Christopher Whalen Fri 2010-09-17 19:31 EDT

The key to the future of finance is now emerging

Christopher Whalen

Basel III is entirely irrelevant to the economic situation and even to the banks. Through things like minimum capital levels, the Basel II rules provided the illusion of intelligent design in the regulation of banking and finance. In fact, Basel II made the subprime crisis possible and the subsequent bailout inevitable [by enabling off-balance sheet finance and OTC derivatives]...Part of the reason for my undisguised contempt for the Basel III process comes from caution regarding the benefits of regulating markets...But a large portion of my criticism for Basel III and the entire Basel framework is even more basic, namely the notion that any form of a priori regulation, public or private, can prevent people from doing stupid things...The key premise of Basel III is that the use of minimum capital guidelines and other strictures will somehow enable regulators to prevent a crises before it occurs. The only trouble is that regulators have no objective measures for compliance with Basel II/III, much less predicting market breaks...As in past decades and crises right through to 2008, the regulators will be the last to know about a problem...

Christopher Whalen; Emergency; finance; future; Key.

Tue 2010-04-20 10:05 EDT

The Search for a Reserve Currency

Gregory R. Copley

...good governance as an essential component of currency value and the trust in that currency can transform overnight, just as we witnessed the post-World War II collapse of sterling, and, now, the shakiness of trust in the US dollar (despite the reality that, at $14.2-trillion in value in 2008, is the world's largest). The age of the US dollar as the global reserve currency isn't yet over, but it's threatened, and the trend toward a flight from the dollar (despite occasional returns to it) is evident. At present, however, the dollar is shored up because in many respects there's nothing of its stature ready to replace it...major trade will gradually become more bilateral in nature, based on very real mutual trust in each other's currencies or goods. This will be a significant limiting factor in trade, and will make bilateral balances of greater interest than in the past when trade balances of a bilateral nature ``washed out'' in the great mixing bowl of the global banking system...

reserve currency; search.

New Deal 2.0 Sat 2010-02-27 22:55 EST

GSE Losses As Shadow Bailout

Roosevelt Institute Fellow Mike Konczal

...As the private sector started to dump housing and housing bonds quickly in 2007 and 2008, government officials made sure that the GSEs would be capable of absorbing these bad loans...This constitutes one part of many ``shadow bailouts'' according to Roosevelt Institute senior fellows Rob Johnson and Tom Ferguson; this argument, and the graph above, is from their Too Big to Bail: The `Paulson Put,' Presidential Politics, and the Global Financial Meltdown Part II paper. (In Part I, they argue that the Federal Home Loan Bank System was also used in a similar manner.) Astute readers will notice that the action of government officials using public funding sources to provide makeshift backstops for losses of the banking sector to clear the balance sheets of toxic assets to ``unlock the frozen credit market'', without having to go to Congress for funding, was also a central feature of Geithner's PPIP plan, with FDIC stepping up to the plate once the GSEs went bust...

0; GSE losses; new dealing 2; Shadow Bailout.

zero hedge Tue 2010-01-05 19:26 EST

Roubini Blasts "The Barbarous Relic," Recommends Spam Over Gold

In a headline piece on roubini.com, Nouriel Roubini writes an extended article slamming both gold bugs, and the so-called gold bubble, which he believes is far too volatile, and which, contrary to ever increasing claims to the opposite, will likely not get to the mythical price of $2000/ounce, and instead will head lower. The argument presented, as is widely the case, boils down to the trifecta of i)gold having no industrial utility, ii) no intrinsic value (no associated cash flow streams) and iii) costing an arm and a leg to store. While Roubini's thesis is attractive on the surface (if somewhat Keynesian and thus often reiterated by mainstream Economists), we present some counter arguments to Roubini's thesis.

barbaric relic; gold; Recommends Spam; Roubini blast; Zero Hedge.

Mon 2009-12-21 18:29 EST

China's Economy: Decoupling from what? - Drorism*

One of the most popular memes repeated by mainstream media since the collapse of Lehman Brothers last year is the idea that China will manage to avoid the consequences economic downturn by shifting from an export-based economy to one based on local consumption...the "decoupling" theory proved to be false: The downturn in the developed world had a significant impact on China's economic well-being, causing a dramatic rise in unemployment and a sharp slowdown in economic growth...A new study published by Professor Hung Ho-fung...compares China's development path to that of other Asian economies, including Japan, Korea, Taiwan, Singapore, and Hong Kong. It provides a concise summary of political and economic events in East-Asia since World War II as well as some colorful predictions and recommendations...

China s Economy; decoupled; Drorism.

zero hedge Wed 2009-10-14 12:12 EDT

Why Did U.S. SDR Holdings Increase Five Fold In The Last Week Of August?

