the lead indicator
S. & P.’s downgrade of U.S. debt offered investors no new information about the quality or the riskiness of Treasury securities. It has, however, challenged foundational assumptions about the workings of the global financial system at a difficult juncture for the fragile recovery.
The uncertainties introduced as a result coincide with other, less qualitative measures of the U.S. economy’s performance, which generally show that the recovery has slowed.
The rating adjustment’s blow to sentiment is amplifying concerns about what these metrics imply for the outlook, prompting investors to move out of risky positions and—ironically—into the safety of Treasuries.
the lead indicator
European leaders met last week in emergency session to hammer out a deal to stave off a disorderly default by Greece and to stabilize conditions in the continent’s sovereign debt markets. In extending more than $150 billion in contingent aid to Greece (including some hits taken by private creditors) and affording more flexibility in the use of the European Financial Stability Authority, the deal is an aggressive attempt to preempt further contagion.
That is an important consideration. From my discussions this week with colleagues in Germany and Switzerland, European central bankers and the core nations’ heads of state are acutely aware that they lack the tools to manage a wider crisis.
As Greece teeters on the brink of default–because of actual economic issues, not just political mayhem, as in the U.S.–French director Jean-Luc Godard has come forward with an innovative plan to solve the problem, Artforum notes today.
Mr. Godard reportedly suggested in a recent interview with the German weekly paper Freitag that Read More
In their ideological zeal, the new Republicans on Capitol Hill seem eager to gamble everything — the financial reputation of the United States, the international status of the dollar, even the chance of a worldwide depression — on a showdown over the national debt ceiling. What has been mostly a routine if unpleasant debate in Read More
Hedge-fund titan Phil Falcone has not run out of clever moves. The authorities found Mr. Falcone’s trick of borrowing money from the hedge fund he founded so creative, they just had to investigate to learn more. Then, the money manager found an extra-creative way for his fund to raise money. And the borrowing Read More
Carl Icahn, Far Rockaway’s favorite billionaire, announced today that he’s offering to buy Metro-Goldwyn-Mayer senior debt from the studio’s creditors at 45 cents on the dollar with the proviso that they vote against a merger between MGM and Spyglass Entertainment. If the debt deal went through, Icahn would become one of the biggest creditors Read More
As expected, the Securities and Exchange Commission has decided that it’d probably be better if financial institutions weren’t regularly misleading investors about the amount of debt they carry on their balance sheets, and so today the agency decided to draft new rules that force companies to say more about their short-term borrowing.
Companies’ tendency to Read More
conflicts of interest
Picture a vicious cycle of financial backscratching that results in ever-increasing systemic fragility, and you’ve got the basic premise for how a decent portion of the credit market works.
Cantankerous finance blog Zero Hedge today points to a letter Goldman Sachs has written to the Financial Accounting Standards Board, the private organization that Read More
An excellent article by Charles Duhigg in the NY Times on November 23, 2009, detailed the degree to which cities around the United States have violated water pollution control standards by dumping raw sewage into our waterways. Unlike the situation he described in a similar piece a few months ago, the violators are Read More