Central banks are pumping billions into markets, but that hasn't steadied investors' nerves. Germany's benchmark DAX plunged below the psychologically important 5,000 mark in early trading Wednesday. In an attempt to calm tensions and keep cash flowing into banks, the European Central Bank on Wednesday, Oct. 8, put an additional $20 billion (14.7 billion euros) back into interbank money markets in one-day loans, bringing the total to $70 billion. The ECB's move is just one in a series of central banks' attempts to shore up the banking sector. Britain announced a 50 billion pound ($87 billion, 64 billion euro) partial nationalization of the country's eight main banks. The measure comes in addition to a 200 billion pound credit line extended to banks. The US Federal Reserve said Tuesday it would buy up short-term debt -- extending its move into the economy -- and central bank chairman Ben Bernanke strongly hinted that a US interest rate cut was likely.
In an attempt to calm tensions and keep cash flowing into banks, the European Central Bank on Wednesday, Oct. 8, put an additional $20 billion (14.7 billion euros) back into interbank money markets in one-day loans, bringing the total to $70 billion.
The ECB's move is just one in a series of central banks' attempts to shore up the banking sector. Britain announced a 50 billion pound ($87 billion, 64 billion euro) partial nationalization of the country's eight main banks. The measure comes in addition to a 200 billion pound credit line extended to banks.
The US Federal Reserve said Tuesday it would buy up short-term debt -- extending its move into the economy -- and central bank chairman Ben Bernanke strongly hinted that a US interest rate cut was likely.
Foreign investors are fleeing, bank lending is down, and growth is slowing in Russia.Two shoppers check out the display at the annual Millionaire Fair in Moscow. But economic troubles may lurk just under Russia's glossy surface. Take a stroll through central Moscow, and you'd be hard-pressed to find evidence of the global economic turmoil. Shiny new malls are packed with shoppers. The streets are filled with Mercedes, BMWs and Land Rovers. On the Presnenskaya Embankment, overlooking the Moskva River, a half-dozen skyscrapers are nearing completion at the Moscow International Business Centre, a $12 billion development intended to become the city's new financial hub. The world credit crisis "doesn't affect us at all," says Tatiana Ilyinishna, a pensioner hauling bags of groceries outside a supermarket near the city's Kiev Railway Station. "Everything here is splendid." But scratch the surface a bit, and things are less splendid than they appear. As the financial crisis spreads, Russians are suddenly discovering that their economy is shakier than many had cared to believe. Credit is increasingly tight, economic growth is slowing, and Russia's fragile financial markets have taken a beating. On Oct. 6 the benchmark RTS index plunged 19 percent, to its lowest level since August 2005. "The current situation is very serious," says Evgeny Nadorshin, chief economist at Trust Investment Bank in Moscow. "A few months ago we thought that we could look forward to a calm life, but now we've lost our advantage and are in the same boat as everybody else."
Foreign investors are fleeing, bank lending is down, and growth is slowing in Russia.
Two shoppers check out the display at the annual Millionaire Fair in Moscow. But economic troubles may lurk just under Russia's glossy surface. Take a stroll through central Moscow, and you'd be hard-pressed to find evidence of the global economic turmoil. Shiny new malls are packed with shoppers. The streets are filled with Mercedes, BMWs and Land Rovers. On the Presnenskaya Embankment, overlooking the Moskva River, a half-dozen skyscrapers are nearing completion at the Moscow International Business Centre, a $12 billion development intended to become the city's new financial hub. The world credit crisis "doesn't affect us at all," says Tatiana Ilyinishna, a pensioner hauling bags of groceries outside a supermarket near the city's Kiev Railway Station. "Everything here is splendid."
But scratch the surface a bit, and things are less splendid than they appear. As the financial crisis spreads, Russians are suddenly discovering that their economy is shakier than many had cared to believe. Credit is increasingly tight, economic growth is slowing, and Russia's fragile financial markets have taken a beating. On Oct. 6 the benchmark RTS index plunged 19 percent, to its lowest level since August 2005. "The current situation is very serious," says Evgeny Nadorshin, chief economist at Trust Investment Bank in Moscow. "A few months ago we thought that we could look forward to a calm life, but now we've lost our advantage and are in the same boat as everybody else."
PARIS: Global central banks moved together Wednesday to ease the credit squeeze with coordinated rate cuts, reducing borrowing costs for troubled banks and arresting a decline in stock markets after a dismal showing in world equity markets. The European Central Bank, the U.S. Federal Reserve and the Bank of England, were joined by the central banks of Canada, Sweden, China and Switzerland in cutting their benchmark overnight rates. The rare joint action helped European stocks, which had been down as much as 5 percent, to pare their losses. Trading in index futures suggested the Dow Jones industrial average would rise slightly at the start of trading New York. "The recent intensification of the financial crisis has augmented the downside risks to growth," the Fed said in a statement announcing the action. Credit had worsened considerably Wednesday, with the cost of borrowing dollars overnight in London, known as Libor, rising by 1.44 points to 5.38 percent, according to the British Bankers' Association.
