Financial Crisis

[Gambles]

I am slightly surprised that the baht is actually a very illiquid currency. I mean buckets of trade flows through the economy. The BoT with net forward positions of US$15bn. I guess an unestablished proper yield curve counts against it. BTW, when I say illiquid I was wondering roughly relative to what. For instance what would the liquidity be like verses the SGD.

SGD versus Offshore Baht?? - good analogy might be haystacks and needles

Edited March 27, 2010 by Gambles

[Gambles]

apropos "AUD = basket case"

Credit Suisse: "We noticed there were a quite number of new A$ transactions recently from major financial institutions. This is likely in respond to increasing demand of AUD denominated products as investors who were traditionally dollar based are now seeking to diversify their currency exposure and are actively seeking for investment instruments in A$."

thanks Herr Naam

You've given me one more definition for a basket case - when a major Swissish bank decides that a carry trade currency is an investment diversifier!

Unless AUD is a base currency or one is a currency trader, the extreme vol & risks associated with AUD should probably be best avoided for now - even though we don't expect the day of reckoning just yet...

[Naam]

if anybody here is misanthropic than it is you with your apocalyptic forecasts that mankind will face chaos, wars, famine and various other horrors. your reasons are getting lamer and lamer by the day (e.g. refinancing a peanuts amount = financial crisis). reading these kind of ignorant arguments raise doubts that you ever (as claimed) ran a successful business. besides, a fact is "the ship did not sink" and it will not sink but you "missed the boat" in all respects and when you are cornered you sidestep with rubbish accusations like "misanthropic" which is ridiculous.

I have been thinking about your statement from this morning and I remembered

what Moody's said just a few days ago…………………………

“Achieving the fiscal consolidation necessary to avert a downgrade

will test “social cohesion” .“People have to decide what level of pain

they are willing to accept to have a healthy economy.”

again nothing but irrelevant bla-bla and that by quoting the Moody Blues, one of the "ratting" agencies who had no <deleted> idea what was going on or were too scared too act. by the way, Moody's good company is Poor Standards and Bitch. all of them either corrupt to the bones or (except Fitch) scared shitless fearing repercussions from Washington or elsewhere (see BBB rating of Greece).

years ago i used to read with awe their ratings and their outlooks till i realised they are only a bunch of nosepoking anals making fancy money by telling us what yesterday's weather looked like

[Gambles]

Actually everyone has their own investment philosophies and lots of them work. It is largely the 'only game in town' idea that I dont like.

and too many don't and if you saw some of the things that I see every day, Abrak, you'd probably be as uptight about that as I am

(1) What I regard as an investment you see as a trade

correct or maybe a theme or idea at best

and I'd rather collect as many good ideas as possible and try to interlink these connected with a macro view

but this isn't really something that can be explored fully on a blog

it's several hours of detailed discussion

(2) What you regard as an investment - say like gold - I regard as a speculative trade

ok

(3) And if you wish to argue that gold is a better investment now because it has outperformed the SET by 300% over the last 10 years, I dont even regard that as an investment argument of a sentient human being.

I don't. I never have. Not sure where you get that idea from.

I don't see a high correlation between gold & SET right now. Maybe that will reduce going forwards.

Would rather sell down both too early now than hang on too late but expect both to rise near term and maybe face a rocky time in/after H2

[Gambles]

conspiracy times are back again. cheers!

I could ( should ) have bet money on this response from you Naam

Why do you trivialise things that you define as a " conspiracy "?

What conditons must prevail for you to cease to consider something as being

a " conspiracy theory " in your words and what must happen for you to start giving credence to

these claims ?

all crisis-irrelevant!

Why do say it is " crisis-irrelevant " ?

How can a site that releases such documents as those about the failed Icelandic Kaupthing Bank ,

and about a loan is to be used for refinancing existing liabilities held by FirstCaribbean & Citibank etc ?

Are these not related to the financial crisis ?

Where do you obtain your information on which you rely to make your investment decisions

and why are those souces any more credible than the documents on the wikileaks site ?

