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): Conditional expectations and September seasonality, September 14, 2009.
One of the arguments we’ve seen a lot lately is the idea that September and October have historically been the worst months for the stock market, coupled with rebuttals by bullish analysts along the lines that the discussion of this historical tendency by the bears makes it likely that nothing bad will happen this time. The fact is that yes, on average, the combined September-October period has historically produced slight declines for the S&P 500 whether you look back since 1870, 1900, 1940 or 1970. But the variance around that slightly negative return is large enough that it’s really misguided, in my view, to base predictions on it.
• Ambrose Evans-Pritchard (Telegraph): China, Bernanke, and the price of gold, September 7, 2009.
China has issued what amounts to the “Beijing Put” on gold. You can make a lot of money, but you really can’t lose.
• Irwin Stelzer (The New York Post): The dilemma of the diving dollar, September 9, 2009.
There was a time when the US Treasury secretary would stand on the steps of the Treasury building and pronounce America’s policy of maintaining a strong dollar. No longer – for two reasons. First, the Obama administration doesn’t seem to have any policy concerning the dollar. And, second, the incumbent secretary, Timothy Geithner, would be paid no attention were he to make such a declaration while simultaneously peddling another huge stack of IOUs as the president’s deficits rise ever higher.
• Vivienne Walt (TIME): Oil prices stabilize – can OPEC keep it that way?, September 11, 2009.
Holding prices steady might be OPEC’s toughest act yet. Oil analysts list a few key factors that OPEC leaders will find all but impossible to control and that could complicate efforts by the U.S. and Europe to kick-start a global economic recovery.
• The Washington Post: Mr Geithner unwinds, September 12, 2009.
Officials may have gotten more things right than many appreciated at the time. They’ll need to keep getting it right as they face the tough calls about when and how to end the remaining emergency programs. Mr. Geithner got to unwind a bit this week. He still can’t relax.
• Jean-Claude Trichet (Financial Times): Europe has mapped its monetary exit, September 3, 2009.
Exceptional times call for exceptional measures. The European Central Bank, like other central banks, has introduced non-standard measures to tackle the financial crisis and cushion its impact on the economy – what I call “enhanced credit support”. These have contained the threats to the stability of the euro area’s financial system and supported the flow of credit to companies and households over and above what could be achieved through interest rate cuts alone. Stressing the importance of the exit strategy should not be confused with its activation: it is premature to declare the financial crisis over. Today is not the time to exit.
• Joseph Stiglitz (Financial Times): Towards a better measure of well-being, September 13, 2009.
GDP will continue to be used as a measure of market activity, but when it comes to measuring societal welfare, we will have to look to other metrics.
• Niall Ferguson (Newsweek): Wall Street players thrive, Main Street dives, September 11, 2009.
A year after the crash, a few financial giants are back to making millions, while average Americans face foreclosure and unemployment. What’s wrong with this picture?
• Joe Nocera (The New York Times): Lehman had to die so global finance could live, September 11, 2009.
What if, a year ago this weekend, the government and the banking industry had somehow found a way to keep Lehman from filing for bankruptcy? How might that have changed the course of the financial crisis?
• Wolfgang Münchau (Financial Times): A pre-crisis treaty for a post-crisis world, September 13, 2009.
I am an unenthusiastic supporter of the Lisbon treaty, but the Irish Yes campaign could once again find itself in a tight spot.
• The Economist: Wall Street’s new shape – rearranging towers of gold, September 10, 2009.
Wall Street has staged a surprisingly strong recovery from its meltdown a year ago. But it will not return to business as usual.
• Art Carden and Steven Horwitz (Forbes): All that you want to know about economists, September 12, 2009.
In a recent article for the Huffington Post, Pulitzer Prize winner Jane Smiley questions the wisdom and integrity of economists – as well as the value of economics. Unfortunately, she misunderstands what economics is and what economists do.
• Floyd Norris (The New York Times): Accountants misled us into the crisis, September 10, 2009.
The accountants let us down. That is one of the clear lessons of the financial crisis that drove the world into a deep recession.