PARIS: Global central banks moved together Wednesday to ease the credit squeeze with coordinated rate cuts, reducing borrowing costs for troubled banks and arresting a decline in stock markets after a dismal showing in world equity markets.
The European Central Bank, the U.S. Federal Reserve and the Bank of England, were joined by the central banks of Canada, Sweden, China and Switzerland in cutting their benchmark overnight rates.
The rare joint action helped European stocks, which had been down as much as 5 percent, to pare their losses. Trading in index futures suggested the Dow Jones industrial average would rise slightly at the start of trading New York.
"The recent intensification of the financial crisis has augmented the downside risks to growth," the Fed said in a statement announcing the action. Credit had worsened considerably Wednesday, with the cost of borrowing dollars overnight in London, known as Libor, rising by 1.44 points to 5.38 percent, according to the British Bankers' Association.
The technical term for it is "negative feedback loop." The rest of us just call it a panic. How else to explain yet another plunge in the stock market Tuesday that sent the Standard & Poor's 500-stock index to its lowest level in five years -- particularly in the absence of another nasty surprise? If anything, the markets should have been buoyed by the Federal Reserve saying it would shore up another troubled corner of finance by lending money directly to companies. Stocks did open higher, but then quickly tumbled as rumors swirled about the viability of big financial firms like Morgan Stanley and the Royal Bank of Scotland. Anybody searching for cause-and-effect logic in the daily gyrations of the market will be disappointed -- even if the overarching problem of a crisis of confidence in the global economy is now becoming clear.
The technical term for it is "negative feedback loop." The rest of us just call it a panic.
How else to explain yet another plunge in the stock market Tuesday that sent the Standard & Poor's 500-stock index to its lowest level in five years -- particularly in the absence of another nasty surprise?
If anything, the markets should have been buoyed by the Federal Reserve saying it would shore up another troubled corner of finance by lending money directly to companies. Stocks did open higher, but then quickly tumbled as rumors swirled about the viability of big financial firms like Morgan Stanley and the Royal Bank of Scotland.
Anybody searching for cause-and-effect logic in the daily gyrations of the market will be disappointed -- even if the overarching problem of a crisis of confidence in the global economy is now becoming clear.
<sigh>
This is why "the rest of us" should stop writing crap about what's going on and pretending they understand it at all.
(Sorry, I can't type those words without cringing). "The womb that spawned that thing is fertile yet"
As for metaphors, vicious circle is better. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
The European Central Bank has done its bit to fight the financial crisis by keeping the money market afloat and cutting interest rates. But its powers are limited, and its efforts risk being undermined by the chaotic, confused response of EU governments to the turmoil over the last week. European Central Bank President Jean-Claude Trichet can dictate monetary policy, but he cannot control the disposal of taypayers' money needed to solve the financial crisis. The European Central Bank joined the United States Federal Reserve and other major central banks in cutting key interest rates by half a point on Wednesday in a concerted move to stabilize financial markets and avert recession, but the ECB's power to stem the financial crisis in Europe is limited, economists say. The cut brought key interest rates down to 3.75 percent in the euro zone and to 1.5 percent in the United States, the banks said in a surprise announcement that followed a dramatic slump in world financial markets this week. The Bank of England also cut its key rate by half a point. It was the ECB's first rate cut in more than five years and the move echoed the coordinated rate cuts on Sept. 17, 2001 in the aftermath of the 9/11 attacks.
The European Central Bank has done its bit to fight the financial crisis by keeping the money market afloat and cutting interest rates. But its powers are limited, and its efforts risk being undermined by the chaotic, confused response of EU governments to the turmoil over the last week.
European Central Bank President Jean-Claude Trichet can dictate monetary policy, but he cannot control the disposal of taypayers' money needed to solve the financial crisis.
The European Central Bank joined the United States Federal Reserve and other major central banks in cutting key interest rates by half a point on Wednesday in a concerted move to stabilize financial markets and avert recession, but the ECB's power to stem the financial crisis in Europe is limited, economists say.
The cut brought key interest rates down to 3.75 percent in the euro zone and to 1.5 percent in the United States, the banks said in a surprise announcement that followed a dramatic slump in world financial markets this week. The Bank of England also cut its key rate by half a point.
It was the ECB's first rate cut in more than five years and the move echoed the coordinated rate cuts on Sept. 17, 2001 in the aftermath of the 9/11 attacks.
