Linking ≠ endorsement.
⇧ Dollar illusion – YouTube
This is pretty striking.
The rise of the almighty US dollar can skew perceptions. John Authers points out that the recent resurgence of European stocks is almost entirely down to the weaker euro.
⇧ Lessons from historical bank failures: the City of Glasgow Bank (1878) – Quarterly Bulletin article – YouTube
Find out the link between a public recital of the works of Shakespeare, a gang of 'desperate adventurers' and bank directors being sent to prison.
After watching this short video, ask yourself why derivatives holders may take all of a bank's assets while depositors are bailed in (meaning their deposits, savings and checking, are taken to pay the Ponzi-scheme gamblers). Are we safe under the FDIC? Let's hope so, but let's reverse the recent Republican-led change in Dodd-Frank allowing the gamblers to even imagine they might be able to strip us of our hard-earned money.
⇧ The pros and cons of the ECB's quantitative easing and Ukraine's bailout – YouTube
The whole Michael Hudson interview is classical-Hudson stuff. He has Edward laughing (in agreement) a number of times.
… Edward Harrison is joined by Axel Merk — president and CIO of Merk Investments. Axel tells us why Germany benefits the most from quantitative easing and a weak euro. He also gives us his take on how QE will affect yields in Europe, small and medium-sized business, and the general real economy. Axel also weighs in on Europe's new bail-in policy now being implemented in Austria with the bankrupt Hypo Alpe Aldria bank and its toxic loan portfolio, called Heta.
[Very interesting point in that discussion: https://youtu.be/WLM9PqxxRjQ?t=9m48s%5D
After the break, Edward sits down with Michael Hudson — distinguished research professor of economics at the University of Missouri, Kansas City. Michael tells us about the dire economic situation in Ukraine and who else besides the IMF can provide the country with funds. He characterizes the loans being provided to Ukraine as an exercise in looting that will not benefit the average Ukrainian, but result in an asset grab that benefits the select few.
⇧ World At A Crossroads: Stop The Fast Track To A Future Of Global Corporate Rule | Occupy.com
This is a radical and very dangerous, shortsighted shift in global governance Kevin Zeese and Margaret Flowers are talking about.
Do we want to be ruled by corporations or ruled democratically? …
… They want the UN remade into a hybrid corporate-government entity, where corporations are part of decision-making. The goal is to end nation-centric decision making and include corporations as decision makers.
The WEF points to how trade rules have stalled in the WTO as an example of the failure of nation-state governance. They believe by making corporations partners in decision making the "can do" attitude of business will push these rules forward where the 'failure mentality' of the state-centric system stalls trade rules. From the perspective of people's movements, this is an example of why we do not want corporations to replace nations as decision makers.
The WTO has been stalled because their rules are opposed by people around the globe. …
National and local laws will be required to be rewritten to be consistent with trade agreements negotiated in secret. This "harmonization" will require a new bureaucracy to review all laws and regulations for consistency. The profits of transnational corporations will become so important that governments can be sued if their laws to protect public health, safety or the planet interfere with expected profits. The cases will be heard in special trade tribunals, staffed mainly by corporate lawyers on leave from their corporate jobs. Their decisions cannot be appealed to any other courts. This makes the public interest secondary to the market interests of big business.
At a time when we need more democracy, the various governments involved in these trade-agreement plans are moving to strip the people of their voices and to have all of their local decisions overridden whenever it suits the world's largest corporations, which are not beholden to those people.
We don't like how these agreements are being negotiated (in secret). We don't like the idea of an up-or-down vote on them. We don't like it that there wouldn't be enough time to digest their provisions, to debate them, etc. We mostly don't like making corporations the main government of the globe over the nation-states.
⇧ ALERT™ :: Event Summary: Severe Tropical Cyclone Pam Slams Vanuatu
We posted this on various social media yesterday but wanted to include it in this Saturday's aggregation.
Over the last two days, Tropical Cyclone Pam has intensified rapidly to become a Category 5 storm (on the BOM scale) and one of the strongest tropical cyclones ever recorded in the area. The eye of the storm will pass very close or perhaps directly over all six of the southernmost populated islands of Vanuatu today: Efate (including the capital of Port Vila), Erromango, Aniwa, Tanna, Futuna, and Aneityum. The islands will likely experience major devastation and perhaps the greatest disaster in their recorded history.
⇧ Living the Saudi Dream by Anas Alhajji – Project Syndicate
Over the next few years, US producers are likely to retrench, focus on sweet spots, improve technology, reduce costs, and increase production once again. At that point, Saudi Arabia's current strategy may no longer be adequate to sustain its market dominance.
Also, if fracking in the US doesn't ramp up enough again via better technology, it will push the US even more into alternative energy for, among other things, strategic-military reasons.
