”I want inflation to be higher than I want it to be.”

So says, in effect, San Francisco Fed President John Williams, who is quoted in the WSJ today as arguing forcefully that the “optimal policy should trade off a transitory period of excessive inflation. . . in order to bring the broader measure of underemployment to normal levels more quickly.”

And the winner is. . .

In the race to the currency bottom, this year’s losers are the yen and the won, both up 3% versus the dollar.  The Renmimbi wins; it’s down 3%.  Ultimately, the winner will be the currency that first achieves zero value.

In the Ivory Tower, computers never crash.

In a curious, nay bizarre, article in today’s FT (p9), Kenneth Rogoff of Harvard argues that there is too much paper money (i.e. cash) around, which is about $4,000/capita in the developed world.  (His recent book argued there was too much debt.)  He proposes doing away with it, beginning with the $100 dollar bill.  This will increase the government’s ability to monitor and, eventually, control every aspect of our spending, which he views as a good thing.

Is it taxes, regulation, or just old age?

U.S. Business failures have exceeded startups since 2009.  The rate of business failures seems relatively steady, while startups have been declining since at least 1978.  If a loss of 2%/year were to continue, there wouldn’t be any businesses left in fifty years. (Economist.)

Has the US passed the private leverage baton to China, and will the results be the same?

Private debt was declining in China until 2008, but then everything changed in a big way.  One has difficulty in imagining a very soft landing.

Please Dr. Yellen, are we taking enough risk yet?

An article in the FT by Patrick Jenkins yesterday identified 5 dangerous bubbles: 

1.      Leveraged loans.  Securities representing $260 bn in covenant light loans were issued in 2013, up 69% from previous peak in 2007. 

2.      ETFs.  Liquid securities composed of increasingly illiquid assets that must be liquidated as EFT's are redeemed have proliferated.

3.      Eurozone sovereign debt.  Peripheral countries like Portugal are paying the same rate as the US treasury.  (Does this reflect overconfidence in Portugal or lack of confidence in the US?) 

4.       European bank paper.    A DB-issued cramdown hybrid bond was 10x oversubscribed, and Spanish non-performing loans quoted at prices that would yield 14% were they paying, which they are not. 

5.      UK property in the southeast.  London house prices have gone from 4x the average earnings of first time buyers to 8x.

The mouse that snored: Shouldn’t the newest EU members be the most enthusiastic?

Slovakia led the 28 EU member countries in apathy in Sunday’s parliament election with the lowest turnout, 13%, compared an EU average of 43%.