Sat 2010-10-09 10:56 EDT

And Then There Were None | afoe | A Fistful of Euros | European Opinion

Edward Hugh

...rather than being over, what the debt crisis now may be entering is a new stage, where one sovereign bond after another is being chisled out and sent off to join their Greek counterpart in the isolation ward...the Irish economy has never really left recession...Irish GDP has now contracted on a quarterly basis for 9 out of the past 10 quarters, and there is no evident end in sight....the riskiest lenders to nationalized Anglo Irish Bank may not get all their money back...In the Portuguese case it is the budget deficit issue which is unsettling the markets, with the spread widening sharply following the revelation that far from the deficit being reduced is was actually increasing...Neither the European sovereign debt crisis nor the banking sector crisis has been resolved and both continue to mutually reinforce each other...the EU's stress tests for banks had manifestly failed to restore the necessary confidence.

afo; euro; European opinion; fisted.

naked capitalism Thu 2010-09-30 08:22 EDT

Why Backstopping Repo is a Bad Idea

The normally sound Gillian Tett of the Financial Times endorses an idea that is both dangerous and unnecessary, namely, government backstopping of the system of short-term collateralized lending called repo, for ``sale with agreement to repurchase.''...But the real problem is that the only securities that were once considered to be suitable were those of the very highest quality, namely Treasuries. The real problem is in widening the market beyond that. If you have absolutely impeccable collateral, you don't care if your counterparty goes belly up if you aren't at risk of losses on the assets you hold...the real problem is the use of low quality collateral...why would we possibly WANT a system that might down the road encourage the pledging of less than stellar instruments as repo?...we need to go back and look hard at why the need for repo has risen since 2001, and how much is related to legitimate activity. The fact that it grew much more rapidly than the economy overall suggests not...official efforts should proceed...to shrink the repo market (as we've recommended for a market that has contributed to the growth of repo, credit default swaps)...our efforts NOT to restrain banks leads to a tremendous tax on all of us...a banking industry that creates global crises is negative value added from a societal standpoint. It is purely extractive...

Backstopping Repo; Bad Ideas; naked capitalism.

Wed 2010-07-21 11:01 EDT

AlterNet: Are Our Bosses Becoming Meaner?

Sam Pizzigati

...Sreedhari Desai, Arthur Brief, and Jennifer George...have been exploring the link between executive pay and ``meanness.''...they may have shifted executive pay scholarly research in a sobering new direction, with much less attention on ``performance'' and much more on raw naked power...``exaggerated power asymmetry'' can make people with power mean to people without. Contemporary corporate workplaces, the three researchers continue, regularly display this ``exaggerated power asymmetry.'' And that asymmetry, they argue, is intensifying as pay gaps between CEOs and their workers have widened...

AlterNet; Bosses Becoming Meaner.

zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Mon 2010-07-19 16:18 EDT

Financial Reform Bill Fixes the Economy ... Not!

Washington's Blog

Congress, Bernanke, Geithner and the boys are patting themselves on the back for passing the financial "reform" legislation...In reality, as discussed below, none of the real problems have been addressed...little in the legislation really restores trust in the system...the bill does nothing to address the ever-widening gap in wealth...The rule of law has not been restored...Unemployment continues to plague the economy...bailing out the banks has simply spread their problems into sovereign crises...the U.S. hasn't reined in its profligate spending...the U.S. has become a a kleptocracy, an oligarchy, a banana republic, a socialist or fascist state ... which acts without the consent of the governed...

dropped; economy; Financial Reform Bill Fixes; long; survival rate; Timeline; zero; Zero Hedge.

