FED’S EXIT STRATEGY FOR MONETARY POLICY

June 14, 2010 at 9:43 pm | Posted in Economics, Financial, Research, USA | Leave a comment

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The Fed’s Exit Strategy for Monetary Policy

FRBSF Economic Letter:

The Fed’s Exit Strategy for Monetary Policy

Researchpubs.sf@sf.frb.org

Mon 6/14/10

by Glenn D. Rudebusch

As the financial crisis has receded, the Federal Reserve has scaled back its extraordinary provision of liquidity. Eventually, the Fed will remove all remaining monetary stimulus by raising the federal funds rate and shrinking its balance sheet. The timing of such renormalizations depends crucially on evolving economic conditions.

Download attached pdf or read full article

Index of recent Economic Letters

The Fed’s Exit Strategy for Monetary Policy

FRBSF Economic Letter:

The Fed’s Exit Strategy for Monetary Policy

Researchpubs.sf@sf.frb.org

Mon 6/14/10

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HEDGE FUNDS: “MORE MONEY THAN GOD” BOOK

June 14, 2010 at 7:07 pm | Posted in Books, Economics, Financial, Globalization, History, Research, USA | Leave a comment

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More Money Than God:

Hedge Funds and the Making of a New Elite

Sebastian Mallaby (Author)

Editorial Reviews

From Publishers Weekly

Journalist Mallaby (The World’s Banker) gives unusually lucid explanations of hedge funds and their balancing of long and short positions with complex derivatives, but what really entrances him is their freedom from regulation, high leverage, and outsized performance incentives. In his telling, they empower a heroic breed of fund managers whose inspired stock picking, currency trading, and futures contracting outsmart the efficient market. In engrossing accounts of epic trades like George Soros’s 1993 shorting of the pound sterling and John Paulson’s shorting of subprime mortgages, the author celebrates hedge titans’ charisma, contrarianism, and market insights. Mallaby contends that hedge funds benefit the economy by correcting market anomalies; because they put managers’ money on the line and are small enough to fail, they are more prudent and less disruptive than heavily regulated banks. Mallaby’s enthusiasm for an old-school capitalism of unfettered risk taking isn’t always persuasive, but he does offer a penetrating look into a shadowy corner of high finance. (June)

Review

More Money than God shines a fascinating light on what is still the most obscure route to becoming a billionaire–the mysterious world of hedge funds. Sebastian Mallaby’s rollicking tour of industry legends–famous and otherwise– tells the improbable story of A.W. Jones, the vagabond journalist-sociologist and daring anti-Nazi activist who, after the war, would create the first “hedged” investment fund. From there, we get rip-roaring profiles of investing titans from the full-throated gambler Michael Steinhardt to the bold émigré George Soros and the courtly stockpicker Julian Robertson to the ill-fated intellects of LTCM and the hedge fund stars of the present day. Even as Mallaby entertains he advances an unorthodox yet compelling brief: rich as they are, hedge funds are probably the best vehicles society has for assuming risk. Any who disagree will have to contend with the evidence of the recent Wall Street collapse. If one shudders at the prospect of concentrating risk inside giant banks whose chieftains wager other people’s money and cavalierly call for taxpayer bailouts then, as Mallaby points out, hedge funds are a necessary antidote.”
-Roger Lowenstein, author of The End of Wall Street

“Sebastian Mallaby takes us into the secretive world of hedge funds and the result is a wonderful story and an education in finance. The book is full of colorful characters playing high stakes’ games. Throughout, with his customary intelligence, Mallaby helps us understand this important transformation of the financial industry.”
-Fareed Zakaria, author of The Post American World

“When Alfred Winslow Jones started the first hedge fund, he had no idea where it would lead. Sebastian Mallaby, who must be the keenest student of hedge funds anywhere, now does-and he shares it with you in this crackling good read.”
-Dr. Alan S. Blinder, Professor of Economics, Princeton University, and Former Vice Chairman, Federal Reserve

“A fascinating history. Mallaby combines vivid description of key personalities and episodes with thoughtful discussion of the sources of advantage for different investment styles in different periods of financial history. I enthusiastically recommend this book to colleagues and students in academia and asset management.”
-John Y. Campbell, Chairman of the Department of Economics, Harvard University, and Partner, Arrowstreet Capital

Product Details:

· Hardcover: 496 pages

· Publisher: Penguin Press HC, The

· June 10, 2010

· Language: English

· ISBN-10: 1594202559

· ISBN-13: 978-1594202551

More Money Than God:

Hedge Funds and the Making of a New Elite

Sebastian Mallaby (Author)

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GLOBAL LABYRINTH OF THE FLOWER BUSINESS: “FLOWER CONFIDENTIAL” BOOK

June 14, 2010 at 2:55 am | Posted in Books, Economics, Financial, Globalization | Leave a comment

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Flower Confidential:

The Good, the Bad, and the Beautiful in the Business of Flowers

Amy Stewart (Author)

