Linking ≠ endorsement.
⇧ [Very highly recommended] ‘Money Creation & Society’ Debate in UK Parliament – YouTube
On Thursday 20th November 2014, for the first time in 170 years, UK parliament has debated the creation of money. Few people know that 97% of our money supply is created not by the government (or the central bank), but by commercial banks in the form of loans.
As the results of our recent poll show, most MPs lack a sufficient understanding of money creation. A worrying number of our MPs do not understand where money comes from. This leaves them ill-equipped to predict another financial crisis, deal with rising debt, housing bubbles or understand a fundamental driver of inequality.
We are, however, not promoting laissez-faire (“free-market”) capitalism but rather a fully informed, democratized monetary system.
⇧ Oil spill ravages Si Chon Beach for the second time this year – Pattaya Mail – Pattaya News, Communities, Opinions and much more…
An oil spill has polluted Nakhon Si Thammarat province’s famous Si Chon Beach, raising concerns from the locals that it may destroy marine life living in the area.
The Gazprom Neft-operated Saturn drilling rig lost one of its lifeboats and had its helipad destroyed by an Arctic storm earlier this month, pictures of the rig show.
We oppose oil drilling in the Arctic. Actually, we oppose all offshore oil-drilling. Actually, we oppose carbon fuels and all associated energy-industries. It’s reckless, not good risk management at all.
We need to truly green our planet, and we can do it in ways that will provide all the clean energy we need!
“One of the two smoke detectors is designed to be mute, and the other one sounded an alarm but the employees could not hear it,”….
A fire department spokeswoman says food left cooking unattended on a stovetop is being blamed for a fire that caused $400,000 damage, destroying a home in Edmonds, Wash., and displacing the couple who live there.
The county plans to buy and demolish three homes in Happy Valley. After the demolitions, no permanent structures can be built on the properties.
⇧ Police seek info on Richmond burglaries
…the suspect or suspects entered the dwellings through a rear, unobserved door. In one case the door was forced open. In the other no force was used.
“…no force was used”? Hmmm.
This article touches upon a number of risks associated with the Polar Vortex driven largely by Anthropogenic Global Warming (AGW) altering the jet stream, driving it farther south than usual into the lower 48.
Lake-effect snow that killed at least 10 people and halted travel across western New York may reach as high as 7 feet in some areas before stopping today [Friday, November 21, 2014], when temperatures will rise along with the risk of flooding.
⇧ Testimony on Improving Financial Institution Supervision: Examining and Addressing Regulatory Capture – Federal Reserve Bank of New York
William C. Dudley, President and Chief Executive Officer. The Federal Reserve Bank of New York:
…I have proposed four specific reforms to curb incentives for illegal and unduly risky conduct at banks. First, banks should extend the deferral period for compensation to match the timeframe for legal liabilities to materialize—perhaps as long as a decade. Second, banks should create de facto performance bonds wherein deferred compensation for senior managers and material risk takers could be used to satisfy fines against the firm for banker misbehavior. Third, I have urged Congress to enact new federal legislation creating a database that tracks employees dismissed for illegal or unethical behavior. Fourth, I have requested that Congress amend the Federal Deposit Insurance Act to impose a mandatory ban from the financial system—that is, both the regulated and shadow banking sectors—for any person convicted of a crime of dishonesty while employed at a financial institution.
⇧ Equity-Building Mortgage Challenged – NYTimes.com
“Instead of a long-term insurance program where the payout is dependent on the level of defaults and losses,” she said, “we’re going to get an upfront subsidy and give it to the banks to buy down the interest rate? That’s taking a tried-and-true program that has been pretty good and turning it instead into a subsidy program for the banks as much as it is for the borrowers.”
⇧ Jens Weidmann: Banking union and regulatory reforms – mission accomplished?
Dr. Jens Weidmann, President, Deutsche Bundesbank:
When Basel III is fully implemented, regulatory capital requirements will be significantly higher and tougher than under Basel II, and the financial system will be more stable than before. A typical credit institution will have to achieve a capital ratio of 8% plus various buffers. But will that be enough?
To give a profound answer to this question, we would first need to have an idea of what would be an optimal, or at least an adequate, capital ratio.
Academic research on this subject is not very broad. However, a recent study by several central bank economists found that a capital ratio of around 11% would be a reasonable figure. 2 That number exceeds the Basel III minimum requirement but falls well short of “more radical proposals”.
According to the latest FSB Global Shadow Banking Monitoring Report, non-bank financial intermediation grew by USD 5 trillion in 2013 to reach USD 75 trillion.
The growing shadow banking sector is something regulators have to watch closely. Given that shadow banking entities essentially cannot tap central bank liquidity and do not benefit from backstops such as deposit insurance schemes, they are latently exposed to the risk of runs.
