Economics Update

Jobless claims are back below 400,000, down to 357,000. This is a noisy number, and it appears that the Easter holiday may have effected this somehow.

In high finance, we are starting to see some of the sh%$pile being liquidated at steep discounts, with Goldman Sachs selling ½ billion of Chrysler debt at about 63¢ on the dollar, which comes to about a $185 million dollar haircut, and it has been revealed that Lehman liquidated about $1 billion in funds.

You can view this as an orderly unwinding of these highly uncertain financial instruments, or the first steps towards a rush to the exits. I'm not sure which, though the fact that the LIBOR-OIS and the TED spreads are up again.^* might indicate that it is a rush to the exits.

Basically, the spread, or difference in interest rates, between what banks demand when they lend to each other is a measure of how skittish people are about debt. The higher the number, the worse fear.

After dropping briefly following the Bear bailout, the spread is heading back up, implying that there are a lot of people who don't want to buy someone else's debt.

In international trade, the Dollar hit a record low vs the Euro, $1.5912:€1.0000, and the Yuan strengthened to below 7 to the dollar for the first time ever.

On the brighter side, the trade deficit rose in February, which might indicate that the economy is strengthening somewhat, though it isn't in the UK apparently, because the Bank of England cuts key British interest rate 25 basis points, to 5 percent.

The continental Europeans appear to be more worried about inflation though, as the European Central Bank left rates unchanged, which will put some more downward pressure on the dollar.

Seriously though, I really can't make a whole bunch of sense in today's data, there is too much noise in opposite directions, which is why a fair man is not too hard on economists, who deal with this all the time.

Luckily, I'm not a fair man, so to all you economists, Go away, or I shall taunt you a second time.

^*As Paul Krugman puts it, "One is the spread between Libor and Treasuries, the other the spread between Libor and the futures price of the Fed funds rate; I tend to prefer TED spread, because fears of bank defaults should affect Fed funds as well as Libor; but I know that Fed officials prefer OIS. Anyway, both pointing in the same direction."