It's not for lack of institutions and ways to coordinate them that the EU hasn't "solved the crisis like the Fed has done" (LOL!) A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
Trust capitalism and shun government interference we were told. But irresponsible bankers saw a chance to get rich quick and went for it. Their failure has become ours -- and the promise of a common good has evaporated along with faith in democratic capitalism. Germany has taken to the skies. It is 9:00 a.m. on Thursday, Oct. 2 and the Luftwaffe Airbus A310 -- Germany's equivalent of Air Force One -- took off half an hour ago from Berlin's Tegel Airport. The plane is heading east, destination Saint Petersburg, Russia. Crew members are serving the usual copious breakfast, including omelets, meat, cold cuts, cheese and honey. The gamblers have eroded confidence in both capitalism and democracy. On board are many of the people who determine Germany's position in the world: the German chancellor and six ministers, the heads of major German corporations like Siemens, Deutsche Bahn and E.on, and a number of journalists. There are no bankers on the plane, but they play the leading role in everyone's mind and in the discussions taking place. After breakfast, German Chancellor Angela Merkel invites the journalists up to the front of the aircraft for an off-the-record chat with the press. Everyone squeezes into a small room, 25 people in all, standing, sitting cramped together, some of them even on the floor. "The microphone isn't working again," says the chancellor to start things off.
Trust capitalism and shun government interference we were told. But irresponsible bankers saw a chance to get rich quick and went for it. Their failure has become ours -- and the promise of a common good has evaporated along with faith in democratic capitalism.
Germany has taken to the skies. It is 9:00 a.m. on Thursday, Oct. 2 and the Luftwaffe Airbus A310 -- Germany's equivalent of Air Force One -- took off half an hour ago from Berlin's Tegel Airport. The plane is heading east, destination Saint Petersburg, Russia. Crew members are serving the usual copious breakfast, including omelets, meat, cold cuts, cheese and honey.
The gamblers have eroded confidence in both capitalism and democracy. On board are many of the people who determine Germany's position in the world: the German chancellor and six ministers, the heads of major German corporations like Siemens, Deutsche Bahn and E.on, and a number of journalists. There are no bankers on the plane, but they play the leading role in everyone's mind and in the discussions taking place.
After breakfast, German Chancellor Angela Merkel invites the journalists up to the front of the aircraft for an off-the-record chat with the press. Everyone squeezes into a small room, 25 people in all, standing, sitting cramped together, some of them even on the floor. "The microphone isn't working again," says the chancellor to start things off.
WASHINGTON -- If governments do not forge a coordinated response to the financial crisis, it could spill over to emerging markets, the International Monetary Fund said on Wednesday in warning that the world's "mature" markets" face their biggest challenge since the Depression. "The world economy is entering a major downturn in the face of the most dangerous financial shock in mature financial markets since the 1930s," the I.M.F. said in its Global Financial Stability Report, which represented the fund's gloomiest forecast in years.<...>" The I.M.F. estimates that all told, the amount lost by banks because of mortgage-related assets could rise to $1.4 trillion, an increase from $945 billion in its last report in April. The banks have already taken account of $560 billion of the losses in markdowns, the report estimates, but the recent collapse in share prices and the freezing of the credit market have made it difficult for the banks to raise fresh capital.
WASHINGTON -- If governments do not forge a coordinated response to the financial crisis, it could spill over to emerging markets, the International Monetary Fund said on Wednesday in warning that the world's "mature" markets" face their biggest challenge since the Depression.
"The world economy is entering a major downturn in the face of the most dangerous financial shock in mature financial markets since the 1930s," the I.M.F. said in its Global Financial Stability Report, which represented the fund's gloomiest forecast in years.
<...>
" The I.M.F. estimates that all told, the amount lost by banks because of mortgage-related assets could rise to $1.4 trillion, an increase from $945 billion in its last report in April. The banks have already taken account of $560 billion of the losses in markdowns, the report estimates, but the recent collapse in share prices and the freezing of the credit market have made it difficult for the banks to raise fresh capital.
Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials. Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks' balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones.
Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks' balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones.
Thank God who someone who knew what they were doing managed to sneak in the necessary language in time. Truth unfolds in time through a communal process.
In fact, who knows, Paulson may have had this in mind from the beginning, and wanted "non-reviewable" decision-making power precisely in order to do something like this -- nationalization of the banks -- over the dead bodies of die-hard Republican Congressmen, bankers, and conservative pundits. At least by asking for this power outright, he was honest and open about it. He either decided not to use or simply not did not know that in Washington, he had to resort to such underhanded means of obtaining power beyond the ken and reach of legislators, much less the people.
Normally, I detest sneaking language into bills in such a manner that it is impossible to know that language even exists, much less to review it. It is clear subversion of democracy, and is an essential flaw in how legislation is done. But in this case, well, the ends may justify the means -- a principle that I detest even more. Truth unfolds in time through a communal process.
--The US financial community is being dragged kicking and screaming into the 21st century. Capitalism searches out the darkest corners of human potential, and mainlines them.
You'll have noticed that McLame pitched a variation of this as as his idea in the debate the other night, making him the leader of the common man. One presumes that he didn't want it bad enough to twist the arms of those who prevented it, his 'afraid of socialism' rat-bastards. Never underestimate their intelligence, always underestimate their knowledge.