From Publishers Weekly

Stewart, an avid gardener and winner of the 2005 California Horticultural Society’s Writer’s Award for her book The Earth Moved: On the Remarkable Achievements of Earthworms, now tackles the global flower industry. Her investigations take her from an eccentric lily breeder to an Australian business with the alchemical mission of creating a blue rose. She visits a romantically anachronistic violet grower, the largest remaining California grower of cut flowers and a Dutch breeder employing high-tech methods to develop flowers in equatorial countries where wages are low. Stewart follows a rose from the remote Ecuadoran greenhouse where it’s grown to the American retailer where it’s finally sold, and visits a huge, stock –exchange–like Dutch flower auction. These present-day adventures are interspersed with fascinating histories of the various aspects of flower culture, propagation and commerce. Stewart’s floral romanticism—she admits early on that she’s “always had a generalized, smutty sort of lust for flowers”—survives the potentially disillusioning revelations of the flower biz, though her passion only falters a few times, as when she witnesses roses being dipped in fungicide in preparation for export. By the end, this book is as lush as the flowers it describes. (Feb.)

From The Washington Post

Reviewed by Adrian Higgins

In an ideal world, we would buy cut flowers for a sweetheart’s birthday from Teresa Sabankaya. From her green kiosk in Santa Cruz, Calif., she sells blooms that she has raised lovingly on her flower farm. Her flowers, held in buckets that crowd her stall, are “all interesting, unusual, old-fashioned, ephemeral, perfumy,” Amy Stewart writes in her eye-opening new Flower Confidential. In summer, Sabankaya’s customers grab larkspur and poppies; in winter, heathers and berried plants.

But this isn’t how most American consumers get their flowers. Instead, our blooms are more likely to have been raised in high-altitude flower factories in Ecuador or Colombia, dunked in chemicals, flown to Miami and distributed to wholesale markets around the country. A rose cut on a Monday morning in the shadow of a snow-capped volcano might find its way to a Manhattan florist the following Friday, and then be good for a week or more with a little care. In your local supermarket, you will find roses completely devoid of fragrance — pretty in a stiff and uniform sort of way, but not the earthy roses of the garden or Sabankaya’s stall.

Indeed, readers of Flower Confidential will be surprised and appalled to learn the extent to which something as fleeting and romantic as a rose or a lily has been turned into an industrial widget. You might accept today that a desk fan or a flashlight has been made somewhere other than in the United States, but a flower? An old Irish song speaks of the last rose of summer “left blooming alone.” But today, there is no last rose of summer, nor a first rose of spring — just roses spewing forth continuously from the jet-age conveyor belt of floriculture. Stewart believes these roses are enchanting as a single bouquet, a personal expression of caring. But force us to look at the machinery of this mass production, as she does so well, and the feeling is a little more queasy.

Consider some statistics gathered by Stewart:

We consume 10 million cut flowers per day in the United States.

On a per capita basis, we still spend considerably less in a year on flowers than Europeans do — $25.90 compared to, say, more than $70 in Norway or $100 in Switzerland.

Twelve years ago, there were 100 carnation growers in the United States; now there are 24.

While America‘s rose production has declined by almost three quarters in the past 12 years, it has soared in places such as Colombia, Ecuador and Kenya.

We buy most of our flowers at the grocery store, but we spend the most money when we order from independent florists struggling to maintain their retail foothold.

All of this reminds us that not even a flower is simple. Delving into the broader world of horticulture leaves one astonished by the complexity of how, say, a petunia arrives at the garden center. This humble flower is backed by a global labyrinth of breeders, seed companies, growers, marketers, sales representatives and shippers. The machinations of floriculture are made even more poignant by the fact that the moment a flower is cut, it begins to die. So flowers are for the moment, which raises their value as a currency of human sentiment. Creating them is a far less poetic affair.

Flowers are not just picked from the wild; each lily or amaryllis is hybridized for particular, commercially viable traits by specialists who devote their lives to doing so. Flower Confidential shows us the original breeder of the ubiquitous Stargazer lily, an eccentric and sad figure who failed to cash in on the flower’s success. But Stewart, who writes regularly for Organic Gardening magazine and the San Francisco Chronicle, also reports on the sophisticated efforts to raise tulips, gerberas and lilies by one of California’s remaining cut-flower producers, Sun Valley Floral Farms. It is run by a grower named Lane DeVries, who left his native Netherlands to build the enterprise into America‘s largest producer of cut flowers. The Dutch influence in the industry is pervasive and legendary. Stewart shows us the daily flower auction at Aalsmeer, a vast concrete complex near Amsterdam that is the major global market for cut flowers and potted plants — a rather cold and soulless place for so beautiful a commodity.

The Dutch auctions are still vital to floriculture, but the shift in actual growing — especially in the western hemisphere — is to the Andes, a region of optimum cultivation conditions and cheap labor. Stewart draws a picture of Ecuador‘s flower industry that is alternately disturbing and encouraging. Human rights groups worry about nursery workers who receive just $150 a month and endure difficult conditions, including exposure to chemicals banned in the United States. Stewart also cites problems with sexual harassment and child labor. But as with some foodstuffs, retailers and consumers can now choose “green label” flowers whose growers pledge to look after their workers and the environment.