In fact i no longer believe anything in the MSM

If the market goes up or down isnt that a form of conspiracy ?

thanks Midas

It seems pretty variable in content quality and relevance but I'm enjoying it....

[Gambles]

years ago i used to read with awe their ratings and their outlooks till i realised they are only a bunch of nosepoking anals making fancy money by telling us what yesterday's weather looked like

maybe another good model for us TVF readers to look into....

[Naam]

apropos "AUD = basket case"

Credit Suisse: "We noticed there were a quite number of new A$ transactions recently from major financial institutions. This is likely in respond to increasing demand of AUD denominated products as investors who were traditionally dollar based are now seeking to diversify their currency exposure and are actively seeking for investment instruments in A$."

thanks Herr Naam

You've given me one more definition for a basket case - when a major Swissish bank decides that a carry trade currency is an investment diversifier! Unless AUD is a base currency or one is a currency trader, the extreme vol & risks associated with AUD should probably be best avoided for now - even though we don't expect the day of reckoning just yet...

that major swiss bank indicated clearly (according to my rather limited knowledge of the english language) that they consider it a matter of diversifying and not carry trade. but whatever, i am very happy having switched a considerable amount of cash €URos (which lazed around at 0.00% yield) into short maturity AUD bonds and look at a "basket case" yield of 12+5% within the last 13 months.

p.s. i am not ruling out that carry trade (especially USD/AUD) exists. but it is an easy task to hedge AUD vs. any major reference currency by one or more forwards in the highly unlikely event that the Treasury Secretary of the Greatest Nation on Eareth™ had one drink too many and raises short term rates without consulting his boss in the White House. my problem is that i have no idea which currency to use as my reference currency .

basket or no basket, the bottom line and the need for dog food and port wine counts

[Naam]

years ago i used to read with awe their ratings and their outlooks till i realised they are only a bunch of nosepoking anals making fancy money by telling us what yesterday's weather looked like

maybe another good model for us TVF readers to look into....

those who make their money buying debt have unfortunately no other choice than looking into it. whether they like it or not.

[AlexLah]

"at what point does a “ conspiracy theory “ ( only by your definition ) cease to be so?"

there was never a conspiracy except for the one you and AlexLah invented.

JPMorgan, Lehman, UBS Named in Bid-Rigging Conspiracy (Update1

[Naam]

"at what point does a “ conspiracy theory “ ( only by your definition ) cease to be so?"

there was never a conspiracy except for the one you and AlexLah invented.

JPMorgan, Lehman, UBS Named in Bid-Rigging Conspiracy (Update1

please inform yourself what the penal code of Greatest Nation on Earth™ lists (ridiculously) as "conspiracy" and then we can talk again.

[Naam]

hey Alex!

i am missing your hints such as "watch out for the 17-21-96-29 because something will happen! you have been warned!"

[midas]

again nothing but irrelevant bla-bla and that by quoting the Moody Blues, one of the "ratting" agencies who had no <deleted> idea what was going on or were too scared too act. by the way, Moody's good company is Poor Standards and Bitch. all of them either corrupt to the bones or (except Fitch) scared shitless fearing repercussions from Washington or elsewhere (see BBB rating of Greece).

years ago i used to read with awe their ratings and their outlooks till i realised they are only a bunch of nosepoking anals making fancy money by telling us what yesterday's weather looked like

again nothing but irrelevant bla-bla without addressing how are Western countries

going to re-build productive capacity ( instead of shopping being the driving force of the biggest economy )

and how are they going to pay back the dosh ?

[midas]

"at what point does a “ conspiracy theory “ ( only by your definition ) cease to be so?"

there was never a conspiracy except for the one you and AlexLah invented.

JPMorgan, Lehman, UBS Named in Bid-Rigging Conspiracy (Update1

please inform yourself what the penal code of Greatest Nation on Earth™ lists (ridiculously) as "conspiracy" and then we can talk again.

