One of the joys of the World Economic Forum is the occasional real-time deflation of egos that you can witness. I am sitting in a session on asset price bubbles where one private sector speaker insisted that you can’t spot bubbles and you should not. I can’t name him because Chatham House rules apply. Then one econmics professor (not hard to guess who) and a prominent regulator, went through all the reasons why you can spot bubbles, and should think about using tools, such as capital requirements or loan to value ratios to limit the size of bubble. Back came a rather deflated first speaker, completely contradicting his earlier point, and arguing that there are some bubbles that can be spotted and need to be addressed with credit restrictions. Did he realsie his views had reversed? Sadly, I doubt it, but his ego was not what it was.
Rising inflation has made an rate rise even more likely at next week’s central bank meeting. Expectations are about 0.25 percentage point, which would take the cash rate to 4 per cent.
Australia’s consumer price index rose 0.5 per cent in Q4 from the previous quarter. While this was just half the Q3 rise of 1 per cent, it pushed the annual rate of inflation up to 2.1 per cent. Read more
It took them a while to react, but central bankers are beginning to voice their approval of US plans to limit bank trading, aka the ‘Volcker plan’.
Yesterday Mervyn King voiced his approval, saying that, thanks to Mr Obama’s plan, ‘radical reform’ was at last on the table. He qualified his support by saying any measures should be part of a ‘major structural change’; one proposal alone would not solve the problem. Read more
Let’s face it. The Davos mood at the World Economic Forum is almost always wrong. In 2007 it was euphoric; 2008 was consumed by a fear of inflation; 2009 was apocalyptic. What about 2010?
Sitting in the first economic debate this morning, the mood seems to be harder to define. It is much better than last year, obviously; it is very positive about emerging market prospects; but it is also very cautious, with worries about the sustainability of global growth. Read more
The real export data produced by the Bank of Japan (and hidden away on their website) is the best way to keep track of what is going on in the most crucial sector of Japan’s economy.
The more popular Ministry of Finance data are not adjusted for export prices, although as it happens, both sets tell the same story for December: that weaker figures the month before were a blip. Read more
Ok, they’re not secret any more. But the New York Fed did, early on, put some effort into not disclosing the names of AIG counterparties. And so, in the run-up to Geithner’s testimony tomorrow, Darrell Issa, the Republican ranking member of the House oversight committee, has released the results of his investigation.
The report reads more like a Washington political thriller than a Congressional document. Just look at its title: “Public disclosure as a last resort: How the Federal Reserve fought to cover up the details of the AIG counterparties bailout from the American people”. Read more