Over My Shoulder | Mauldin Economics

Over My Shoulder

Daniel Stelter: Germany’s Choice: Shaper or Bystander?

March 24, 2015

I know, I know, weeks  with just a few Over My Shoulder submissions and then lately there are a lot. And you are about to get more, as I keep running across really interesting material.

This is from my German friend and uber-thinker Dan Stelter, who outlines a plan to hold the Eurozone together. I have been saying for years that the only way the euro survives is through some type of mutualization of debt and then a fiscal union. Dan outlines a serious path for euro survival, but not without cost, of course. Just who pays and how much is the question.

Personally, my better than even bet (but not much better) is that something like this will happen, but ONLY in a crisis and probably one caused by France. And the reason why it's not a sure bet is that voters will see such a move as giving up sovereignty over their budgets and the arrival of a certain level of budget austerity, which it will be. But the mutualization of debt just might be the right carrot to entice them to do it. C’est la vie.

Download - Germany%E2%80%99s_Choice%3A_Shaper_or_Bystander.pdf

Bob Eisenbeis: The Dots Do Matter!

March 23, 2015

I know there have been more OMS's than usual lately, but there has been a flurry of good pieces. Bob Eisenbeis of Cumberland Advisors tells us why to expect a move at the Fed. My bet is 50 bps this year, but not right in a row – staggered.

Download - 150323_Cumberland.pdf

Financial Times: China: With friends like these…

March 22, 2015

"Beijing has used its status as the world’s biggest provider of development finance to burnish claims of leadership in the developing world, deploying funds from its $3.8tn in foreign currency reserves to boost relations with countries that sometimes have an anti-US agenda. But this model now looks compromised, analysts say. Bilateral deals stitched together in secret with countries afflicted with poor credit ratings, insecure governments and ailing resource sectors have shown a propensity to unravel."

Download - China-_With_friends_like_these.pdf

Bangkok Post: Political turmoil leaves Asean vulnerable

March 22, 2015

Interesting article in the Bangkok Post on the mounting political problems in Southeast Asia.

Due to a mixture of misfortune and mortality, Southeast Asia is now as volatile as it was when the Asian Financial Crisis struck in 1997, as we witness a series of unconnected leadership crises across the region. These crises exacerbate more fundamental problems: entrenched vested interests, rampant corruption, and poorly integrated plural societies. Add to this growing ethnic and religious tensions and the threat of violent extremism and it makes for a combustible brew.

It’s important to note that US dollar liabilities and externally fragile funding conditions are only part of the reason John & I expect to see waves of capital flight from a number of emerging markets in the coming quarters. Political dysfunction (like that described in this article) and idiosyncratic business/social risks (like the scandals in Brazil and Malaysia today or like Mexico’s Zapatista rebellion in 1994) have historically played MAJOR roles in FX crises by eroding confidence and adding to foreign investors’ collective rationale for capital flight. – Worth Wray

Download - 150319_Bangkok_Post.pdf