⇧ How to Begin Investing in Real Estate – US News
One way to test your tolerance for being a landlord is to buy a duplex or a small apartment building, with the aim of living in one unit and renting the others.
⇧ Job Growth Was Fantastic Last Month. So Why Aren't Wages Rising More? – NYTimes.com
…the lack of progress on wages and lack of progress in pulling people into the labor force give plenty of ammunition to those officials who believe that there remains plenty of slack in the labor market and that it wouldn't be the worst thing in the world for the Fed to let the economy run a little hot for a while to try to change those trends.
It seems sensible that financial markets acted as if the news made it slightly more likely that the Federal Reserve would raise interest rates sooner rather than later, with, for example, long-term interest rates and the dollar both rising on the news. But the report itself makes the debate over what the best policy would be more cloudy rather than less.
Hot is a term that should be reserved to all the following happening together: rising wages, rising number of hours per week, and rising price inflation less the artificially lower oil prices.
It should not be used simply to describe growth. Hot is friction-based. We can have great growth with no friction if we fund it correctly rather than with Federal Reserve Notes.
⇧ A European Argentina – Forbes
What a mess: Frances Coppola:
The Hypo Alpe Adria collapse rumbles on. Following the announcement by Austria's Financial Markets Authority (FMA) a few days ago that Heta, the "bad bank" created last year from the remnants of Hypo Alpe Adria (HAA), would be wound up, Moody's has downgraded the rating of the Austrian province of Carinthia with a negative outlook.
…if losses rebound to the sub-sovereign via the guarantees, taxpayers cannot be said to have been protected. If Carinthia required "extraordinary central government support" as a consequence of the triggering of Heta bond guarantees, as Moody's envisages, it would be an indirect bail-out of Heta bondholders by the Austrian government. And even if Carinthia did not need central government support, it would still be a bail-out of Heta bondholders by Carinthian taxpayers. However you look at it, allowing these guarantees to stand undermines the EBRRD principle that creditors should take losses before taxpayers.
⇧ BBC News – Eurozone not viable, says top fund boss Neil Woodford
The Conservative Party has promised to hold an in-out referendum on the UK's continuing membership of the EU if it wins this year's general election.
The referendum would be held only after David Cameron, if he is still prime minister after May, had attempted to renegotiate the terms of the UK's membership of the EU.
"The likelihood of a referendum, I think, will put a brake on external investment, international investment in the UK… it will create uncertainty," Mr Woodford told the BBC's Hardtalk programme.
⇧ Calculated Risk: Phoenix Real Estate in February: Sales Up 9%, Inventory DOWN 8% Year-over-year
For the third consecutive month, [residential real estate for sale] inventory was down year-over-year in Phoenix. This is a significant change.
⇧ A Global Strategy for Disaster Risk by Ban Ki-moon – Project Syndicate
Ban Ki-moon, Secretary-General of the United Nations:
Over the last 12 months, thousands of lives were saved in India, the Philippines, and elsewhere by improved weather forecasting, early-warning systems, and evacuation plans. Advances in risk reduction that safeguard development gains and business investments must match this progress in disaster preparedness, and we must make wise choices that create greater opportunities in the future.
I have seen the human toll of disasters — from earthquakes in China and Haiti to floods in Pakistan and Bangladesh to Superstorm Sandy, which affected the Caribbean and North America, even inundating the lower floors of the UN facilities in New York. When business, civil society, and government team up to help countries withstand disasters, they save lives, boost stability, and create opportunities that enable markets and people alike to flourish.
We aren't Ban Ki-moon fans, but we also know that the UN isn't what it used to be largely because its peacekeeping role as been greatly diminished due to lack of international support for the same.
That said, we largely agree with his efforts here concerning disaster preparedness and relief, etc.
⇧ Economics hijackers could do with a history lesson
We couldn't agree more. We've always been for more history.
Simon Ville, Professor of Economic and Business History at University of Wollongong:
In spite of recent setbacks, natural resource industries have always dominated exports. Contrary to the advocates of the "resource curse", primary industries have continued to reinvent themselves through the application of waves of innovation. The "elephant in the room", though, is the services sector — about 80% of our economy, yet largely neglected in the public discussion. Nothing new about this either.
Should we believe that immigration will increase unemployment? Economic historians have shown that immigrants do not "rob jobs". Each new arrival brings a demand for goods and services as well as taking up employment. Migrants respond to economic vicissitudes rather than create them — as history shows, they arrive in good times but rarely in downturns.
⇧ Four themes for the future of banking – Agenda – The World Economic Forum
Roberto Egydio Setubal, CEO and Chairman of the Board, Itaú Unibanco:
The yield on US Treasuries — so far still at historically low levels — has the potential to rise much faster than it is already priced at by the market.
If that happens, financial conditions for emerging economies will suddenly tighten. Emerging market currencies are likely to depreciate further, and their domestic interest rates — both the short- and long-end — will rise, dragging down internal demand. For those emerging markets more reliant on foreign funding, drastic balance sheet adjustments may ensue.