Tue 2010-06-01 18:24 EDT

billy blog >> Blog Archive >> In the spirit of debate ... my reply Part 2

Bill Mitchell

Today, I offer Part 2 of my responses to the comments raised in the debate so far...Modern monetary theory does not use the term ``money'' in the same way as the mainstream because it creates instant confusion. As Scott said ``Money is always someone's liability, so better to be precise about whose liabilities we are talking about than saying money.'' That is why we emphasis fully understanding the asset-liability matches that occur in monetary systems. And that leads you to realise that transactions between government and non-government create or destroy net financial assets denominated in the currency of issue whereas transactions within the non-government sector cannot create net financial positions...So modern monetary theorists prefer to concentrate on what is going on with balance sheets after certain flows have occured rather than narrowly defining some financial assets as money and others not...There is no doubt that the non-government institutions can increase credit. Some slack analysts call this an increase in money. But the accurate statement is that, as a matter of accounting it increases the (in Scott's words) ``the quantity of financial assets and financial liabilities 1 for 1 in the non-govt sector. So, with private credit, there is BY DEFINITION no NET increase in private sector financial assets created.'' Once we understand that and note that typically the non-government sector seeks to net save in the currency of issue then modern monetary theory tells you that the public sector must run a deficit to underwrite this desired net saving or else see an output gap widen...Who is in control is an interesting question. Clearly, the government cannot directly control the money supply which renders much of the analysis in mainstream macroeconomics textbooks as being irrelevant. The Monetarists via Milton Friedman persuaded central banks to adopt monetary targetting in the 1980s and it failed a few years later -- miserably...Then you might like to consider it from the other angle -- a government which accepts responsibility for full employment can ``finance'' the saving desires of the non-government sector by increasing its deficit up to the level warranted by the spending gap (left by the full employment non-government savings)...Orthodox macroeconomic theory struggles with the idea of involuntary unemployment and typically tries to fudge the explanation by appealing to market rigidities (typically nominal wage inflexibility). However, in general, the orthodox framework cannot convincingly explain systemic constraints that comprehensively negate individual volition. The modern monetary framework clearly explicates how involuntary unemployment arises. The private sector, in aggregate, may desire to spend less of the monetary unit of account than it earns. In this case, if this gap in spending is not met by government, then unemployment will occur. Nominal (or real) wage cuts per se do not clear the labour market, unless they somehow eliminate the private sector desire to net save and increase spending...to maintain high levels of employment and given that the public generally desire to hold some reserves of fiat money, the government balance will normally have to be in deficit...modern monetary theory demonstrates that if you want the non-government sector to net save...

Billy Blog; blogs Archive; Debate; reply Part 2; Spirit.

Culture of Life News Mon 2010-04-26 18:42 EDT

Xenophobia Is Very Destructive

Elaine Supkis

Japan always interests me because it is at the center of the ZIRP system which is, in the Cave of Wealth and Death, the place where economies go to die. Despite a 50 year record of successfully preventing any US penetration of Japan's domestic market while selling higher and higher quality goods to the US, the country finds itself mired in a perpetual depression. The gap between the rich and poor are widening while the country struggles with xenophobia which prevents foreign influences from seeping in...

Culture; DESTRUCTION; Life News; Xenophobia.

zero hedge Thu 2009-12-17 10:37 EST

Is Selling US CDS A Risk-Free Way To Short The Dollar?

There has been much conjecture on whether using CDS is an effective way to hedge against US default risk. Many theoreticians, especially those of the post-March lows variety, have sprung up and are speculating that buying Credit Default Swaps on the US is ultimately a futile and pointless endeavor. The main argument: a US default would likely mean that interconnected dealers won't recognize contracts on a US default event, as they themselves will be out of business. Even if they continued to exist, like cockroaches in a postapocalyptic world, the collateral which backs derivatives is mostly US Treasurys: the same obligations that would end up being massively impaired...the US CDS seller syndicate could easily be one of the key sources of dollar short funding: with sellers pocketing euros and immediately going to market and selling dollars...a dollar-short unwind would probably have repercussions in the US CDS market. Not only would the dollar spike, but paradoxically US credit risk would probably widen dramatically...any unwind at the heart of the prevalent risk trade now: the massive dollar carry, would impact virtually every investment product, quite possibly in self-referential feedback loops. If correct, it merely shows how much more the Fed has at stake in keeping the dollar depressed than merely getting mom and pop to buy Amazon at $130/share. Losing control of the carry trade will be the systemic equivalent of allowing Lehman's book to be marked-to-market: a potentially complete collapse in systemic confidence, which would have such far ranging implications as the $300 trillion interest rate derivative market. And when sudden volatility reaches this product universe which is 6 times bigger than world GDP, the events from last year will seem like a dress rehearsal.

CDS; Dollar; Risk-Free Way; sell; short; Zero Hedge.

Thu 2009-07-30 00:00 EDT

Zero Hedge: Guest Post: Tax Revenues Tanking

-- ``the lions share of the planned sales of Treasuries in 2009 cannot be met by demand from the market..Auctions will fail and the Fed will step in...the 2009 budget deficit is more likely to widen to levels between $2.5 and $3 trillion rather than the CBOs $1.8 trillion forecast. We also believe that inflation could start setting in as early as Q3 of 2009 and will accelerate sharply by 2010.''

Guest Post; Tax Revenues Tanking; Zero Hedge.

Mon 2008-07-21 00:00 EDT

McClatchy Washington Bureau | 07/19/2008 | Commercial bankruptcies soar, reflecting widening economic woes

by Tony Pugh

07/19/2008; Commercial bankruptcies soar; McClatchy Washington Bureau; reflecting widening economic woes.

Fri 2007-11-30 00:00 EST

Mish's Global Economic Trend Analysis: Lenders Rapidly Tighten Credit

watching LIBOR spreads widen dramatically; "increasing risk of a major bank failure or major market dislocation"

Lenders Rapidly Tighten Credit; Mish's Global Economic Trend Analysis.