Brad Setser says "Ut-Oh", beating me to the punch on the September trade release, which showed US exports plunging. It's a post that Paul Krugman rightly expresses some angst upon reading. And now I'm going to add two more reasons to worry (not that I think Setser and Krugman aren't aware of these points).

First, after reflecting upon the collapse of exports noted by Setser, think "disaggregate".

Figure 1 depicts exports of capital goods; they declined 10%, exceeding the 8% reported for all goods exports (all calcuations in log terms). That's 10% for September alone. Since the standard deviation of monthly log changes is 3.1% (2004M02-08M9), well, that's pretty significant... Why focus on capital goods exports (more so than say ag exports), given their volatility? Because they represent foreign demand for goods that can be used to produce things; as demand for capital goods goes down, so too should

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J. Christoph Amberger says the economic misery in Europe and fears over emerging markets makes the US dollar a great safe haven. Could this make it the next short-term asset bubble?

This from Today’s Financial News:

The dollar bears should be celebrating.

Their dire predictions about debt catching up with the financial markets are coming true. The markets are plunging.

Some, like the venerable London stock exchange, saw their valuations drop by the largest amount ever.

The papers tell you it’s so bad, you feel like digging up those old Gary North Y2K newsletters from the water-stained boxes in the garage… to find that advertising supplement for the three-year supply of dried butter and canned red wheat.

After all, a man’s gotta eat.

But the bears are eerily quiet. Not only is the dollar SOARING against their favorite currencies. Gold is lagging behind.

Now, if you look at this right, gold ought to be trading at

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J. Christoph Amberger says the economic misery in Europe and fears over emerging markets makes the US dollar a great safe haven. Could this make it the next short-term asset bubble?

This from Today’s Financial News:

The dollar bears should be celebrating.

Their dire predictions about debt catching up with the financial markets are coming true. The markets are plunging.

Some, like the venerable London stock exchange, saw their valuations drop by the largest amount ever.

The papers tell you it’s so bad, you feel like digging up those old Gary North Y2K newsletters from the water-stained boxes in the garage… to find that advertising supplement for the three-year supply of dried butter and canned red wheat.

After all, a man’s gotta eat.

But the bears are eerily quiet. Not only is the dollar SOARING against their favorite currencies. Gold is lagging behind.

Now, if you look at this right, gold ought to be trading at

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I was surprised by this item from the BBC:

Chinese trade surplus at new high

Wednesday, 10 September 2008

China's trade surplus hit a monthly record of $28.7bn (£16.28bn) in August as the gap with the US and Europe widened, despite weaker world demand.

China's global trade gap for the month was 14.9% wider than the same month in 2007, official state data showed.

Exports rose 21.1% to $134.9bn, while imports were up 23.1% to $106.18bn in August, the customs agency said.

Meanwhile other official figures showed consumer inflation hit a 14-month low of 4.9% in August, from 6.3% in July.

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Exchange rate issues

August's trade gap trumped the last record high of $27bn in October 2007.

China's trade surplus with the US rose 16.6% to $17.5bn during the month, and the gap with the 27-member European Union, China's biggest trading partner, increased by 25% to $16bn.

The data is likely to add fresh

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In the wake of global financial events, a couple of articles have caught my attention in terms of implications for the dollar. First was this Reuters account of a People's Daily editorial, suggesting "diversification". But it's hard to discern the underlying message given the low signal to noise ratio in official publications. Today's article in the IHT is a little more informative, not just about what's going on in China but in Asia (where a lot of that "saving glut" was alleged to come from):

In Asia, bloom is off the U.S. rose

By Keith Bradsher, Published: September 18, 2008

HONG KONG: Tremors from Wall Street are rattling Asian confidence, leading many investors to question the wisdom of being invested in the United States to the tune of trillions of dollars.

Asian investors were starting to show hesitation even before the financial earthquake of the last week. Now, a wariness toward the

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So goes the title of one of Shakespeare's plays, and as I am slowly adjusting to life in Lausanne and its beautiful environnements I am forced to admit the truthfulness of this axiom. Consequently, and while I have now settled down in a nice shared apartment I feel the need to confess my readers the tremendous difficulty with which I, finally, managed to secure housing in Lausanne. I will not belabor you with details, but merely pass on my humble advice that if you are ever going to Lausanne (indeed, the entire Vaud canton!) looking for short term rental accommodations ... bring valiums or deep pockets, and preferably both!

In any case that is now well past me and to prove that I am now safely and nicely housed I have chosen to flatter this entry

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I am pretty much up to my ears at the moment with, of all things, a country outlook/analysis on Chile. This means that I have not exactly had time to do my usual tour of the recent economic data from the Eurozone and Eastern Europe. I hope to redeem myself at a later point next week.

Meanwhile I thought that I would round up this week at Alpha.Sources with a couple of pointers on a range of recently debated topics.

Hank Paulson, his Bazooka, and a European Perspective

Good old Hank Paulson certainly seems to be under the spotlight at the moment (see also my last post), not least in these two Bloomberg pieces from today and yesterday respectively. As could have been predicted it is all about who and what which will eventually make it under the soothing umbrella of the incoming treasury bail-out.

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It never rains, but it pours; so goes an old adage and while the US authorities are still scrambling to figure out just what to do in the context of the erstwhile jewels, but now broken, mortgage giants Fannie and Freddie Mae foreign investors are beginning to vote, as it were, with their feet. As such, the big news so far this week must certainly be the extent to which portfolio managers at foreign central banks held suspiciously back in their hunger for Freddie Mac's three year note auction.  Reuters and the IHT provide the details. 

On Tuesday, Freddie Mac had to pay a steep premium on a $3 billion issuance of five-year debt. The company will pay an interest rate of 1.13 percentage points higher than the rate the U.S. government pays for comparable borrowing. Earlier this year, the premium was as low as 0.6 points, according to Bloomberg.Even with Freddie ...

By Claus Vistesen Copenhagen

[Update: Brad Setser clarifies, in the comment section, his view on Sender's FT piece referenced below]

THE last week (or was that year?) has certainly been something of a ride hasn't? In fact, I thought it would be apt to reproduce this picture by the brilliant KAL who normally spices up the Economist with his imagery that lay serious claim to the adage that a picture tells more than a thousand words. This particular specimen and the ensuing headline were on the front cover in October 1997 when markets also took investors and observers for a roller-coaster ride. I think it is quite fitting in describing the feeling many a trader and market participant must have at the moment.

Even though it could only seem as a few days ago that the credit turmoil went global

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[Update: Brad Setser clarifies, in the comment section, his view on Sender's FT piece referenced below]

THE last week (or was that year?) has certainly been something of a ride hasn't? In fact, I thought it would be apt to reproduce this picture by the brilliant KAL who normally spices up the Economist with his imagery that lay serious claim to the adage that a picture tells more than a thousand words. This particular specimen and the ensuing headline were on the front cover in October 1997 when markets also took investors and observers for a roller-coaster ride. I think it is quite fitting in describing the feeling many a trader and market participant must have at the moment.

Even though it could only seem as a few days ago that the credit turmoil went global with BNP Paribas' announcement that it too

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