We agree but with the proviso that the Fed is mostly focused on slack. There's a huge contingent out there that wants to pretend that it isn't so.
⇧ Citigroup Has Cleanest Fed-Test Pass of Wall Street Rivals – Bloomberg Business
The tests are a cornerstone of the Fed's strategy to prevent a repeat of the 2008 financial crisis and another taxpayer bailout of the largest banks. The results released Wednesday are the annual exam's second and final round, determining whether firms can withstand losses and still pay dividends, buy back stock or make acquisitions.
Let's pray the tests are good enough. Let's pray the US stops re-weakening standards but rather moves to strengthen them. It's really in everyone's interest except for the fraudulently and criminally minded.
⇧ Emerging Europe: Belarus embarks on a charm offensive /Euromoney magazine
Belarus's leaders are promising a dramatic package of reforms that could overhaul the country's sclerotic command economy and reduce its dependence on Russia. The only trouble is, no one believes them. Mixed messages to the bond markets haven't helped.
Okay, but how many people are starving in Belarus? Are the poorest of the poor as poor as the poorest of the poor in the US or the UK, etc.?
Why is privatization written of as if it's sacred or even just inherently righteous?
Can Belarus allow greater capitalism without harming its welfare state but rather improving it?
Can the international privatizers guarantee it by backing it up with guaranteed money to see to it? They could, but they won't agree to do it.
⇧ What China's economic shift means for Africa – Agenda – The World Economic Forum
… the industrial manufacturing component of the Chinese economy is passing through the "Lewis Turning Point", as the cost of production is now surpassing gains in productivity. This portends the start of a long-term trend of offshoring of China's low-end labour-intensive manufacturing sector. While China will remain a very competitive manufacturing economy, at least over the medium term, rising production costs in manufacturing-heavy south-eastern coastal provinces will result in Chinese firms relocating their operations both inland and abroad. A part of this offshoring could find its way to Africa.
Where will Chinese industry — which now accounts for over 20% of global manufacturing — begin to move to? The emerging competitors to Africa's manufacturing aspirations are all Asian: Indonesia, the Philippines, Thailand and Vietnam all stand out. Their labour costs are becoming relatively cheaper as China's increase.
Africa did not lay the same foundations for industrialization that its Asian counterparts did in the 1970s and 1980s. The "latecomer challenge" now lies in building the necessary infrastructure, institutions and skills base to attract the investment.
⇧ BBC News – Why does the UK want to join the China-led development bank?
The UK is the first Western country to seek to become a founding member of the Asian Infrastructure Investment Bank (AIIB). It's a new international financial institution (IFI) essentially led by China and viewed as a rival to the World Bank.
Why do they want to do it?
London is one of the top financial centers of the world. They need to keep their hands in such developments they think. It's also a way to cause China to not want to fight with the West, per se (part of the continued opening up of China strategy).
⇧ What's new | CRED
CRED, the Centre for Research on the Epidemiology of Disasters, has been active for over 30 years in the fields of international disaster and conflict health studies, with research and training activities linking relief, rehabilitation and development. CRED promotes research, training and technical expertise on humanitarian emergencies, with a special focus on public health and epidemiology.
⇧ Producer Price Index News Release text
There's been deflation over and above the drop in oil prices. The deflation remains even when seasonally adjusted. It will take another month to begin to see the fuller impact of the harsh polar-vortex and West-Coast-ports strike.
In February, nearly 30 percent of the decline in the index for final demand services can be traced to margins for fuels and lubricants retailing….
Of course, the Fed keeps an eye on this, and it will impact the decision as to whether and when to raise the Fed rate or take any other measures at the Fed's disposal.
⇧ Call the cops! This house is for sale…huh?
It's a really bad time to buy in many places. It's a seller's market on steroids.
"It's just that we're lacking inventory. We really need more inventory. Prices are going up, and we just don't have enough property to sell," said Luther.
Driving demand are several factors: increased consumer confidence, better employment and sky-high rents. More than 12 percent of current renters in the nation's 20 largest housing markets now say they intend to buy a home in the next year, according to a survey just released by Zillow, a real estate company. That is about 5.2 million renters, a 25 percent jump from a year ago.
"As home affordability continues to look great and rental affordability looks abysmal, many current renters clearly seem to be rethinking their attitudes toward home ownership, and are expressing more confidence in the overall housing market as a result," said Zillow Chief Economist Stan Humphries. "But while this confidence is heartening, it's important to inject a note of reality here: Not all renters who want to buy this year will be successful. Saving a down payment, qualifying for a mortgage and finding an affordable home to buy all remain formidable challenges for many."