Stewart’s journey takes us down many such paths, all connected by her own curiosity and highly readable prose. The greatest value of Flower Confidential, however, is that it was written at all. We know so little of the ways simple daily items are brought to us that such a book helps us grasp our modern world. Who knows? Flower Confidential may compel us to return to something purer, more local. It may send us in search of our own version of Teresa Sabankaya’s flower kiosk.

Product Details:

· Hardcover: 306 pages

· Publisher: Algonquin Books First Edition first Printing edition

· January 4, 2007

· Language: English

· ISBN-10: 1565124383

· ISBN-13: 978-1565124387

Flower Confidential:

The Good, the Bad, and the Beautiful in the Business of Flowers

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EFFICACY OF MONSTER BAILOUTS

June 14, 2010 at 1:14 am | Posted in Economics, Eurozone, Financial, Globalization, Research, World-system | Leave a comment

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Monster bailouts won’t cancel the final day of

reckoning

Squillions? Gazillions? The new numbers being tossed around

are beyond visualisation, but passing on debt is just a conjuring

trick, argues macro investor Geoffrey Barker.

Hong Kong macro hedge fund manager Geoffrey Barker of Ballingal Investment Advisors.

By Simon Osborne | 11 May 2010

There was a big European bailout at the weekend. Approximately $960 billion has been organised.

The tally stacks up as $640 billion from the European Union, 90% of that sum coming in the form of loan guarantees, and the remaining 10% in emergency European Commission funding. In addition there is another $320 billion from the International Monetary Fund.

So, it is mostly government commitments or guarantees that would have to be paid back if the money is drawn down. The hope is that by providing the commitment then the confidence of creditors is restored and there will be no need to actually use the money. To date, unlike over at the Fed, there has been no money printing in the European Union.

Has all the money that has been borrowed and wasted now been miraculously risk managed then? Is everything plain sailing from here?

“My view is different. There is still too much debt in the Western world, and in Japan, and we are simply witnessing an effort to shuffle it from one holder to another, or provide guarantees for it, without the underlying ability to repay,” says Hong Kong macro hedge fund manager Geoffrey Barker of Ballingal Investment Advisors.

“Every so often this inability to repay is crystallised, whether it be US mortgages or banks, Dubai or the Greek government,” he says. “There is a tightening of credit conditions and another flurry of policy initiatives to ‘provide liquidity’ and implicitly bail out the bondholders.”

But does all this bequest of debt and contingent liabilities succeed in sweeping the toxic pile of obligations under the carpet?

Geoffrey Barker says: “What is now occurring is that governments that have taken on board a portion of private sector debt are being forced to tighten fiscal policy. This will result is a slowdown in global growth in the second half of 2010, most likely starting in Europe, and we will see more trouble.”

So it is probably not over yet, the time bomb has just been passed on. $960 billion for Europe is a lot, but just meditate on what the US has committed through its programmes.

TARP $700 billion

Asset Guarantee Programme, Auto, Term Asset-Backed Securities Loan Facility (TALF), Making Home Affordable programme (MHA), Public Private Investment Programme (PPIP) AIG

Federal Reserve Rescue Efforts $6.4 trillion

Fund liquidity facility (ABCP), Bank of America and Citi backstop, Bear Stearns bailout, Commercial Paper Funding Facility (CPFF), Government Sponsored Enterprises (GSE), TALF, Term Asset Backed Securities facility.

Federal Stimulus Programmes $1.2 trillion

Economic Stimulus Act, Student Loan guarantees, American Recovery and Reinvestment Act, Cash for Clunkers.

AIG $182 billion

Asset purchases, bridge loans, government stake in subsidiaries, TARP investment.

FDIC Bank Takeovers $45.4 billion

2008 and 2009 bank takeovers.

Other Financial Initiatives $1.7 trillion

Credit Union deposit insurance programme, money market guarantee programme, Credit Union bailout, Temporary Liquidity Committee Programme.

Other Financial Initiatives. $745 billion

Fannie and Freddie Mac bailout, FHA.

That is a total of $11 trillion in commitments, making Europe‘s hole look modest in comparison.

· External shocks to take their toll on Asia next year

· Sovereign wealth funds agree on best practices

· Sovereign wealth funds finalise guiding principles

· Deutsche launches Asian inflation index

· Thailand not yet ready for sovereign wealth fund

Outlooks

· Asian equities at risk of Greek rescue-package fears

· Threadneedle: Asian investors shouldn’t write off Europe

· Water: The undervalued liquid asset

· Government bond downside risks now outweigh upside risks, says Western

· Will venture capitalists find greenbacks in green investing?

Comment:

http://by147w.bay147.mail.live.com/default.aspx?n=1171489443

Monster bailouts won’t cancel the final day of

reckoning

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