Bank Research Consensus Weekly 04-06-09

Published April 6th, 2009 - 12:44 GMT

Central banks surveying the post-crisis landscape will undoubtedly sift the rubble for evidence of their own mistakes. The charge is well-known: by allowing money to be too easy for too long, central banks created an asset price bubble that has now burst, with familiar consequences.

Stephen Roach, Head Economist, Morgan Stanley



Weekly Bank Research Center 04-06-09



 

The Morning After

Stephen Roach, Head Economist, Morgan Stanley

Central banks surveying the post-crisis landscape will undoubtedly sift the rubble for evidence of their own mistakes. The charge is well-known: by allowing money to be too easy for too long, central banks created an asset price bubble that has now burst, with familiar consequences (for an earlier version of the same charge, see J. Fels, Bubble Trouble, August 27, 2003). For example, as we illustrate, both the Fed and the ECB kept real short rates well below their natural level over the 2002-05 period. Whether guilty as charged or not, the current crisis is likely to provoke a comprehensive rethink of the role of asset prices in monetary policy. What are the likely consequences, and how might central banks adjust their policies?

 

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G20 Agree to Avoid Competitive Devaluation and Issue SDR

Niels-Henrik Bjørn Sørensen, Senior Analyst, Danske Bank

It could not happen - and it did not happen. In the end the G20 summit was not the fiasco that had prompted the world's press for a few nail-biting days beforehand to draw parallels with the catastrophic meeting in London in 1933, when the world was also in deep crisis. In the final statement, the G20 leaders agreed to continue their ongoing fiscal expansion, which will amount to USD5,000bn or 4% of global output by the end of 2010. They also decided to treble the resources available to the IMF to USD750bn, which is a clear acknowledgement that the fund is to play a very important role in rebuilding the global economy.

 

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U.S. Sheds 663,000 Jobs in March While the Unemployment Rate Climbs to 8.5%

Steve Chan, Economist, TD Bank Financial Group

The U.S. economy lost another 663,000 net jobs in March, generalized across nearly all sectors of employment. Revisions to prior months only altered the January figure, bringing the job loss tally up by 86,000 for a total of 741,000. By U.S. standards, such a revision is not large. The average monthly job loss in the first quarter was a whopping 685,000. Meanwhile, the household survey revealed that the unemployment rate climbed from 8.1% to 8.5%. These combined data are not good news by any stretch of the imagination. Another chilling milestone was reached with this latest employment report: a net 5.1 million jobs have been lost since of the start of the U.S. recession. However, the bad news for March was anticipated as the figures were on par with consensus forecasts. And, of late, lack of surprise to the downside or of any significant deterioration from previous months' data have been enough to send equity markets rallying. This would be consistent with their typical behavior which tends to lead the actual economic cycle by a few quarters.

 

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Compiled by: David Song, Currency Analyst and Geng Chen, Dailyfx.com

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