Finance

China’s trade surplus declined in the first quarter, and during March the country ran a deficit of $7.2 billion, its first monthly trade deficit since 2004. Contrary to some analyses, this is not proof that the economy has made significant progress toward rebalancing or a reason for the United States to back away from pushing China on yuan appreciation.

The deregulation of the American financial industry that began in the 1970s is now widely viewed as a disaster. Even Bill Clinton has admitted that the supporters of deregulation in his administration, like Robert Rubin and Larry Summers, gave him bad advice.

A year and a half after an economic earthquake shook the world, the so-called experts are still trying to figure out what happened and how to move forward. In the shadows of that confusion, new economic models are beginning to find traction.

In the prologue to The Big Short: Inside the Doomsday Machine, Michael Lewis explains that he envisioned his first and perhaps most famous work, Liar's Poker, as a grim obituary for an industry that rewarded inexperience and greed. However, the byzantine banking industry continued to flourish, and young readers wrote Lewis to ask how they, too, could get into the game. His disappointment is palpable.

On Monday, President Barack Obama released a complimentary statement about Sen. Chris Dodd's latest proposal for financial reform, singling out its creation of "a new consumer financial protection agency to set and enforce clear rules of the road."

While members of Congress take their spring break, the debate over financial reform and, most relevantly, Sen. Chris Dodd's omnibus bill simmer here in Washington. Dodd's bill has raised any number of questions -- starting, most fundamentally, with "Are you with the banks or the consumers?" -- but perhaps the most confusing debate right now is over the previously obscure issue of prudential standards. (If you're just joining this debate, read my primer on the effort so far.)

The administration has made economic policy as if it believes that once financial institutions and financial markets are restored, credit will start flowing and growth will follow.

The Federal Reserve has recently activated its newly acquired powers to pay interest on reserves of depository institutions. The Fed maintains its new policy increases economic efficiency and intends it to play a lead role in the exit from quantitative easing.

A Background to Short Selling
There are two dominant ways of making money off of a stock price change.  The most obvious way is to go "long" on the stock, meaning that the investor believes that a stock is undervalued and the price is destined to rise in the future.  So the investor buys this stock on the market, waits for the price to rise before selling the stock.  The profit is in the spread.

Go sit in the corner and think about what you’ve done, carbon!  You’re driving us all mad and keeping hundreds of financial wizards employed, trying to figure out why you never follow the price models.

Since 2005, Europe has had the European Union Greenhouse Gas Emission Trading System (ETS).  It’s a bizarre market that refuses to behave like that of other commodities – not like oil, natural gas or coal, nor like corn or pork bellies.  Currently, the most obvious quirk is that carbon allowances tr