Links: 2008-12-10

So we have gotten our auto sector bailout. Let’s see how this shakes out. I am already hearing rumblings that this will not be easy as bondholders are not playing nice. See the link to Felix Salmon’s comments below. My own view is that bond holders will need to take a haircut here, if we are to have any measure of success.

Meanwhile, you will have noticed my post on VW demonstrating that any bailout solutions need to be well crafted and comprehensive in order to avoid the more unpalatable of unintended consequences. We shall see soon whether this auto bailout invites a response from the Germans and Japanese.

I still need to address the Treasury Bubble issue as well despite the fact that government bonds have traded off. My worry here is that, if and when the economy responds to stimulus, we will get a large, uncontrollable selloff, the consequences of which are unknown. In my view, we should always fear unintended consequences.

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So we have gotten our auto sector bailout. Let’s see how this shakes out. I am already hearing rumblings that this will not be easy as bondholders are not playing nice. See the link to Felix Salmon’s comments below. My own view is that bond holders will need to take a haircut here, if we are to have any measure of success.

Meanwhile, you will have noticed my post on VW demonstrating that any bailout solutions need to be well crafted and comprehensive in order to avoid the more unpalatable of unintended consequences. While the foreign automakers have been mum on the U.S. bailout, we shall see soon whether this auto bailout invites a response from the Germans and Japanese.

I still need to address the Treasury Bubble issue as well despite the fact that government bonds have traded off. My worry here is that, if and when the economy responds to stimulus, we will get a large, uncontrollable selloff, the consequences of which are unknown. In my view, we should always fear unintended consequences.

Below are a few links to stories on the web you might enjoy. Other news stories can be found at our newsfeed. The newsfeed is also available via RSS. Note the first two articles related to the auto bailout and the FT Alphaville Treasuries bubble article below.
GMAC’s bonds fall after exchange offer fizzles | Reuters

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Economist’s View: Free Rides?

FT Alphaville » Blog Archive » Treasuries bubble danger

Bank of England could print more money to tackle deflation, says Treasury | Politics | guardian.co.uk

Economist’s View: “Attack of the Invisible Hand” (absolutely hilarious)

FT.com / Europe – Greek public sector workers go on strike (I view the unrest in Greece as an ugly harbinger of what is to come if we don’t solve this crisis soon).

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Clashes outside parliament as strike grips Greece | Reuters

“Das deutsche Problem” • Börsennotizbuch (Here is a link to a great German blog site which laments the German’s hiding their head in the sand. The Germans could be a real problem in terms of coordinating a global or European solution to crisisand their refusal to coordinate a solution introduces a free rider problem that Mark Thoma discusses below)

Finding Holes in the TARP – Finance Blog – Felix Salmon – Market Movers – Portfolio.com

The next few links are about the collapse in trade in Asia and the worrisome dearth of Chinese domestic demand.

Brad Setser: Follow the Money » Blog Archive » Global trade is shrinking, fast (This piece by Brad Setser should be worrisome to the ‘China as saviour’ crowd)

Asian trade in ‘free fall’ as exports to West dry up – Ambrose Evans-Pritchard,Telegraph

Chinese exports tumble | Reuters

Needed: Rapid and large liquidity funding for emerging markets | vox – Research-based policy analysis and commentary from leading economists

naked capitalism: Fed Ponders Issuing Debt to Finance Its Mushrooming Balance Sheet

Swedish icon Volvo could end up in Chinese hands – European – Independent.ie

immobilienblasen: Gold’s Post-Bubble Performance In The UK, U.S. And Japan.

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