All GLG News Analyses Filed Under: Economics

Mark MariottiChief Executive OfficerFuture Management Holdings Inc

State by State - Recovery

April 16, 2009

Analysis of:happiness index: nebraska nabs top spot | news | money/investing | mainstreet | www.mainstreet.com

Similar to financial sectors, each US State will have its own pace of recovery.

The FED Contributed to the Housing Bubble but was not the Sole Cause Thereof

April 9, 2009

Analysis by: GLG Expert Contributor

Analysis of:Did the Fed Cause the Housing Bubble? | online.wsj.com

The current economic crisis which originated in the financial sector housing sector nexus clearly calls for significant changes in policies and regulations in several areas. In terms of the FED, the goal of stable asset prices might have to be added to the goals of low inflation and full employment. This would mark an important and controversial policy change, but the prevention of future bubbles requires strong medecine. Similarly, strong measures are necessary in the financial services industry, the Government Sponsored Enterprises (GSEs) such as Fannie Mae and Freddie Mac, and consumer education or the next bubble is just a matter of time.

Title: A World Currency Should not Reflect Oil Prices by: Riccardo Fiorito, University of Siena

April 2, 2009

Analysis by: GLG Expert Contributor

Analysis of:U.N. panel says world should ditch dollar | www.reuters.com

A UN panel recently suggested that a basket of currencies should replace the dollar as the world reserve currency. This proposal is not new and shows up again because of i) changing composition of the world trade and ii) large imbalances between China and the US. Yet, another reason is also important in my view: oil prices account for actual or predicted dollar depreciations. This evidence dates back since the first 1973 oil shock which was basically originated by the OPEC reaction to the US dollar fall. Once current recession will be happily won, there is a risk of  rising oil and commodity prices if the US monetary policy will continue to promp dollar devaluation. While Europe does not make enough for winning current recession from the fiscal side, a prolonged lax monetary policy by the Fed will help US exports but will also accelerate the time for replacing the dollar with a currency basket. This is not a premature concern if we really believe in a better 2010.

Fall in Dollar... time to run for Euro and Yuan

April 1, 2009

Analysis by: GLG Expert Contributor

Analysis of:U.N. panel says world should ditch dollar | www.reuters.com

In 1971, gold parity was abandoned, and we know of the consequences.  If countries ditch the dollar, there is likely to be a run for Euro and Yuan.  Many countries may go bankrupted when China puts its enormous dollar reserve on sale.  The price of large commodity exports currently denominated in dollar would go up as dollar value goes down.  World institutions may also collapse, the UN itself may not have enough funds for its actions around the world, the IMF and World Bank may not have enough funds to bail out economies.  That would cause huge spasm and contraction in the world economy and further shocks.  Someday, we should have a move away from the dollar reserves, but the question is: Is the timing appropriate?  As G20 meets, may be rules would be set on a way forward, but would that be sufficient to hold frantics around the world from a run? 

Willingness to Take Risk Is What Got Humans to the Top of the Food Chain

March 31, 2009

Analysis by: GLG Expert Contributor

Analysis of:Buckle Up Your Seatbelt and Behave | www.smithsonianmag.com

The article discusses the latest research in risk compensation, or the idea that humans adjust their risk tolerant behavior in response to perceived changes in risk.  The seatbelt example is but a platform for a short but serious discussion on how humans perceive risk and adjust their habits to their perceptions.  We can see this behavior in action as we review the current economic difficulties.

Mark MariottiChief Executive OfficerFuture Management Holdings Inc

Budgets - Actual vs Estimated

March 31, 2009

Analysis of:fdic: 2009 budget executive summary | www.fdic.gov

The strength of a properly estimated budget, and the conviction to execute within budget sends a strong positive fiscal message.

A Flawed Monetary Policy Model Caused the Housing Bubble and Will Cause Another

March 30, 2009

Analysis by: GLG Expert Contributor

Analysis of:Did the Fed Cause the Housing Bubble? | online.wsj.com

This article is important because it provides a variety of expert views as to the causes of the housing bubble that led to the current financial crisis.  Most of the analyses contribute valuable insights but miss the mark.  One can use these essays to speculate as to how the next bubble will develop, given that the flawed model that produced previous bubbles is still in place.

The Federal Reserve Had an Extremely Minor Effect on the Housing Crisis

March 30, 2009

Analysis by: GLG Expert Contributor

Analysis of:Did the Fed Cause the Housing Bubble? | online.wsj.com

The argument that the Federal Reserve caused the housing crisis is similar to the notion of a "natural rate" of interest.  The Federal Reserve is seen as somehow undermining this natural rate through its interest rate policies.  But if the argument for a natural rate is wrong, the Federal Reserve had very limited responsibility for the housing crisis, except in that members of the Federal Reserve argued against regulation that might have avoided it.

Mandated low income lending create the housing crisis.

March 30, 2009

Analysis by: GLG Expert Contributor

Analysis of:Did the Fed Cause the Housing Bubble? | online.wsj.com

The Clinton administration and Congress required lenders to increase lending in low income neighborhoods and mandated that Fannie Mae and Freddie Mac guarantee those loans.  Faced with toxic assests, the lenders and Wall Street created "mortgage backed securities" to pass the risk on.  The rest is history.

Peter DehnenPartnerDEHNEN.Lawyers

Optimistic at Mid-term

March 30, 2009

Analysis of:Original title: Business confidence hits 18-year low in Germany | www.ft.com

Business confidence in Germany is at an all-time low. The business climate index, as surveyed by the Munich-based Ifo Institute, has reached the lowest result measured since the survey began in 1991. Even worse is that, according to Ifo’s president Hans W. Sinn, the bottom of the downturn has not yet been reached. That’s the bad part of the news. Here comes the good news: Although the part of the survey which measures current conditions continues to decline, the part of the survey measuring optimism for the next six months has increased steadily since the beginning of the year.

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