backed with US real estate loans. This triggered a severe credit crunch in the US, which grew into a full-blown financial crisis of global proportions and later ended up affecting the entire global economy. The prime characteristics of the current global economic crisis have so far been plummeting stock and equity prices, skyrocketing bank failures, and a sudden collapse in international trade.

http://www.voxeu.org/index.php?q=node/3537

Posted by Brian Schuettler at 4:51 am  
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