Conspiracy cases are defined as cases in which two or more persons agree to commit a crime or to perpetrate an illegal act. The end may be legal, but the planned means are illegal. For example, two persons making a plan to steal bread from a supermarket (illegal) to donate to a local food bank (legal) would be guilty of conspiracy. While intent is key in any federal conspiracy case, only “general intent” to violate the law is necessary; proof of the defendants’ specific intent to violate the law is not needed, only an agreement to engage in an illegal act.

U.S.C. Title 18, Chapter 19 prohibits conspiracies to defraud the United States, conspiracies to impede or injure an officer, and conspiracies to commit violent crimes. However, conspiracy is prohibited in several other federal statutes. It is important to note that an actual crime is not necessary to prosecute a conspiracy case – only the stated intent to break the law. This means that even if the ultimate crime was not committed, the conspirators can be prosecuted under federal law.

http://criminal-law.freeadvice.com/crimina...-conspiracy.htm

[Gambles]

apropos "AUD = basket case"

Credit Suisse: "We noticed there were a quite number of new A$ transactions recently from major financial institutions. This is likely in respond to increasing demand of AUD denominated products as investors who were traditionally dollar based are now seeking to diversify their currency exposure and are actively seeking for investment instruments in A$."

thanks Herr Naam

You've given me one more definition for a basket case - when a major Swissish bank decides that a carry trade currency is an investment diversifier! Unless AUD is a base currency or one is a currency trader, the extreme vol & risks associated with AUD should probably be best avoided for now - even though we don't expect the day of reckoning just yet...

that major swiss bank indicated clearly (according to my rather limited knowledge of the english language) that they consider it a matter of diversifying and not carry trade. but whatever, i am very happy having switched a considerable amount of cash €URos (which lazed around at 0.00% yield) into short maturity AUD bonds and look at a "basket case" yield of 12+5% within the last 13 months.

p.s. i am not ruling out that carry trade (especially USD/AUD) exists. but it is an easy task to hedge AUD vs. any major reference currency by one or more forwards in the highly unlikely event that the Treasury Secretary of the Greatest Nation on Eareth™ had one drink too many and raises short term rates without consulting his boss in the White House. my problem is that i have no idea which currency to use as my reference currency .

basket or no basket, the bottom line and the need for dog food and port wine counts

well I'd guess you'd still have some time left on that but what was a smart move at 65c is a dangerous game at 90 c - I hope that you manage to get the hedge timing right on the way out

For your reference currency -

for income it should surely be Thai Baht plus the source currency of your imports

for your capital, it really depends on your plans for that

For USD strengthening - look for other factors, I don't think that the main driver will be US rate hikes

Edited March 27, 2010 by Gambles

[Naam]

For your reference currency -

for income it should surely be Thai Baht plus the source currency of your imports

for your capital, it really depends on your plans for that

Gambles,

to discuss my reference with you over a bottle of good wine would be indeed interesting. this is not a joke, i mean it! as i already mentioned i am clueless and can't make up my mind. true, the lion share of my expenses is THB but my core income is a multiple of my THB expenses. the expenses i have in two other countries / currencies are fully covered by investment in relevant local currencies including a hefty provision for inflation. therefore... do i use just the percentage THB/income as reference and if yes what reference currency for any plans should i use for the non-essential income?

long term plans for my capital do not exist and i don't see any need to establish plans, except if you provide me with valid reasons to do so. depending on the environment and yields i move of course a consirable percentage of my capital in and out of various currencies when i feel the risk/reward ratio warrants it.

[Gambles]

For your reference currency -

for income it should surely be Thai Baht plus the source currency of your imports

for your capital, it really depends on your plans for that

Gambles,

to discuss my reference with you over a bottle of good wine would be indeed interesting. this is not a joke, i mean it! as i already mentioned i am clueless and can't make up my mind. true, the lion share of my expenses is THB but my core income is a multiple of my THB expenses. the expenses i have in two other countries / currencies are fully covered by investment in relevant local currencies including a hefty provision for inflation. therefore... do i use just the percentage THB/income as reference and if yes what reference currency for any plans should i use for the non-essential income?

long term plans for my capital do not exist and i don't see any need to establish plans, except if you provide me with valid reasons to do so. depending on the environment and yields i move of course a consirable percentage of my capital in and out of various currencies when i feel the risk/reward ratio warrants it.

is it possible to hold a discussion without wine? - and has anyone researched correlation between quality of wine and quality of discussion?

