Not in the spirit of Hayek

BOOK REVIEW

Keynes Hayek: The Clash That Defined Modern Economics, Author: Nicholas Wapshott.

By Nicholas Wapshott – Friedrich Hayek has become the patron saint of conservative intellectuals – and with good reason. He went head to head with John Maynard Keynes in 1931 in an effort to stop Keynesianism in its tracks. Hayek failed, but his attempt gave him mythical status among thinkers who deplore big government and central management of the economy.

Hayek became a conservative hero a second time with publication of his Road to Serfdom (pdf)  (1944) that suggested the larger the state sector, the more there was a tendency to tyranny. Many of today’s Hayekians harden up Hayek’s carefully expressed thoughts to declare that all government is potentially despotic, while also ignoring his arguments in favor of governments providing a generous safety net for the less advantaged, including a home for every citizen and universal health care. more> http://tinyurl.com/c3lylpc

For all the debt, there’s a shortage of bonds

By Mike Dolan – Debt may be everywhere but there’s a scarcity of bonds.

JPMorgan estimates that the world’s central banks and commercial banks alone now hold some $24 trillion worth of bonds – or 55 percent of the entire $44 trillion universe of government, asset-backed and corporate bonds as captured by Barclays Multiverse Global Bond Index.

What’s more, this bond drought on the investment markets has added to growing concern about a shortage of high quality collateral – typically top-rated bonds – pledged and repledged within the financial system to raise cash. more> http://tinyurl.com/bd569f4

Weak yen a boon for investors, not Japan

By James Saft – The yen has fallen by more than 20 percent since Prime Minister Shinzo Abe, who advocates aggressive monetary and fiscal policy, was elected in December, busting through the 100 yen to the dollar level last week.

But a look at the actual data shows Japanese companies, like British ones during a similar bout of currency weakness in 2008, appear to be more eager to use a newly competitive currency to pad profits through higher margins rather than higher export volumes.

“Japanese companies have not actually cut the foreign currency prices of their exports. Just as with the UK exporters, the Japanese have chosen to hold foreign prices constant, maintain market share, and increase the yen value and thus the yen profit associated with yen depreciation,” UBS economist Paul Donovan writes. more> ttp://tinyurl.com/ct2m38j

Policy patience seen wearing thin as yen drops

By Vidya Ranganathan – The yen’s fall past 100 per dollar highlights growing concerns about ultra-loose monetary policy around the globe and raises the prospect that policymakers elsewhere may take action to protect their economies from a tide of hot money.

Fears that a global currency war is brewing were fueled when the Reserve Bank of Australia and Bank of Korea both cut interest rates this week, citing the strength of their currencies as one of the reasons to act.

New Zealand’s central bank confessed for only the second time since 1985 that it had intervened in currency markets. more> http://tinyurl.com/d2gqkoq

Related>

• Keep on, or enough already? Fed officials spar over QE3, Ann Saphir, Luciana Lopez and Jonathan Spicer, Reuters
• Bitcoin Is a Junk Currency, But It Lays the Foundation For Better Money, Nathan Lewis, Forbes

Fed’s credibility tested as inflation drifts below target

By Pedro Nicolaci da Costa – With the inflation rate about half of the Federal Reserve’s 2.0 percent target, the central bank is facing a major test and some experts wonder whether it will eventually need to ramp up its already aggressive bond buying program.

The Fed cut official interest rates effectively to zero in late 2008 during the financial crisis. Since then, it has bought more than $2.5 trillion in bonds to bolster an anemic economic recovery and speed up the decline in unemployment. more> http://tinyurl.com/brhem8s