The Treasury yield curve is at its steepest since February. That’s a widely recognized sign that the economy is set to strengthen. Researchers have recognized for years that the slope of the yield curve has proven itself a worthy leading indicator.
MARKETS MAY FAIL, BUT THAT’S (THANKFULLY) THE EXCEPTION
Paul Krugman dispatches a new broadside against free market theory today in his New York Times column. The attack is anything but subtle. “Free-market fundamentalists have been wrong about everything…” Everything? Call me crazy, but I can think of one or two things that’s productive about free markets. I suspect that I’m not alone.
BOOK BITS FOR SATURDAY: 12.18.2010
● The Gold Standard at the Turn of the Twentieth Century: Rising Powers, Global Money, and the Age of Empire
By Steven Bryan
Review via Economic Principles
A historian working for the moment in Tokyo as an attorney (Columbia Ph.D, Harvard Law J.D.), Bryan exemplifies a new generation of historians who cast a jaundiced eye on the market triumphalism of the 1990s. In The Gold Standard at the Turn of the Nineteenth Century: Rising Powers, Global Money and the Age of Empire, he argues that Argentina, Japan, Germany and other countries rose to power in the years before World War I following currency policies not all that dissimilar to China’s today. By adopting the gold standard, they were looking to lock in the most depreciated currency possible in order to promote industry and exports.
ANALYZING FINANCIAL ADVICE
The possibility that financial advice can sometimes be worse than nothing needs no explanation these days. Think Bernie Madoff. That was extreme, of course, but how wary should investors be when it comes to more prosaic counsel from, say, the local financial planner? As with everything else in finance, the answer boils down to a gray area. In short, it depends.
THE TWO-YEAR TAX SOLUTION
The House of Representatives passed the tax-cut extension bill last night and sent it over to the White House for President Obama to sign it into law. The legislation prevents the Bush tax cuts from expiring on December 31, offering what some say is a stimulus for the economy at a critical point in the recovery.
THE SLOW DECLINE IN JOBLESS CLAIMS
The favorable trend in weekly updates for initial jobless claims over the past two months remains intact with today’s release. New filings for unemployment benefits in the U.S. on a seasonally adjusted basis dipped by 3,000 last week to 420,000, the Labor Department reports. That’s hardly a definitive sign that all’s well, but the modest decline of late appears to be alive still, giving hope to the notion that the trendless trend for this series that prevailed earlier this year is now history. Such is the diminished definition of progress these days when it comes to the labor market.
DATA CHECK: EMERGING MARKETS
A new article in the IMF’s Finance & Development journal brings some fresh analysis and numbers to an old theme: emerging markets are hot and they’re reshaping the global economy. We’ve heard the story before, but the details are no less no impressive.
MORE MARKET GAINS IN 2011, ACCORDING TO MANAGER SURVEY
Russell Investment’s new quarterly survey of investment managers reports a fair degree of confidence in the performance outlook for the global economy and capital markets next year.
INFLATION STAYS TAME IN NOVEMBER
Today’s update on consumer prices for November provides no cover for analysts expecting higher inflation to burst out any day now. Consumer inflation rose a mere 0.1% last month on a seasonally adjusted basis, the Labor Department reports. That’s down from 0.2% in October. Core inflation—price changes less the volatile food and energy sectors—is also quiescent, inching higher last month by only 0.1%. If there’s an imminent threat of inflation trouble, it’s not obvious in today’s CPI report.
WHAT’S THE DEAL WITH HIGHER RATES?
The Federal Reserve is forging ahead with its quantitative easing strategy for monetary policy. Although there’s a sea of critics who think the central bank should rethink QE2, there was no mention of the debate in yesterday’s FOMC statement, which explained: “To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November.”