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Still uncharted territory – post-crisis central banking

With Janet Yellen firmly in the reigns of the world’s largest central bank, many are looking to the legacy left by her predecessor Ben Bernanke. Love or loathe him, Bernanke undoubtedly pioneered a new style of central banking based on large scale direct market intervention, mainly through policies such as quantitative easing. With the policy now being scaled down, it is useful to ask whether QE and more broadly whether the Federal Reserve has been successful in supporting the US recovery.

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The Great Deformation

David Stockman’s ‘The Great Deformation’: doomsday ramblings or insightful criticism of modern financial systems? Hungy reads to find out.

Gold Class Animal Spirits

In his 1936 book ‘The General Theory of Employment Interest and Money’ John Maynard Keynes outlined how rather than being independently rational, investors were often prone to erratic herd-like behaviour. He argued that macroeconomic stability is inherently vulnerable to the ‘animal spirits’ of speculators. The recent deflation of the post Global Financial Crisis (GFC) gold price bubble is a prime example of this phenomenon.

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Chinese GDP and growth: What's in a number?

Recently China’s president Xi Jinping was quoted in saying that China’s GDP growth will be subdued in the foreseeable future, relative to the rapid growth in the past decade. China’s official newspaper Xinhua has put the internal target at 7.5% p.a. for 2013 from a 7.8% p.a. actual figure achieved in 2012, and many are undoubtedly aware that this is a 13-year record low. Exactly how much has the world’s second largest economy grown by and how has China done it?

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The Virtues of Contrariness in Economic Forecasting

Economists as a whole are notorious for their poor forecasting predictions, which is why the saying “economists predicted nine out of the last five recessions,” is so well known. Economic forecasting is no doubt a difficult task. There are those few economists who are known for ‘getting it right’ or perhaps are just plain lucky. Neither obtaining an economics degree nor working as a professional economist can guarantee success. Of course, no forecasts are 100% correct and we can expect small errors in the numbers. However at times these forecasts are the opposite of actual outcomes and we experience unexpected economic meltdowns like the Global Financial Crisis and the Euro Crisis, during times when economists had predicted strong robust growth. So it isn’t a surprise that the credibility of economists as a whole has come under fire these past few years, and that economic forecasts are taken less seriously than before.

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Why we aren’t feeling the mining boom?

We are all aware about the mining boom going on in WA and QLD, and the other states trapped in the slow lane of the 2 speed economy, patiently waiting for the supposed income flows from the mining boom to come. The RBA seems to always be optimistic that the boom will stay strong and the income and prosperity will spread to the other states eventually. The government has attempted to help out with the Minerals Resources Rent Tax.  Theoretically economic flows can be felt widespread under normal circumstances however the effect of the Global Financial Crisis plays a major role in why we have a 2 speed economy and how it is constraining the flows from the mining boom to the rest of the economy.

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