This post provides links to a number of thought-provoking articles I have read over the past few days that you may also find interesting.

• John Hussman (Hussman Funds): Biting a bullet, July 27, 2009.
In my view, investors have left themselves far too little room for error, not only in stocks, but also in corporate bonds. We’ll take our evidence as it comes, and change our positions as the expected return-to-risk profile of the market changes. For now, we remain defensive.

• Alan Blinder (The Wall Street Journal): The economy has hit bottom, July 23, 2009.
How’s the economy, you ask? I have the proverbial good news and bad news, but in this case, they’re exactly the same: The US economy appears to be hitting bottom.

• Wolfgang Münchau (Financial Times): There is no easy way out for central banks, July 26, 2009.
They would not readily adopt policies they knew would lead to excessive inflation later on. The point is that they may not have a choice.

• James Barty (Financial Times): Long road back to normality, July 22, 2009.
One of the key issues investors have to make a decision on in the next couple of years is what the likely profile for inflation is going to be and how it will affect their investment decisions. Some have framed this decision as being one between deflation and hyper inflation. Even if we ignore the somewhat ridiculous “hyper” element of the choice, the implications for financial assets are hugely different.

• Samuel Brittan (Financial Times): How the budget hole developed, July 23, 2009.
There is now more danger of economic stimuli being reversed too soon than of their being continued too long.

• Floyd Norris (The New York Times): A retreat from global banking, July 23, 2009.
The era of financial globalization may be coming to an end. Virtually universal revulsion at the errors and excesses of the financial giants, and the global recession that resulted, has not led to any real consensus what to do about it, at either national or international levels.

• John Makin (Commentary): A government failure, not a market failure, July/August 2009.
Decades of unwise housing policy by Uncle Sam contributed significantly to the US’s recent economic troubles.

• Dropping the shopping, July 23, 2009.
Can America wean itself off consumption? The first of a series on how the world’s four biggest economies must change to ensure sustainable global growth.

• Robert Higgs (The Independent Institute): Economists’ pro-Fed petition discredits its signers, July 18, 2009.
A number of bigwig economists has signed a petition urging Congress and the executive branch “to reaffirm their support for and defend the independence of the Federal Reserve System as a foundation of US economic stability.” All in all, the economists’ petition reflects the astonishing political naïvité and historical myopia that now characterize the top echelon of the mainstream economics profession. It is … high time that the Fed be not only audited and required to reveal its inner machinations to the people who suffer under its misguided actions …

• Barry Eichengreen (Project Syndicate): All stimulus roads lead to China, July 23, 2009.
Now that the “green shoots” of recovery have withered, the debate over fiscal stimulus is back with a vengeance. In the US, those who argue for another stimulus package observe that it was always wishful thinking to believe that a $787 billion package could offset a $3 trillion fall in private spending. But unemployment has risen even faster and further than expected. Combine this with the continued fall in housing prices, and it is understandable that consumer spending remains depressed.

• Philip Stephens (Financial Times): Lack of ambition leaves Europe in the slow lane, July 23, 2009.
The world is witnessing as big a geopolitical upheaval as any in the past century. The international institutions and rules upon which Europe relies for security and prosperity are under strain. And Europe looks set to absent itself from the debate.

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