Frank Delaney ~ Ireland
Treasury Secretary Henry Paulson signaled the government may invest in banks as the next step in trying to resolve the deepening credit crisis. Paulson told reporters in Washington yesterday that legislation Congress passed last week to rescue financial institutions gave him broad authority that he intends to use, beyond just buying mortgage-related assets on banks' balance sheets. He indicated that an option available may be boosting companies' capital with cash infusions. ``It is the policy of the federal government to use all resources at its disposal to make our financial system stronger,'' Paulson said. ``We will use all of the tools we've been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size.'' Banks worldwide aren't raising enough capital to offset losses: while posting $592 billion of writedowns and losses during the crisis, they have added just $442.5 billion of new capital, according to data compiled by Bloomberg. The International Monetary Fund anticipates losses will more than double to $1.4 trillion.
Paulson told reporters in Washington yesterday that legislation Congress passed last week to rescue financial institutions gave him broad authority that he intends to use, beyond just buying mortgage-related assets on banks' balance sheets. He indicated that an option available may be boosting companies' capital with cash infusions.
``It is the policy of the federal government to use all resources at its disposal to make our financial system stronger,'' Paulson said. ``We will use all of the tools we've been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size.''
Banks worldwide aren't raising enough capital to offset losses: while posting $592 billion of writedowns and losses during the crisis, they have added just $442.5 billion of new capital, according to data compiled by Bloomberg. The International Monetary Fund anticipates losses will more than double to $1.4 trillion.
A note from Shumeet Banerji to Booz & Company clients ...My observations are backed with a particular form of data--the recent views of business leaders in some of the most important places in the world. For I am writing this on a flight back to London from Beijing, having just attended the World Economic Forum's Tianjin summer conference--and having spent the previous two weeks visiting Booz & Company clients in Asia, Europe, and the Americas. So. Is this the end of Capitalism? What caused this? When will it end? This downturn originated almost entirely in the U.S. financial markets. Essentially, cheap credit from the U.S. Federal Reserve fuelled an extraordinary leveraging of the U.S. economy over the past six years. Its locus is in consumer debt, especially mortgage debt. The original sin was not in (the lack of) regulation, but in the expansion of credit with outrageous terms to un-credit-worthy people--for example, 105% "Loan to Value" loans with no credit checks. ... The second victim of cheap debt was the bank balance sheet. Many financial services institutions have imploded because their asset purchases were fuelled by leverage, raising debt/equity rations of some banks to 30: or 40:1. I strongly believe that, once again, the culprit was not the lack of regulation, nor the "complexity" of risk. The job of financial institutions is to collect, price, disaggregate, de-correlate, re-aggregate, and price risk. To blame complexity is to seek a barter economy. The culprits are bad incentive systems and poor risk management at several major banks. Our financial services practice is working on these issues right now. The impact of all of this on the "real economy" is fairly clear. Foreclosures and tough credit don't ease spending, and the U.S. economy is heavily dependent on credit-based consumer spending. (This comprised 72% of the U.S. economy last year). Demand and growth will be slow, with most commentators expecting a recession by 4th Quarter this year. I expect this will be painful, but it won't lead to another Great Depression. Swift macroeconomic action will soften the blow, and growth will probably return late next year. <...> While some commentators argue that decoupling does not exist, I think we have genuine duality in the world today. Countries with big demographic or resource dividends will follow a very different trajectory through this downturn than the U.S. and Western Europe. And I think they will pull us out. Having heard the Chairman of the China Banking Regulatory Commission (CBRC) and Premier Wen Jiabao speak this week at the World Economic Forum, I must say that the world has something to learn from Chinese leadership in terms of their steady hand on the tiller. In the end, there will be a tough adjustment in the U.S. and the U.K., a mixed story in Western Europe, and some anxiety in the rest of the world. I expect the U.S. correction will take time. Sovereign wealth funds will own big chunks of Western assets and we will end up with a saner financial system--until the next leap off the cliff.
A note from Shumeet Banerji to Booz & Company clients
...My observations are backed with a particular form of data--the recent views of business leaders in some of the most important places in the world. For I am writing this on a flight back to London from Beijing, having just attended the World Economic Forum's Tianjin summer conference--and having spent the previous two weeks visiting Booz & Company clients in Asia, Europe, and the Americas.
So. Is this the end of Capitalism? What caused this? When will it end?
This downturn originated almost entirely in the U.S. financial markets. Essentially, cheap credit from the U.S. Federal Reserve fuelled an extraordinary leveraging of the U.S. economy over the past six years. Its locus is in consumer debt, especially mortgage debt. The original sin was not in (the lack of) regulation, but in the expansion of credit with outrageous terms to un-credit-worthy people--for example, 105% "Loan to Value" loans with no credit checks. ...