Shadow banks can thus become a source of systemic risk, especially when they are structured to perform bank-like functions like maturity and liquidity transformation and when they are highly interconnected with the regular banking system.
The capital ratio (reserves) in the US is set at 10% by the Fed, which doesn’t stop the banks from lending but wasn’t enough to keep them out of trouble in the run-up to the recent crash.
⇧ Mario Draghi: Stronger together in Europe – the contribution of banking supervision
Mario Draghi, President, European Central Bank:
During the crisis, the cost of restructuring failing banks was borne disproportionately by taxpayers. This was not only unfair, as it entailed in some instances large social and economic costs. It also created the wrong incentives for banks’ shareholders and creditors. Fairer and more effective burden-sharing rules have now been put in place and resolution costs will be borne primarily by the banks themselves.
… Deposits under €100,000 will not be touched and those above that amount will benefit from preferential treatment compared to other unsecured creditors.
That means that if you keep your deposits below that amount, including via multiple accounts, you will not be “bailed in.” The same holds for US depositors under FDIC, though the amount allowed or covered in the US is thankfully higher. Your deposits will not be taken to bailout the bank(s).
Cut supply and cut prices? Interesting. Paul Stevens:
Since prices began to fall this summer, the Saudi response has been to cut sales to the market — 300,000 barrel per day (b/d) in August; 300,000 b/d in September; plus (to the annoyance of Kuwait) the unilateral closure of the Neutral Zone Khafji field on ‘environmental grounds’, losing another 320,000 b/d. However, at the same time, they have been cutting prices leading to speculation about a ‘price war’.
⇧ Falling Wages at Factories Squeeze the Middle Class – NYTimes.com
Some manufacturers have turned to staffing agencies for hiring rather than employing workers directly on their own payroll. For the first half of 2014, these agencies supplied one out of seven workers employed by auto parts manufacturers.
The increased use of these lower-paid workers, particularly on the assembly line, not only eats into the number of industry jobs available, but also has a ripple effect on full-time, regular workers.
Meanwhile, the top executives pay themselves more and more and more. They are undercutting the foundations of the nation’s economy, which will finally harm everyone’s quality of life and prospects for the future.
In our view, it would be wise and good for executives and investors to care much more about their offsprings’ prospects by caring about the economy as a whole.
⇧ House Efforts to Make “Tax Extenders” Permanent Are Ill-Advised — Center on Budget and Policy Priorities
Taking from the poorest of the poor and giving it to those who are better off is both immoral and unethical. It’s also bad economics.
Misplaced priorities. The House approach places corporate tax provisions ahead of other, more important tax provisions scheduled to expire in coming years — notably, key elements of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) for low-income working families. While the House voted this year to expand the CTC for relatively affluent families — and on a permanent basis — the House legislation ignores key provisions of the CTC and EITC that help low-income working families. It lets three important CTC and EITC provisions in effect through 2017 die at the end of that year. If that occurs, more than 16 million people in low-income working families, including 8 million children, will fall into — or deeper into — poverty. Some 50 million Americans, including 31 million children, will lose part or all of their EITC or CTC.
⇧ Document leaks put the EU’s new chief in the hot seat
British euro-skeptics howling for Juncker’s skin are silent about corporate tax breaks in mainland Britain, not to mention the fiscal practices of UK offshore territories such as the Cayman Islands, Jersey and Bermuda.
⇧ RealTime Economic Issues Watch | Are Russia’s Usable Reserves Running Dangerously Low?
This and the next two links concern Russia. We won’t editorialize concerning them, as we don’t hold with the neoconservative or neoliberal views concerning Russia at all but rather take a pragmatic, realist approach.
In other words, we believe that there is a load of false propaganda to be avoided. We think US foreign policy toward Russia right now is very shortsighted and counter-productive.
Russia is heading toward a serious financial squeeze next year, despite the confident statements of President Vladimir Putin. The official figures accounting for Russia’s international reserves show a dramatic decline in international reserves, but an examination of the numbers reveals that the situation is far worse than the Kremlin says, raising serious questions about the sustainability of Russian reserves in the future.
⇧ Russia Can Survive An Oil Price War
After a frosty reception at the G20 summit in Australia this week, Russian President Vladimir Putin required some much needed rest, at least according to the official explanation given for his conspicuously early departure from the proceedings. All things considered it could have been a lot worse. Russia finds itself in familiar territory after a controversial half-year, highlighted by the bloody and still unresolved situation in Ukraine. Nonetheless, the prospect of further sanctions looms low and Russia’s stores of oil and gas remain high.
⇧ Russian firms face huge insurance costs as foreign providers flee | Reuters
Russian companies face billions of dollars in extra insurance costs as Western sanctions prompt foreign insurance firms to start pulling out, worried that any business they undertake is at risk from future measures and an increasingly sick economy.
