Juggling Dynamite

“Economist Nouriel Roubini of NYU’s Stern School of Business tells The Daily Ticker that it’s not only monetary stimulus by the Fed that’s been driving stocks higher but also “more unconventional monetary policy” from the ECB, Bank of Japan, Bank of England and the Swiss National Bank. That stimulus is aimed at boosting economic growth and it may have helped, but the global economy is slowing.

In the fourth quarter, the major economies of the U.S., U.K, Japan and the Eurozone all contracted and they could slow even more because of spending cuts, says Roubini. “The core of the Eurozone has to do it, the U.S. has to do it…and when you have synchronized fiscal contraction the negative effects on economic growth are worse.”

Here is a direct link.

For the past 15 years, the US Federal Reserve has maintained a “see no evil” policy on asset bubbles–they said they couldn’t see them building, so not possible to avoid them. But this time around, 5 years after the credit bubble burst so horribly, Fed efforts to mop up the mess have now left its own financial stability in jeopardy. This is not a Fed who can view markets dispassionately from the side lines, this is a Fed who has tripled its own balance sheet to absorb trillions in over-priced bonds over the past 3 years. This time the Fed itself is at risk of “significant capital losses when these holdings are unwound” (as acknowledged in the Fed minutes yesterday). Now at last the Fed has a very personal reason to predict and manage the risk of asset bubbles. Perhaps even where this requires withdrawing liquidity from a slumping economy.

WSJ’s Global Economics Editor David Wessel and Chief Economics Correspondent Jon Hilsenrath (aka Bernanke’s mouth) discuss the Federal Reserve’s newest concern: The danger that its easy money policies may fuel another financial crisis.Here is a direct link.

I saw Zero Dark Thirty this week. It is very entertaining, but also reminds of the incredible financial cost the US has unnecessarily born in its stubborn dependence on foreign oil and hostile regimes. Time to wise up.

“Manufacturing in the U.S. could take off right now on the back of “the cheapest energy in the world,” BP Capital founder T. Boone Pickens told CNBC on Thursday.

Prices from American supplies are “20 percent cheaper on oil; 75 percent cheaper on natural gas; and 50 percent cheaper on gasoline,” he said in a “Squawk Box” interview, adding that companies could pay their factory workers higher wages and still make more money than they would if they outsourced overseas because of lower energy input costs.”

Here is a direct link.