The second victim of cheap debt was the bank balance sheet. Many financial services institutions have imploded because their asset purchases were fuelled by leverage, raising debt/equity rations of some banks to 30: or 40:1. I strongly believe that, once again, the culprit was not the lack of regulation, nor the "complexity" of risk. The job of financial institutions is to collect, price, disaggregate, de-correlate, re-aggregate, and price risk. To blame complexity is to seek a barter economy. The culprits are bad incentive systems and poor risk management at several major banks. Our financial services practice is working on these issues right now.
The impact of all of this on the "real economy" is fairly clear. Foreclosures and tough credit don't ease spending, and the U.S. economy is heavily dependent on credit-based consumer spending. (This comprised 72% of the U.S. economy last year). Demand and growth will be slow, with most commentators expecting a recession by 4th Quarter this year. I expect this will be painful, but it won't lead to another Great Depression. Swift macroeconomic action will soften the blow, and growth will probably return late next year. <...>
While some commentators argue that decoupling does not exist, I think we have genuine duality in the world today. Countries with big demographic or resource dividends will follow a very different trajectory through this downturn than the U.S. and Western Europe. And I think they will pull us out. Having heard the Chairman of the China Banking Regulatory Commission (CBRC) and Premier Wen Jiabao speak this week at the World Economic Forum, I must say that the world has something to learn from Chinese leadership in terms of their steady hand on the tiller.
In the end, there will be a tough adjustment in the U.S. and the U.K., a mixed story in Western Europe, and some anxiety in the rest of the world. I expect the U.S. correction will take time. Sovereign wealth funds will own big chunks of Western assets and we will end up with a saner financial system--until the next leap off the cliff.
What does "countries with big demographic or resource dividends" mean in non-strategic consultant speak?
Also, is there any other way of interpreting "a steady hand on the tiller" except as a metaphor for government regulation? Truth unfolds in time through a communal process.
Having heard the Chairman of the China Banking Regulatory Commission (CBRC) and Premier Wen Jiabao speak this week at the World Economic Forum, I must say that the world has something to learn from Chinese leadership in terms of their steady hand on the tiller.
Here is what Mr. Liu Mingkang, the Chairman of the China Banking Regulatory Commission, whose speech Mr. Banerji references, had to say:
"When U.S. regulators were reducing the down payment to zero, or they created so-called `reverse mortgages,' we thought that was ridiculous," Liu said at the World Economic Forum in this eastern Chinese city. He said debt in the United States and elsewhere rose to "dangerous and indefensible" levels.Liu's comments were unusually pointed criticism of U.S. financial regulation for a Chinese official. They added to suggestions by countries that are under U.S. pressure to liberalize their financial markets that Washington's model might not be ideal.
But then, Mr. Banerji said that "The original sin was not in (the lack of) regulation." He is clearly an extremely smart man. So I would be curious to hear how he reconciles these two (what seem to me) contradictory positions. Truth unfolds in time through a communal process.
I strongly believe that, once again, the culprit was not the lack of regulation, nor the "complexity" of risk. The job of financial institutions is to collect, price, disaggregate, de-correlate, re-aggregate, and price risk. To blame complexity is to seek a barter economy. The culprits are bad incentive systems and poor risk management at several major banks.
What is regulation but an "incentive system"?
the culprit was not the lack of regulation, (...) the world has something to learn from Chinese leadership in terms of their steady hand on the tiller.
(...)
the world has something to learn from Chinese leadership in terms of their steady hand on the tiller.
What is regulation but a "hand on the tiller"?
Why do we even pretend to listen to these wankers???? In the long run, we're all dead. John Maynard Keynes
Now, are we aware of our own ulterior motives? A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
Spelling out one's own hidden biases is a bit harder :-) A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
So, our bias may be correlated to the bias in the general media. If the main winds were to change, we may change in the opposite direction. Or maybe not, we can't know because it hasn't happened. Yet I remember your warning that we should not try to find confirmation of what we were saying in each and every item of the current crisis -confirmation bias.
I tend to see ET as having different standards for some countries (Russia and China come to mind) -being ready to defend things that would be slammed in many other ones. That's an example of appearing to overshoot in opposing the mainstream bias. Similarly, and I say that as an ardent supporter of wind power, I have the impression that some graphs are explained with enthusiasm trumping a purely neutral analysis -again, the barrage of bad faith from the mainstream may explain some of that.
As for myself, I know that the French right has been so awful for so long that I have to fight deep scepticism if something they say seems to make sense. I'm always looking for the catch (there very often is one. Is there always one? Maybe not). "The womb that spawned that thing is fertile yet"
Well, I personally wouldn't call him a wanker. But I think we need to listen to people like him if only because they have enormous influence, and if we disagree with them, then we need to provide arguments that are persuasive to people who are uninformed or undecided.
Your two points --
-- are examples of such argumentation that will help in convincing people that the "de-regulation was not the problem" meme is wrong. Truth unfolds in time through a communal process.
And they bug me also when they pick all the contracts thanks to their absolute absence of shame in talking complete bullshit. Then they leave with nothing done and we have to pick up the pieces and actually do the work, except there is only 20% of the budget left.
