MARKET COMMENT

July 15, 2008

Senator Jim Bunning threw a strike right down the plate with his excoriation of Bernanke & Co and the Fed today. Bernanke offered no response. But Hall of Famer Bunning still knows how to pitch that’s for sure. [Some say he isn’t right mentally but he was throwing strikes today and sounded the sanest of the bunch.]

The rest of the pols just mumbled the same garbage while a couple of spotlight seekers [you know who they are] wanted to discuss short-selling and speculation. I guess they only want to discuss the latter when things aren’t going their way.

But, Bunning has things right.

“I’m deeply concerned about what the Fed has done in the last year and in the last decade. Chairman Greenspan’s easy money in the late 90s and then following the tech …

Article Source By Jeffrey Frankel Today, we're fortunate to have Jeff Frankel, Harpel Professor at Harvard's Kennedy School of Government, as a guest blogger. His blog is here. The possibility that some Gulf states, particularly the UAE, might abandon their long-time pegs to the dollar is getting increasing attention (from Martin Feldstein and Brad Setser, for instance). It makes sense. The combination of high oil prices, rapid growth, a tightly fixed exchange rate, and the big depreciation of the dollar against other currencies (especially the euro, important for Gulf imports) was always going to be a recipe for strong money inflows and inflation in these countries. The economic dynamism -- most striking in Dubai -- is admirable and fascinating, but also now clearly indicative of overheating. Indeed inflation, as predicted, has risen alarmingly. Among other ill effects, it is producing ...

Article Source Bruce Mizrach prepared some very thoughtful questions for an interview at the Society for Nonlinear Dynamics and Econometrics Symposium in San Francisco two months ago. We discussed a broad range of topics, including my background, Markov-switching models, the Fed, oil prices, and why I blog. Below are links you can follow to see the answers to particular questions. The background for the interview and details of the questions can be found in a nice write-up by Bruce Mizrach that appeared in the latest issue of Studies in Nonlinear Dynamics and Econometrics. Here are abbreviated versions of the questions with links to the relevant video. Thanks much to Bruce for preparing this and helping make it accessible to all our readers. 1. Why economics? [WMV] [Real Media] 2. Economics training [WMV] [Real Media 3. San Diego [WMV] [Real Media] 4. Markov switching ...

With recent interest rate decisions I had closer look into 2 emerging markets in Central Europe. Hungary and Poland. Hungarian central bank again by 25bp (to 8,5%) to tighten monetary policy. Currently highest interest rates since January 2005. Bank acted mainly because of upward inflation. Its outlook has been raised from 3,6% to 4,2%.Economic picture doesn't look very well. Retail sales down by -4% or construction down by -11%. Industrial output remains positive but with sharp decline to 4%. Numbers are year on year basis. GDP growth stays already one year below 1%. And with current high interest rates it's hard to see soon any revival.Polish central bank left rates unchanged on 5,75%. The decision mainly taken by better than expected inflation reading (4%). Unemployment shows very positive trend and latest number is 7,7%. Retail sales ...