Forgive me for stating the obvious (my personal speciality) but your current approach is very sensible. However you also recognise that no currency is as self-contained as it used to be - holding Baht to cover Thai income is a risk in a time when Baht depreciates against currencies in which your imported goods or services are priced. That said, we expect Baht to strengthen against western currencies for a number of years (although short term we still think that USD will strengthen prior to this) but that is merely a forecast. We also wonder the wider ongoing impact of this on the Baht/Thai economy and how THB will interreact with RMB over coming years. A free-floating Baht in such an environment could be a liability but then if the long term dynamic is much stronger RMB then things could change very dramatically but I don't see PRC becoming such a permanently heavy importer overnight whatever the shorter term stats show is happening. Inflation ranges from very high to negative in the total range of plausible scenarios.

A difficult one and would definitely require an exceptional bottle of wine or 2 to resolve this conundrum!

[Naam]

"However you also recognise that no currency is as self-contained as it used to be - holding Baht to cover Thai income is a risk in a time when Baht depreciates against currencies in which your imported goods or services are priced. That said, we expect Baht to strengthen against western currencies for a number of years (although short term we still think that USD will strengthen prior to this) but that is merely a forecast."

THB seems to be a special animal. when it strengthens (as it did for the last several years) goods imported from countries with a weaker currency became more expensive. no matter what the Baht does, domestic and imported goods (with few exceptions) become more expensive.

conclusion: established economic teachings or logic do not apply in Thailand!

[Abrak]

"However you also recognise that no currency is as self-contained as it used to be - holding Baht to cover Thai income is a risk in a time when Baht depreciates against currencies in which your imported goods or services are priced. That said, we expect Baht to strengthen against western currencies for a number of years (although short term we still think that USD will strengthen prior to this) but that is merely a forecast."

THB seems to be a special animal. when it strengthens (as it did for the last several years) goods imported from countries with a weaker currency became more expensive. no matter what the Baht does, domestic and imported goods (with few exceptions) become more expensive.

conclusion: established economic teachings or logic do not apply in Thailand!

I also believe that the underlying strength of the baht is somewhat exaggerated. I would estimate that the baht is roughly unchanged on a trade weighted basis to where it was two years ago.

[Gambles]

"However you also recognise that no currency is as self-contained as it used to be - holding Baht to cover Thai income is a risk in a time when Baht depreciates against currencies in which your imported goods or services are priced. That said, we expect Baht to strengthen against western currencies for a number of years (although short term we still think that USD will strengthen prior to this) but that is merely a forecast."

THB seems to be a special animal. when it strengthens (as it did for the last several years) goods imported from countries with a weaker currency became more expensive. no matter what the Baht does, domestic and imported goods (with few exceptions) become more expensive.

conclusion: established economic teachings or logic do not apply in Thailand!

agreed - very special but so far predictable to an extent..but now existing relationships may be about to break dowm

[Gambles]

I also believe that the underlying strength of the baht is somewhat exaggerated. I would estimate that the baht is roughly unchanged on a trade weighted basis to where it was two years ago.

quite - the general isn't much use is it? If your biggest single expense by a big margin is, e.g., imported New Zealand wine then the Baht-NZD relationship is suddenly more important than Baht-US$, Baht-GBP and Baht-Euro which are the most popularly quoted

[Abrak]

quite - the general isn't much use is it? If your biggest single expense by a big margin is, e.g., imported New Zealand wine then the Baht-NZD relationship is suddenly more important than Baht-US$, Baht-GBP and Baht-Euro which are the most popularly quoted

Your point about imports is well taken. What I find generally more scary is the mismatch on the Thai asset side that so many people have who live here. It seems that many people who have foreign currency earnings also keep their savings in foreign currency while the majority of their liabilities are in Thai baht. There is then general whinging about what has actually been a very modest appreciation. It is certainly possible that the baht will appreciate at least a further 30% over the next couple of years. Of course it might go nowhere or down. I just dont see anything that would justify a mismatch of asset and liabilities. In a couple of years some of those guys will not be worried so much about the price of a decent bottle of wine (which I do admit it is very serious issue that doesnt seem to receive enough attention) but how to save Bt2 on a bottle of Chang.