For instance, I'm working on some improvement projects that used to be the tiny brother to a major program. Well, now it's part of the major program, and in fact pretty much ALL of the major program. Said major program included it because, well, it had not delivered anything and needed to actually show some results, which is what we were getting.
Now, prior to that, the major program (I can't tell you which consulting company did it of course, but you just know it was 'strategic consulting' of course) had communicated quite a lot on what they had done. Guess what was the main metric in their communication?
The length of the process maps they had produced (we're talking post-its on flipcharts there). They were bragging about how many meters they had. [Cyrille's Jawdrop™ Technology] there. Of course they got a lot (A LOT) more money than we'll get for actually finding the problems and fixing the main ones. Oh, and in passing, their process maps were unusable and we has to redo the ones we needed. Silly us, we failed to measure them and use that as proof of our action.
That was my rant for the day. Mmm, maybe that's why Mig thought I was a lot older than I actually was.
(and I can just picture a ((*rant Cyrille)) popping up next now, silly me) "The womb that spawned that thing is fertile yet"
"Mr. Greenspan declined requests for an interview."
The Reckoning - Taking Hard New Look at a Greenspan Legacy - Series - NYTimes.com
"In a market system based on trust, reputation has a significant economic value," Mr. Greenspan told the audience. "I am therefore distressed at how far we have let concerns for reputation slip in recent years." <...> In 1992, Edward J. Markey, a Democrat from Massachusetts who led the House subcommittee on telecommunications and finance, asked what was then the General Accounting Office to study derivatives risks. Two years later, the office released its report, identifying "significant gaps and weaknesses" in the regulatory oversight of derivatives. "The sudden failure or abrupt withdrawal from trading of any of these large U.S. dealers could cause liquidity problems in the markets and could also pose risks to others, including federally insured banks and the financial system as a whole," Charles A. Bowsher, head of the accounting office, said when he testified before Mr. Markey's committee in 1994. "In some cases intervention has and could result in a financial bailout paid for or guaranteed by taxpayers." In his testimony at the time, Mr. Greenspan was reassuring. "Risks in financial markets, including derivatives markets, are being regulated by private parties," he said. "There is nothing involved in federal regulation per se which makes it superior to market regulation."
In 1992, Edward J. Markey, a Democrat from Massachusetts who led the House subcommittee on telecommunications and finance, asked what was then the General Accounting Office to study derivatives risks.
Two years later, the office released its report, identifying "significant gaps and weaknesses" in the regulatory oversight of derivatives.
"The sudden failure or abrupt withdrawal from trading of any of these large U.S. dealers could cause liquidity problems in the markets and could also pose risks to others, including federally insured banks and the financial system as a whole," Charles A. Bowsher, head of the accounting office, said when he testified before Mr. Markey's committee in 1994. "In some cases intervention has and could result in a financial bailout paid for or guaranteed by taxpayers."
In his testimony at the time, Mr. Greenspan was reassuring. "Risks in financial markets, including derivatives markets, are being regulated by private parties," he said.
"There is nothing involved in federal regulation per se which makes it superior to market regulation."
Just like food safety regulation: sure, a company that sells deadly products might not satay in the market very long, but it's going to be a small comfort for those that die from its products before its reputation is touched... In the long run, we're all dead. John Maynard Keynes
His support was instrumental in getting Congress to approve cuts thaty many of them were wary about.
And his responsibility in propping up the bubbles in the late 90s and then throughout the noughties (denying that there even was a bubble, and keeping Fed rates absurdly low for way too long) cannot be overstated.
Quite simply, he behaved like a hawk, and used his "credibility" on the markets (earned thanks to his frequent use of the "Greenspan put", ie using monetary policy to prop up markets when they went down) for narrow political goals. In the long run, we're all dead. John Maynard Keynes
So, read it again:
Systemic risk, counterparty risk, moral hazard. All known, and wilfully ignored. In the long run, we're all dead. John Maynard Keynes
Iceland's Financial Supervisory Authority will take control of Kaupthing Bank hf, the nation's biggest bank and the third lender to be seized by the government since the financial crisis escalated. Kaupthing's domestic deposits are fully guaranteed, and the aim of the takeover is to provide a ``functioning domestic banking system,'' the FSA said in a statement on its Web site today. Iceland's banking system has buckled under the weight of debts equal to 12 times the size of the economy, with financial regulators already in charge of the second and third largest lenders, Glitnir Bank hf and Landsbanki Islands hf. Prime Minster Geir Haarde indicated yesterday he may be forced to seek aid from the International Monetary Fund after failing to secure loans from European governments and central banks. The central bank yesterday abandoned an attempt to fix the exchange rate, indicating it is powerless to halt the slump in the krona. Iceland will start talks with Russia on Tuesday to secure a loan of as much as 4 billion euros ($5.46 billion), Haarde said yesterday. Iceland's oversized bank industry put it ``probably in the worst position in the developed world to cope with the ongoing credit crisis,'' Deutsche Bank AB economist Henrik Gullberg said on Oct. 7.