"We're afraid that interest rates are going to creep up, and inventory is down, so there's more of a fear of loss right now in the market and people are coming out, Maria Rini, a real estate agent with Re/Max in Bergen County, New Jersey.
What we're going to see if the economy really picks up is a race between developers of houses for sale and units for rent. We're betting on the rental developers to start with. It's going to take a great deal of economic rebuilding before homeownership will edge out renting. That's largely because of massive student-loans. They've change the calculus.
Also, if buying standards continue dropping, we'll see bubbles sooner than bad memories from the crash will have faded, not to mention that the Internet serves the general public better in terms of people being able to remind the public not to be reckless, not to repeat the mistakes of the past.
⇧ Repeat foreclosures result from failed lender can-kicking – OC Housing News
In general, Larry Roberts is quite right about this.
Slowing the sales rate of must-sell inventory is the key to preventing housing market crashes. It's the reason can-kicking began in 2009, and it's still the focus of all lender policies toward resolving bad loans now.
We'll add that it was the Fed's plan right from the start. The Fed propped up the entire banking sector so that, that sector would not have to "mark to market" (http://www.investopedia.com/terms/m/mar ktomarket.asp) and be declared insolvent (which the whole sector was) and be nationalized, which should have happened. The Fed retroactively took away the risk (inevitable crash) for the very bad deregulation frenzy that had occurred under Alan Greenspan's watch (concerning which he finally admitted he was completely wrong).
The Fed is still propping up that sector while the whole economy waits until the "assets" of the banks rise back into bubble territory enough.
You see, the true value of those assets was never in bubble territory. The portion of all values that lie above the line where a given bubble begins is fake value. Therefore, the Fed is helping the banks recreate fake value.
It's not as bad as it was. The Fed does have stress testing and other measures in place, but there is, and will continue to be, a mostly Republican-led move to again recklessly deregulate. The Fed is far from the only target too.
We've already seen Dodd-Frank incorrectly weakened to allow the banking sector to pay itself first for any derivatives bets that go wrong, including if the entire derivatives house of cards collapses. That house of cards is the single largest aspect of the global economy.
Even regular depositors at banks will be expected to bail in the banks (take the hit after whatever the FDIC will offset, which we hope will be all FDIC insured amounts and via the full faith and credit of the US stepping in to avoid the violent revolution that would ensue otherwise).
⇧ Getting Mortgages Is Now Considerably Easier Than a Year Ago | Zillow Blog
"We're a long way from again letting credit get too loose, but we'll need to remain vigilant not to repeat the mistakes of the recent past."
We're not convinced we're "a long way from again letting credit get too loose." We think we've already strayed beyond the line. How far into that territory do we allow the market to stray?
⇧ Giving Homes to the Homeless is Cheaper Than Leaving them on the Street. Here's Proof – NationofChange
Doing the math is the easy way to sell this method to those who put money first. Either way, it's the right thing to do.
Once people are in such housing and getting decent healthcare, etc., it becomes much easier for them to obtain work (if they are capable of doing typical work — some aren't).
It is much more cost-effective to build public, low-income housing for the homeless than it is to leave them on the street.
One thing we want to add is that those who are against such measures should not be allowed to come in and underfund them to ruin them to make it appear that the measures are inherently and fatally flawed where reasonable, adequate funding and proper management would see to it that the measures are wildly successful.
Thank you to Richard B. Usher of Hill & Usher for this link.
⇧ Economist's View: 'John and Maynard's Excellent Adventure'
Mark Thoma's lede here is actually much more important than Paul Krugman's article, though Krugman's article is not unimportant.
Revisiting the past: "How Krugman lost equilibrium," by Steve Keen. March 13, 2013: http://www.businessspectator.com.au/arti cle/2013/3/13/economy/how-krugman-lost-e quilibrium
Could Mark Thoma referee? Are Krugman and Keen speaking at cross-purposes (about different things given contexts)?
⇧ Can Canada's oil sands cope with $50 crude? – YouTube
If this is right, then over the medium term, we're in for lower, not higher, oil prices.
Extracting crude from Canada's oil sands is expensive to set up. Whether these operations will be mothballed with oil around $50 per barrel is another matter. Lex's Oliver Ralph and Alan Livsey discuss the outlook for crude production.
⇧ Martin Wolf on US-UK row over China – YouTube
The US has accused the UK of a "constant accommodation" of China after Britain decided to join the Asian Infrastructure Investment Bank. The FT's Frederick Studemann asks Martin Wolf why Britain acted and what this means for their 'special relationship'.
Martin Wolf is viewing this new bank as beyond benign for the US, actually helpful in terms of "healthy" competition.
Why he didn't mention Russia and Ukraine might be telling. That's a huge issue to not touch. Russia and China, while not in a mutual defense pact (yet), are cozying up as a hedge against NATO expansion flexing globally.
We mention this geopolitical aspect because it is the pinnacle in risk-management issues.
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