The Bear's Lair: World War I is still damaging us today

July 21, 2014

A fascinating new book, "Archduke Franz Ferdinand Lives!: A World Without World War I," by Richard Ned Lebow (Palgrave Macmillan, 2014) looks at history's likely trajectory if the Sarajevo assassin Gavrilo Princip had missed. He concludes that, while much would be changed, we would at best be only modestly better off. However, Lebow is not an economist and he misses two enormous economic factors that would almost certainly be different in a world without World War I. His "worst-world" scenario might have derailed us, but absent that, 2014 without World War I would probably enjoy much greater prosperity than today's real world.

Druckenmiller the Statesman

July 18, 2014

Geopolitical risk erupts and a hedge fund titan speaks candidly.

The Bear's Lair: Technology appears to be wrecking markets

July 14, 2014

The New York Attorney General's lawsuit against Barclays' dark pool is yet another example of banks' increasing resemblance to asbestos manufacturers. But it also reflects an uncomfortable truth: Whether through "fast trading," through the new area of "crypto-currencies" or through the increasing frailty of bank and corporate security systems, technology is transforming previously well-understood markets into insider-dominated scams. The implications for the future of a free economy are dire indeed.

2014 vs. 2007

July 11, 2014

Action at the "periphery of the periphery."

The Bear's Lair: Is finance developing asbestos-like legal risk?

July 7, 2014

The French bank BNP Paribas is about to be fined $9-$10 billion for doing business with Iran, a country with which the U.S. is finding common ground in Iraq. Since 2008, the U.S. and the trial bar have obtained fines and settlements from global banks totaling $88 billion (as of early June.) Now medium-sized U.S. banks such as Sun Trust are being zapped with fines—$968 million to settle claims over its mortgage practices.

The Moneyness of Risk Assets

July 4, 2014

Dr. Yellen, you just condoned “Terminal Phase” excesses.

The Bear's Lair: What productivity numbers tell us

June 30, 2014

Nonfarm business productivity fell by 3.2% in the first quarter of 2014, according to the Bureau of Labor Statistics' revised data. Most commentators have rather ignored this number. You expect productivity figures to be bad when GDP drops unexpectedly, as it did in the first quarter. After all, the last such bad number was in the first quarter of 2008, the outset of the Great Recession, and the one prior to that was in 1990, when that recession hit unexpectedly. Still, in this expansion, output numbers have been much weaker than employment numbers as productivity has stagnated. But then, in a period of such massive malinvestment, to use the Austrian economists' term, that's what you'd expect.

No Bubble?

June 27, 2014

Fed hawks are beginning to make some noise.

The Bear's Lair: China may soon take giant step backwards

June 23, 2014


Eight years ago, the accountants Ernst and Young got in trouble with the Chinese authorities for estimating the bad debts in the Chinese banking system at $911 billion. It was especially tactless in that the major Chinese banks were mostly within months of launching IPOs in the international markets. Since then, the Chinese bad-loan problem has been swept under the rug, and we have had to make do with guesses about its scale.

The Bear's Lair: Systemic risk is worse now than in 2008

June 16, 2014



Since the crash of 2008, huge attention has been paid by regulators to systemic risk, the risk that some event will cause the crash of the entire banking system, not just of an individual bank. Tens of thousands of pages of financial regulations have been written, and almost as many thousands of speeches have been bloviated, about how we now understand the dangers of “too big to fail” and therefore a crash such as occurred in 2008 can never happen again.

Sound or Unsound?

June 13, 2014

Add meltdown in Iraq to the long list of geopolitical risks.

The Bear's Lair: Bad Times breed bad ideas

June 9, 2014

Good times tend to be relatively infertile of new economic ideas. Even radical economists, grinding their teeth at the apparent success of the market, don't want to be accused of killing the golden-egg-laying goose.

Credit Allocation

June 6, 2014

Signs of an upside dislocation

The Bear's Lair: The coming bond market meltdown

June 2, 2014

Extreme policies produce extreme attitudes among investors. Now, the nearly six years of zero interest rate policies—accompanied by quantitative easing—that we have seen in most Western economies are producing such an extreme attitude in the world's bond markets.

He's Back

May 30, 2014

A synchronized melt-up in global risk markets.

The Bear's Lair: Europe's cost bloat makes its future gloomy

May 26, 2014

When I wrote two years ago that the eurozone resembled the Hindenburg approaching the docking mast at Lakehurst, New Jersey, Euroskeptics cheered and only those committed to the worst features of Europhilia suggested I had underestimated Europe's capacity for recovery.

How the Euro was (Really) Saved

May 23, 2014

The short squeeze was back.

The Bear's Lair: The most important job in the world

May 19, 2014

This column is being written before final Indian election results are available, let alone a government being selected. However, if exit polls are confirmed and Narenda Modi has won a majority that allows him to govern for five years, then he has potentially the most important job in the world.

Nervous Time

May 16, 2014

Tepper and Summers offer valuable insight.

The Bear's Lair: Economics is a science with partial answers

May 12, 2014

Nobel Prize-winning (1992) economist Gary Becker, who died last weekend, extended economic theory into areas such as racism, crime and family formation, in which it hadn't been thought relevant. Critics, whether of religious or other persuasions, complained that Becker's analysis dehumanized us by leaving out many other factors that were of equal or greater importance.


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