I travel for business purposes a lot these days. Moreover, the battery life on my laptop is limited. As a result, at least these are the excuses I am offering, I do not have as much time to write as I used to. Hence the dearth of Econtrarians. Once a month we must update our economic and interest rate forecasts. Given that I have little new to say about the forecast this month, as was the case last month, I am again using the update as an opportunity to communicate some thoughts I have had over the past month but have not had the opportunity until now to jot them down.

Although the forecast on an annual basis has changed little from last month, we have raised our GDP growth estimates meaningfully for the fourth quarter of this year and the first quarter of 2010 (Q1 2010 forecast rose to 2.0% from 1.6%).The sectors accounting for the bulk of the increases in projected real GDP growth are business and residential investment. Business equipment spending is rebounding faster than we expected, but by no means are we projecting a capital spending boom. The same holds true for residential investment expenditures. But we believe that the rebound in housing will be quite modest after the third quarter’s 23.3% annualised surge.

US dollar carry trade?
There is a lot of chatter that global speculators are borrowing greenbacks at bargain basement interest rates and buying higher-yielding assets denominated in foreign currencies. Some have suggested that this dollar-carry trade is creating yet another asset-price bubble. Other than the fact that the US dollar has been depreciating on a trade-weighted basis in recent months, where is the evidence for this dollar-carry trade? In other words, where is this alleged massive bubblicious US dollar credit creation showing up? I will tell you where it is not showing up – on the books of US commercial banks. In the 26 weeks ended 28 October 2009, loans and investments at US-domiciled commercial banks have contracted at an annual (Devil’s) rate of 6.66% (See Fig.1).