Part of the answer is to import over the Malaysian border.

[Gambles]

quite - the general isn't much use is it? If your biggest single expense by a big margin is, e.g., imported New Zealand wine then the Baht-NZD relationship is suddenly more important than Baht-US$, Baht-GBP and Baht-Euro which are the most popularly quoted

Your point about imports is well taken. What I find generally more scary is the mismatch on the Thai asset side that so many people have who live here. It seems that many people who have foreign currency earnings also keep their savings in foreign currency while the majority of their liabilities are in Thai baht. There is then general whinging about what has actually been a very modest appreciation. It is certainly possible that the baht will appreciate at least a further 30% over the next couple of years. Of course it might go nowhere or down. I just dont see anything that would justify a mismatch of asset and liabilities. In a couple of years some of those guys will not be worried so much about the price of a decent bottle of wine (which I do admit it is very serious issue that doesnt seem to receive enough attention) but how to save Bt2 on a bottle of Chang.

Part of the answer is to import over the Malaysian border.

couldn't have put it better - in fact I tried in my post & I didn't

[sokal]

apropos "AUD = basket case"

Credit Suisse: "We noticed there were a quite number of new A$ transactions recently from major financial institutions. This is likely in respond to increasing demand of AUD denominated products as investors who were traditionally dollar based are now seeking to diversify their currency exposure and are actively seeking for investment instruments in A$."

thanks Herr Naam

You've given me one more definition for a basket case - when a major Swissish bank decides that a carry trade currency is an investment diversifier! Unless AUD is a base currency or one is a currency trader, the extreme vol & risks associated with AUD should probably be best avoided for now - even though we don't expect the day of reckoning just yet...

that major swiss bank indicated clearly (according to my rather limited knowledge of the english language) that they consider it a matter of diversifying and not carry trade. but whatever, i am very happy having switched a considerable amount of cash €URos (which lazed around at 0.00% yield) into short maturity AUD bonds and look at a "basket case" yield of 12+5% within the last 13 months.

p.s. i am not ruling out that carry trade (especially USD/AUD) exists. but it is an easy task to hedge AUD vs. any major reference currency by one or more forwards in the highly unlikely event that the Treasury Secretary of the Greatest Nation on Eareth™ had one drink too many and raises short term rates without consulting his boss in the White House. my problem is that i have no idea which currency to use as my reference currency .

basket or no basket, the bottom line and the need for dog food and port wine counts

If a bond astronaut cowboy like you isn't taking part in the carry trade then it probably doesn't exist.

[Naam]

I also believe that the underlying strength of the baht is somewhat exaggerated. I would estimate that the baht is roughly unchanged on a trade weighted basis to where it was two years ago.

quite - the general isn't much use is it? If your biggest single expense by a big margin is, e.g., imported New Zealand wine then the Baht-NZD relationship is suddenly more important than Baht-US$, Baht-GBP and Baht-Euro which are the most popularly quoted

cases like these are as rare as sabre-toothed hens.

[Naam]

What I find generally more scary is the mismatch on the Thai asset side that so many people have who live here. It seems that many people who have foreign currency earnings also keep their savings in foreign currency while the majority of their liabilities are in Thai baht. There is then general whinging about what has actually been a very modest appreciation.

some people never learn

[sokal]

What I find generally more scary is the mismatch on the Thai asset side that so many people have who live here. It seems that many people who have foreign currency earnings also keep their savings in foreign currency while the majority of their liabilities are in Thai baht. There is then general whinging about what has actually been a very modest appreciation.

some people never learn

????

