The ongoing dollar carry trade has recently come to the forefront of the international policy debate (Roubini, 2009). Capital inflows to emerging market countries have put pressures on some currencies, and authorities have responded by slowing the pace of appreciation, in some cases by capital controls. This short article uses a GARCH framework to examine the co-movement of the U.S. dollar with a number of key financial asset prices in recent years.

After the Lehman Brothers collapse in September 2008, volatility spilled over into the foreign currency markets with the carry trades starting to rapidly unwind, whereby this breakdown was reflected by the implied volatilities of major emerging market (EM) currencies. High-yielding and previous investment currencies saw large depreciations against the U.S. Dollar, while funding currencies such as the Japanese yen benefited by a repatriation of funds into Japan. There was a scramble for U.S. dollars, which was reflected in the higher volatility of the Euro-U.S. dollar swap rates.

Over the next few months, Big Think will roll out interviews with leading economics experts to analyze the financial crisis and answer some pressing questions: Who’s to blame? Where do we go from here? The project’s aim is to generate a uniquely dynamic and comprehensive educational resource for the lessons gleaned from the financial crisis and work toward a viable path going forward. Today’s interview is with David Wessel, economics editor of the Wall Street Journal and author of recent bestseller, "In Fed We Trust: Bernanke's War on the Great Panic." This project is presented by the Charles G. Koch Charitable Foundation. Watch all 5 parts at BigThink : http://bigthink.com/

With the media finally waking up to the risk of recurring "systemic threats", aka Goldman not paying $20 billion in bonuses, courtesy of finding out just how much shit is really held by the Fed's discount window, everyone is suddenly interested in hearing it direct from the man at Ground Zero - Ron Paul... Even Steve Liesman, who no matter how hard he tries to spin "Audit the Fed" into "Control the Fed" will fail miserably every time he is not stuck in a patented blathering, factless monologue mode.

The growing financial turbulence of the past several months represents a massive stress test for the global financial system—one that has become more pervasive and more worrisome in recent weeks. The financial crisis that started in a relatively small part of the U.S. financial system today has grown into a global challenge. A problem that seemed at first to be essentially financial in nature by now has evolved—through the increasingly complex interlinkages between financial markets and the real economy—into a threat to the sustained and stable global growth that has prevailed over the past five years.

All those who have spent late hours playing SimCity 3000 and never understood why the damn thing would never get any people to move into it, will derive a deranged pleasure from the following clip. In China, where 8% GDP is guaranteed and has to be "goal seeked" by any and every increasingly more deranged economic project, the authorities have taken the game of SimCity and applied it to real life. Alas, they started out on "difficult" level

Read the whole article over here at Zero Hedge

By Greg Gordon | McClatchy Newspapers WASHINGTON — In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting. Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies. Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk. Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.

Interview with Marc Faber (Bloomberg News)

Interview with Marc Faber (Bloomberg News)

This is Rep. Alan Grayson asking Federal Reserve General Counsel Scott Alvarez about the Fed's independence.

"[The Fed] is bigger than the Congress, [it] has more power than the Congress. The Fed Chairman probably is more powerful than our president, and yet we refuse to look at it. The time has come for us to look at the Fed"

While Zero Hedge has been accused of disagreeing with President Obama's statements, ideas, and policies before, we would like to state on the record that we wholeheartedly agree with the President 

on this one occasion, with the caveat that it was uttered at a time when i) he was not a president, and ii) he presumably actually did in fact care about "our children and grandchildren" instead of simply indulging in an onanistic splurge of spending, bailing out beta chasing bankers and hedge fund managers, and, through his appointee Ben Bernanke, reducing the national currency of the United States to a smoking hulk of burnt toast. Superimposing Obama from 2006 with his current incarnation, threatens a schizoid break no less than would dropping Bono's two alter egos (Macphisto and The Fly) in the same room without a limitless supply of Thorazine.

Read more at Zero Hedge

Professor Roubini China cannot drive the world out of recession

Dr. Marc Faber speaking on Indian television channel, December 19, 2009

Banks are paying back TARP money and claiming theyre the picture of health. So what happened to all those toxic assets that were clogging their arteries a few months back? Senior Editor Paddy Hirsch explains.