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Convergence

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The big story of the last 20 years has been a tale of two worlds coming together.  While the developed world experienced a decade of growth in the 1990s followed by stagnation and decline in the 2000s, the developing world saw nothing but growth.  The two phenomena are related in the tremendous expansion of credit and general money supply over this time, and are now starting to come together.   The developing world is feeling the pinch the same as the developed world.

This story first appeared in Barataria back in September 2012, but it’s now quite fashionable to talk of the end of the great boom in “Emerging Markets” (EM).  They have, simply, started to either mature or fall back.  And investors are trying to find the next wave of fantastic growth stories to invest in.

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Three Views of an Economy

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When the summer livin’ is easy, I enjoy sitting out on the porch with a few tunes.  Today’s lazing soundtrack was “Three Views of a Secret” by Jaco Pastorius as I went over some old posts to see if anything needed revisiting.  And this piece from July 2011 popped out as a debate that is still raging – but with some resolution.  It seemed to fit the tension that always builds in a Jaco piece.

Economists, as noted before, have widely divergent views about the economic situation and what should be done about it.  But the experiments that have been running through various economies are teaching us all a little bit along the way as to who may be right.  It’s worth revisiting.

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Risk and Reset – Who Pays?

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Two news stories highlight the precarious nature of the restructuring that has laid the foundations for the next economy. They don’t seem to be related at all, but they highlight the twisted nature of “risk” and what it means when interest rates are low but investors are developing a renewed appetite for risk.

The first is the bankruptcy of Detroit, a long time coming, which was filed today.   The city has $18B in liabilities that they’d like to cut to $2B – hence a Chapter 9 liquidation filing, a declaration of surrender.  The city is beyond broken and needs to start again.  The second story is the rise of collateralized loan obligations (CLOs) and how our old friend Captain Morgain, er, JP Morgan is making a big bet on sketchy loans.

How are they related?  Both stories show risk laid bare, and both stories have a backstory of pushing the ol’ red button with RESET in big letters on it.

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Summing it Up

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Much has been happening lately, but the news is hard to digest.  For now, I’d rather stay with the economic news and summarize what I think is going on.  This post is largely a repeat from last year, but it makes a jumping-off point.  I think that the context of the news is extremely important because without it all we have is a senseless jumble of events and not a coherent understanding.

If we can’t grab what is happening around us and make it our own, how can we call ourselves a free and democratic society?  Barataria does what it can to offer a different way of looking at what is happening and relate it in story form, free of unexplained jargon.  Hopefully, this will help to make a more real and useful politics.

After a few months of big events and heavy articles, it’s time to summarize the Baratarian view on the big economic picture in one polemic and invite your comments.

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Economy Still Ahead at the Half

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It’s halftime!  2013 is half over, and data for another quarter is in.  It’s time to check in on Barataria’s predictions for the year and see how things are going.

The mainstream press has already latched onto the story of a recovery that is slow but gaining strength, so this is hardly news anymore.  But exactly how and why it is strong remains important in many ways.  This is a restructuring more than a traditional recovery after a recession, so it takes a lot of time.  The foundation has to be laid before the new economy can be framed on top of it.  That foundation came through in 2012, but progress has to continue in key areas to make it possible for the jump to a new boomtime around 2017 or so.

Break out the expensive commercials and grill the burgers, we have a game!

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