Kaupthing's domestic deposits are fully guaranteed, and the aim of the takeover is to provide a ``functioning domestic banking system,'' the FSA said in a statement on its Web site today.
Iceland's banking system has buckled under the weight of debts equal to 12 times the size of the economy, with financial regulators already in charge of the second and third largest lenders, Glitnir Bank hf and Landsbanki Islands hf. Prime Minster Geir Haarde indicated yesterday he may be forced to seek aid from the International Monetary Fund after failing to secure loans from European governments and central banks.
The central bank yesterday abandoned an attempt to fix the exchange rate, indicating it is powerless to halt the slump in the krona. Iceland will start talks with Russia on Tuesday to secure a loan of as much as 4 billion euros ($5.46 billion), Haarde said yesterday.
Iceland's oversized bank industry put it ``probably in the worst position in the developed world to cope with the ongoing credit crisis,'' Deutsche Bank AB economist Henrik Gullberg said on Oct. 7.
Ooops.
As of this morning it was unclear how much is in play (a tory was on the Today show speculating that it was at least a billion UKP), but various local govt lobby groups are bending the treasury's ear about getting these deposits guaranteed along the same lines as the private depositors guarantee that Darling announced earlier in the week.
Regards Luke -- #include witty_sig.h
Local authority leaders are seeking an urgent meeting with the chancellor after it emerged at least 20 councils have cash in troubled Icelandic banks. Their overall investment is hundreds of millions of pounds and they are asking the UK government for the protection it has promised to personal savers. The Conservatives have warned that up to £1bn in council funding could potentially be in danger.
Their overall investment is hundreds of millions of pounds and they are asking the UK government for the protection it has promised to personal savers.
The Conservatives have warned that up to £1bn in council funding could potentially be in danger.
Kent County Council, £50m Transport for London, £40m Westminster City Council, £17m Hertfordshire County Council, £17m Havering Council, £12.5m
Up to £1bn comes out of the largest pot of money, £50M by Kent County Council, times 10 institutions. The Tories don't even know how to do this properly.
But £200M sounds about okay. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
I mean times 20. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
The city of Oskarshamn has lost something like €30-35 million on some supposedly safe real interest bonds, except for a clause that said that if the seller of said bonds fell onto hard times they would lose all value.
It's even sadder because Oskarshamn is not a wealthy place, but the city government is wealthy (they still have like €130 million in financial assets). That's because they, that's right, sold all their city owned hydro electric power plants 15 years ago. They were initially paid with shares from the company that bought the plants (Sydkraft, later bought by Eon), so not too horribly bad...
But some idiot official who misunderstood what diversification is about and what it's good (and not good) for sold those shares and bought a diversified portfolio. And here we are. </head explodes>
Lessons: city governments should not own shares and bonds. If they have more money than they can spend they should cut taxes. If the citizens feel like specualting on the markets they can now do it with their own money.
And if city governments really do own anything, it should be strategic assests with stable cashflows and without any kind of surprises... like hydroplants.
Grrrr!
Peak oil is not an energy crisis. It is a liquid fuel crisis.
Iceland's stock exchange on Thursday suspended trading in all shares citing unusual market conditions after the country's largest lender, Kaupthing Bank, followed domestic peers into state ownership.The nationalisation of Kaupthing followed that of Landsbanki, owner of the Icesave savings business popular in the UK, and Glitnir earlier this week and pushed the island economy to the verge of collapse.Sigurdur Einarsson, Kaupthing's executive chairman, said the bank had asked Iceland's Financial Supervisory Authority (FME) to take control after Kaupthing Singer & Friedlander, its UK subsidiary, was placed into administration on Wednesday by the UK government, putting the parent company in technical default."It did not matter that the parent company had sufficient liquidity and its position was solid," he added. Mr Einarsson also said Kaupthing Edge, Kaupthing's online saving bank, had been hit by a wave of withdrawals by UK depositors in the wake of the run on Icesave, in spite of its deposits directly benefiting from a UK guarantee, whereas Icesave's were backed by an Icelandic protection scheme in the first instance. Kaupthing agreed to sell Kaupthing Edge deposit business to ING, the Dutch bank, on Wednesday.
The nationalisation of Kaupthing followed that of Landsbanki, owner of the Icesave savings business popular in the UK, and Glitnir earlier this week and pushed the island economy to the verge of collapse.
Sigurdur Einarsson, Kaupthing's executive chairman, said the bank had asked Iceland's Financial Supervisory Authority (FME) to take control after Kaupthing Singer & Friedlander, its UK subsidiary, was placed into administration on Wednesday by the UK government, putting the parent company in technical default.
"It did not matter that the parent company had sufficient liquidity and its position was solid," he added.