...The big question mark at the end of August is when the U.S. International Reserve Position increased by almost 50%. The reason for this: a near quintupling of S.D.R. holdings on the U.S. balance sheet in the span of one week... By purchasing $40 billion in SDRs virtually overnight, what the Fed has done is to increase the value of the entire basket pro-rata, while in the process reducing the actual value of the dollar (which is a weighted constituent of the SDR basket). This was an operation to reduce the dollar's value: pure and simple. In many ways it explains why the DXY has continued its straight one way decline since the beginning of September, when many pundits assumed the market was finally going to tank on profit taking after Labor day. By performing this dollar adverse transaction, the Fed sent a loud and clear signal what the Fed was going to do going forward vis-a-vis the i) dollar and ii) its derivative, the stock market.

August; Folding; U.S. SDR Holdings Increase; weekly; Zero Hedge.

Sun 2009-09-20 14:12 EDT

America's Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession | The New America Foundation

Thomas Palley

This report traces the roots of the current financial crisis to a faulty U.S. macroeconomic paradigm. One flaw in this paradigm was the neo-liberal growth model adopted after 1980 that relied on debt and asset price inflation to drive demand. A second flaw was the model of U.S. engagement with the global economy that created a triple economic hemorrhage of spending on imports, manufacturing job losses, and off-shoring of investment. Deregulation and financial excess are important parts of the story, but they are not the ultimate cause of the crisis. Instead, they facilitated the housing bubble and are actually part of the neo-liberal model, their function being to fuel demand growth based on debt and asset price inflation. The old post-World War II growth model based on rising middle-class incomes has been dismantled, while the new neo-liberal growth model has imploded. The United States needs a new economic paradigm and a new growth model, but as yet this challenge has received little attention from policymakers or economists.

America's Exhausted Paradigm; Financial Crisis; Great Recession; Macroeconomic Causes; New America Foundation.

Thu 2009-07-30 00:00 EDT

naked capitalism: Thought Police II: Media Airbrushing (Including Removal of Article With Negative Comments on TARP)

article; Media Airbrushing; naked capitalism; negative comments; remove; TARP; Thought Police II.

Tue 2009-06-16 00:00 EDT

Calculated Risk: Bank Balance Sheet: Liquidity and Solvency, Part II

bank balance sheets; Calculated Risk; liquidity; parts II; solvency.

Tue 2009-02-24 00:00 EST

Cassandra Does Tokyo: Inflation(ists) vs. Deflation(ists) - Part II

inflation versus deflation part 2

Cassandra; deflation; Inflation; ist; parts II; Tokyo.

Thu 2009-01-15 00:00 EST

Jesse's Café Américain: Capitalism II: Brave New World

Jesse's Café Américain: Capitalism II: Brave New World; Michael Hudson and Jeffrey Sommer; Managed Capitalism

Brave new world; Capitalism II; Jesse's Café Américain.

Mon 2008-12-15 00:00 EST

London Banker: Deflation has become inevitable

``The extent to which capital has been betrayed in the past quarter century under Bretton Woods II, bank deregulation and the Basle Capital Adequacy Accords is unrivalled in the history of fiat banking.''

becomes inevitably; deflation; London Banker.

Sun 2008-11-23 00:00 EST

Jesse's Café Américain: The Dollar Trap Part II: Mutually Assured Financial Destruction

Jesse's Café Américain: The Dollar Trap Part II: Mutually Assured Financial Destruction

Dollar Trap Part II; Jesse's Café Américain; Mutually Assured Financial Destruction.

Fri 2007-12-21 00:00 EST

War And Peace: The Truth About Economic Tsunamis: Shifts In Global Power

by Elaine Meinel Supkis; British imperial decline; Smoot-Hartley beneficial to US; US imitating British decline after WW II

economic tsunami; Global Power; peace; shifted; truth; war.

Thu 2007-12-06 00:00 EST

Calculated Risk: MBS For UberNerds II: REMICs, Dogs, Tails, and Class Warfare

(collateralized mortage obligations; CMO)

Calculated Risk; Class Warfare; dog; MBS; REMICs; tails; UberNerds II.

Wed 2007-11-28 00:00 EST

FT Alphaville >> Blog Archive >> ACA hits trouble - squared

(CDO squared Lancer Funder II default event; CDO implosion}

ACA Hits troubles; blogs Archive; FT Alphaville; squared.

Tue 2007-08-28 00:00 EDT

naked capitalism: Extreme Measures II: Gillian Tett at the Financial Times

"parties who are in the best position to facilitate price discovery have every reason to impede that process"

Extreme Measures II; Financial Times; Gillian Tett; naked capitalism.

Sun 2007-08-26 00:00 EDT

naked capitalism: Market Failure II: Corporate Bankruptcy

Corporate Bankruptcies; Market Failure II; naked capitalism.