⇧ Inheritance and Inequality by Edward N. Wolff – Project Syndicate
Starting at 1989 skews the data. Also, if the crash hadn’t occurred, the data starting in 1970 would show even greater disparity/inequality, the impact of which Thomas Piketty wrote.
We do agree though that most great fortunes are typically greatly diluted over several generations.
⇧ Rental Apartment Construction Is At a 27-Year High – Real Time Economics – WSJ
Multifamily construction is now higher than it was during the peak in the previous housing cycle, reached in 2006. But back then, far more of these units were being built as condominiums, not as rentals.
⇧  The Colder War Part II and Auerback on Europe – YouTube
[@3:28] Erin sits down with Marshall Auerback — director of institutional partnerships at The Institute for New Economic Thinking. Marshall tells us what impact an increase in labor participation rates could have on the US economy and gives us his take on the political and institutional constraints in Europe.
[Speaking of Russia and geopolitics: @17:50] Erin is joined Marin Katusa — chief energy investment strategist at Casey Research and author of “The Colder War: How the Global Energy Trade Slipped from America’s Grasp.” Marin tells us if fracking and liquefied natural gas will lead to energy independence for the US and gives us his take on the alleged shortage of water.
We completely disagree with the notion that Vladimir Putin is out to take over country after country. He is, however, interested in Russian speakers and wants to see Russian speaking regions cooperating together.
⇧ Even as Supply Mounts, It’s Business as Usual for Apartments in the Twin Cities – YouTube
New apartment supply is back up to recent highs in Minneapolis/St. Paul, but that hasn’t changed the story of the local apartment market. As usual, vacancies are few. And as usual, rent growth is limited.
⇧ Camden’s Campo: No Evidence of Overbuilding in Multifamily Sector | REIT.com
Campo pointed to a deficit of between 400,000 and 500,000 apartments nationwide as a result of the financial crisis.
“In a lot of markets, like Houston, for example, occupancy levels are at all-time highs, and the supply is really needed to be able to house people that are moving there,” he said.
Campo said oversupply does not appear to be evident in any market.
- Improving job growth and a rising propensity to rent are boosting net absorption; so far, this effect has been strongest in the South and West.
- With the labor market strengthening and income growing, there is greater potential for the release of pent-up household formation. This could keep demand and rent growth at their current pace through 2015.
- Rentable multifamily completions are expected to peak in 2015, to be followed by a more moderate pace of construction.
- Multifamily rent growth will stay slightly ahead of inflation over the next five years. While the vacancy rate is expected to rise slightly, it should remain near its historical norm.
- The strong pace of investment activity this year suggests that total sales volume in 2014 could surpass the prior record level of $105 billion, set in 2007. Multifamily would be the first property sector to reach this milestone.
- Miami Spotlight: Strong demand for apartments has outstripped supply since 2008, resulting in a low, 2.4% vacancy rate in Q3 2014 and a record-high monthly rent of $1,239 per unit. Since 2012, apartment construction has shifted into high gear, with more than 8,000 new units expected to be completed by the end of 2014, along with robust condominium construction.
⇧ China’s New Global Leadership by Jeffrey D. Sachs – Project Syndicate
A very intelligent, sober article from Jeffrey D. Sachs:
According to the IMF, China’s GDP will be $17.6 trillion in 2014, outstripping US output of $17.4 trillion. Of course, because China’s population is more than four times larger, its per capita GDP, at $12,900, is still less than a quarter of the $54,700 recorded in the US, which highlights America’s much higher living standards.
China faces huge internal challenges, including high and rising income inequality, massive air and water pollution, the need to move to a low-carbon economy, and the same risks of financial-market instabilities that bedevil the US and Europe. And if China becomes too aggressive toward its neighbors — for example, by demanding rights to offshore oil or territory in disputed waters — it will generate a serious diplomatic backlash. No one should assume smooth sailing for China (or for any other part of the world, for that matter) in the years ahead.
⇧ Hard Evidence: is the UK facing another financial crisis? – Steve Keen’s Debtwatch
When Steve Keen talks about debt, we listen.
The key indicator I use to anticipate where the economy is headed is the acceleration of private debt. Just as the rate of change of private debt indicates what’s going to happen to the level of economic activity, the acceleration of debt indicates whether activity is likely to rise or fall. That indicator, which was trending up from mid-2010 until mid-2012, has been headed down ever since. Debt acceleration was strongly negative as of mid-2014, running at minus 10% of GDP. That, combined with Richard Vague’s indicator that crises occur when private debt exceeds 150% of GDP (tick at 170% in mid-2014) and has grown by 20 percentage points or more over five years (in fact it’s shrunk by 30 percentage points since 2010), points to stagnation rather than crisis being the likely outcome for the UK economy. In this scenario, an attempt to pare government spending back could make the stagnation worse — just as it has done across the Channel.