Losing purchasing power in the currency that you live off of sucks.

[flying]

An economic puzzle Bernanke can't solve

(Reuters) - It's a mystery that has puzzled even Federal Reserve Chairman Ben Bernanke: if the U.S. economy is growing rapidly, why isn't it creating jobs?

Friday's hotly anticipated employment report for March may muddle matters even more. Economists polled by Reuters had widely divergent views, with one looking for an increase of 400,000 jobs -- which would be the strongest in a decade -- while others thought it may show another small net decline.

The consensus expects a gain of 190,000 jobs, which would mark only the second month of job growth since the recession started in December 2007, and the largest increase since March of that year.

Government jobs are expected to account for the bulk of the growth, thanks to the once-a-decade Census, which requires taking on hundreds of thousands of temporary workers. While the jobs pay well ($22.00 an hour in San Francisco; $11.75 in Ames, Iowa,) they last only a few months.

Bernanke and his central bank colleagues are well aware that Census hiring will skew readings, and have cautioned that unemployment will likely remain near 10 percent all year.

The Fed and private economists are trying to answer the bigger question of why the labor market shed 8.4 million jobs during this recession. Although the downturn was the deepest since the Great Depression, the job losses were even more severe than most forecasters had predicted based on models that compare economic growth and employment.

Bernanke offered two possible explanations.

"One is that maybe the recession was deeper than we thought," he said in response to a question from a member of Congress last week. "The other is that the productivity gains were greater than we thought they would be when firms were able to cut their work forces and still maintain output."

CAUSE FOR OPTIMISM

The first theory gained support when one of Bernanke's staff economists wrote a research paper suggesting that the most commonly used measure of U.S. economic growth, gross domestic product, had understated the depth of the recession and overstated the recent recovery.

The economist, Jeremy Nalewaik, argued that a lesser known measure called gross domestic income may give a more accurate assessment of the business cycle. GDP looks at spending to measure the size of the economy, while GDI focuses on income.

Based on GDI, the economy began contracting in 2007, not 2008 as GDP data indicates. It also shows growth did not resume until the final quarter of 2009, while GDP showed the economy had expanded in the third quarter as well.

If GDI is indeed a more accurate gauge, there is reason to think employment will soon rise. Data released last Friday showed GDI jumped at a 6.2 percent annual rate in the fourth quarter, even faster than GDP's 5.6 percent pace.

That would also help explain why payrolls were still contracting eight months after GDP indicated economic growth resumed. Employment gains normally lags economic growth by a few months, so if the cycle turn came in October rather than June, it would make more sense to see job growth now.

If the U.S. economy does indeed show large job gains for March, it would pull ahead of the euro zone, which is expected to report on Wednesday that the jobless rate ticked up to 10 percent in February from 9.9 percent the prior month.

The U.S. unemployment rate is at 9.7 percent, and the consensus view is that it will hold there in March. What happens after that is open for debate.

Some economists think it will inch up again later this year, for a somewhat counter-intuitive reason. As the labor market improves, discouraged workers may decide to start looking for work again. Those who give up the search are not officially counted in the unemployment rate, but when they jump back into the labor pool they are.

David Rosenberg, chief economist at money manager Gluskin Sheff in Toronto, is more concerned that the economy will weaken just as the Census jobs are disappearing. Government stimulus spending will be fading later this year, and the Fed may be cutting back on its extraordinary economic support.

"I would be looking for a second-half growth relapse that sees the unemployment rate climb back to a new cycle high once the Census hiring effect subsides," Rosenberg said.

[Gambles]

If a bond astronaut cowboy like you isn't taking part in the carry trade then it probably doesn't exist.

Naam already said that he has exposure didn't he?

Study the stats - carry in Aus is obvious from studying the data

[Gambles]

I also believe that the underlying strength of the baht is somewhat exaggerated. I would estimate that the baht is roughly unchanged on a trade weighted basis to where it was two years ago.

quite - the general isn't much use is it? If your biggest single expense by a big margin is, e.g., imported New Zealand wine then the Baht-NZD relationship is suddenly more important than Baht-US$, Baht-GBP and Baht-Euro which are the most popularly quoted

cases like these are as rare as sabre-toothed hens.

I was being extreme to make the point ;-)

[Gambles]

it's because the money isn't circulating, Mr. Bernanke, and all of us not blinded by monetarism have been telling you this since you wrote your one-eyed, doctorate years ago..........even someone as 'brilliant' as you, Ben, can't force Americans to keep spending money they don't have

ooooh these people make me so mad!!!!!!!!

An economic puzzle Bernanke can't solve

(Reuters) - It's a mystery that has puzzled even Federal Reserve Chairman Ben Bernanke: if the U.S. economy is growing rapidly, why isn't it creating jobs?

Friday's hotly anticipated employment report for March may muddle matters even more. Economists polled by Reuters had widely divergent views, with one looking for an increase of 400,000 jobs -- which would be the strongest in a decade -- while others thought it may show another small net decline.

The consensus expects a gain of 190,000 jobs, which would mark only the second month of job growth since the recession started in December 2007, and the largest increase since March of that year.

Government jobs are expected to account for the bulk of the growth, thanks to the once-a-decade Census, which requires taking on hundreds of thousands of temporary workers. While the jobs pay well ($22.00 an hour in San Francisco; $11.75 in Ames, Iowa,) they last only a few months.

Bernanke and his central bank colleagues are well aware that Census hiring will skew readings, and have cautioned that unemployment will likely remain near 10 percent all year.

The Fed and private economists are trying to answer the bigger question of why the labor market shed 8.4 million jobs during this recession. Although the downturn was the deepest since the Great Depression, the job losses were even more severe than most forecasters had predicted based on models that compare economic growth and employment.

Bernanke offered two possible explanations.

"One is that maybe the recession was deeper than we thought," he said in response to a question from a member of Congress last week. "The other is that the productivity gains were greater than we thought they would be when firms were able to cut their work forces and still maintain output."

CAUSE FOR OPTIMISM

The first theory gained support when one of Bernanke's staff economists wrote a research paper suggesting that the most commonly used measure of U.S. economic growth, gross domestic product, had understated the depth of the recession and overstated the recent recovery.

The economist, Jeremy Nalewaik, argued that a lesser known measure called gross domestic income may give a more accurate assessment of the business cycle. GDP looks at spending to measure the size of the economy, while GDI focuses on income.

Based on GDI, the economy began contracting in 2007, not 2008 as GDP data indicates. It also shows growth did not resume until the final quarter of 2009, while GDP showed the economy had expanded in the third quarter as well.

If GDI is indeed a more accurate gauge, there is reason to think employment will soon rise. Data released last Friday showed GDI jumped at a 6.2 percent annual rate in the fourth quarter, even faster than GDP's 5.6 percent pace.

That would also help explain why payrolls were still contracting eight months after GDP indicated economic growth resumed. Employment gains normally lags economic growth by a few months, so if the cycle turn came in October rather than June, it would make more sense to see job growth now.

If the U.S. economy does indeed show large job gains for March, it would pull ahead of the euro zone, which is expected to report on Wednesday that the jobless rate ticked up to 10 percent in February from 9.9 percent the prior month.

The U.S. unemployment rate is at 9.7 percent, and the consensus view is that it will hold there in March. What happens after that is open for debate.

Some economists think it will inch up again later this year, for a somewhat counter-intuitive reason. As the labor market improves, discouraged workers may decide to start looking for work again. Those who give up the search are not officially counted in the unemployment rate, but when they jump back into the labor pool they are.

David Rosenberg, chief economist at money manager Gluskin Sheff in Toronto, is more concerned that the economy will weaken just as the Census jobs are disappearing. Government stimulus spending will be fading later this year, and the Fed may be cutting back on its extraordinary economic support.

"I would be looking for a second-half growth relapse that sees the unemployment rate climb back to a new cycle high once the Census hiring effect subsides," Rosenberg said.