Mr Einarsson also said Kaupthing Edge, Kaupthing's online saving bank, had been hit by a wave of withdrawals by UK depositors in the wake of the run on Icesave, in spite of its deposits directly benefiting from a UK guarantee, whereas Icesave's were backed by an Icelandic protection scheme in the first instance. Kaupthing agreed to sell Kaupthing Edge deposit business to ING, the Dutch bank, on Wednesday.
AIG gets another Fed lifeline The Federal Reserve on Wednesday threw another financial lifeline to AIG, agreeing to provide up to $37.8bn in additional liquidity to the stricken insurer. The move, which comes on top of the $85bn rescue loan that gave the government control of the company last month, is designed to help AIG fund its troubled securities lending operations. Before its collapse, AIG had used the programme - which lent securities to fund managers and other financial institutions for a few days in exchange for a fee and cash collateral - as a source of liquidity. AIG reinvested the collateral in longer-dated instruments, including troubled mortgage assets. The plunge in the value of those assets made it impossible for AIG to repay its counterparties once they returned the securities and demanded the collateral back.
The Federal Reserve on Wednesday threw another financial lifeline to AIG, agreeing to provide up to $37.8bn in additional liquidity to the stricken insurer.
The move, which comes on top of the $85bn rescue loan that gave the government control of the company last month, is designed to help AIG fund its troubled securities lending operations.
Before its collapse, AIG had used the programme - which lent securities to fund managers and other financial institutions for a few days in exchange for a fee and cash collateral - as a source of liquidity.
AIG reinvested the collateral in longer-dated instruments, including troubled mortgage assets. The plunge in the value of those assets made it impossible for AIG to repay its counterparties once they returned the securities and demanded the collateral back.
Is that what one calls "throwing good money after bad"? Sure looks like it... In the long run, we're all dead. John Maynard Keynes
Problem loans nearly triple in US The percentage of large syndicated US loans rated as problematic has nearly tripled in the last year, highlighting the damage done by the lax underwriting standards of the private equity boom, a report by US regulators showed on Wednesday. During 2006 and early 2007, leading banks competed fiercely to lend to private equity groups, often dispensing with the usual covenants meant to secure such credits in a development that led to the so-called "cov-light loan". The annual federal "shared national credits" survey - which examines credit committments of more than $20m held by three or more banks - found that $373.4bn of such loans faced actual or potential difficulties at the end of the second quarter. That was an increase of $259.3bn from the total of "criticised" loans during the previous year. Such problem credits accounted for 13.4 per cent of the total held by lenders in the US, up from 5 per cent the previous year, the survey showed.
The percentage of large syndicated US loans rated as problematic has nearly tripled in the last year, highlighting the damage done by the lax underwriting standards of the private equity boom, a report by US regulators showed on Wednesday.
During 2006 and early 2007, leading banks competed fiercely to lend to private equity groups, often dispensing with the usual covenants meant to secure such credits in a development that led to the so-called "cov-light loan".
The annual federal "shared national credits" survey - which examines credit committments of more than $20m held by three or more banks - found that $373.4bn of such loans faced actual or potential difficulties at the end of the second quarter.
That was an increase of $259.3bn from the total of "criticised" loans during the previous year. Such problem credits accounted for 13.4 per cent of the total held by lenders in the US, up from 5 per cent the previous year, the survey showed.
The snowball is still rolling. In the long run, we're all dead. John Maynard Keynes
Debt-holders Bears are on top over bulls in the stock market. And the reason is that debt-holders seem to be in the ascendancy over shareholders. Each hour on Tuesday brought a new attempt to avert disaster somewhere in the banking world: a state loan to Russia's banks, a Spanish scheme to buy distressed securities, the US Federal Reserve's move to buy commercial paper from issuers (or lend directly to non-financial companies) and the UK decision to inject capital into banks. The effects on credit and stock markets were divergent. For stock markets, it became ever more apparent that the ultimate resolution for the crisis would be the nationalisation of banks in some form. Injections of capital into banks will horribly dilute the existing shareholders' holdings. This was reason to sell financials. (...) However, governments' scramble to act did have an effect where it was most needed. Credit markets suggest that the risk of default by financials remains far below its highs for the crisis. The cost of insuring against that risk barely rose. Money markets calmed slightly. So Tuesday's sell-off is a bet that creditors (and depositors) will be spared, and that taxpayers and shareholders will share the cost of saving them from a banking collapse.
Bears are on top over bulls in the stock market. And the reason is that debt-holders seem to be in the ascendancy over shareholders.
Each hour on Tuesday brought a new attempt to avert disaster somewhere in the banking world: a state loan to Russia's banks, a Spanish scheme to buy distressed securities, the US Federal Reserve's move to buy commercial paper from issuers (or lend directly to non-financial companies) and the UK decision to inject capital into banks.
The effects on credit and stock markets were divergent. For stock markets, it became ever more apparent that the ultimate resolution for the crisis would be the nationalisation of banks in some form.
Injections of capital into banks will horribly dilute the existing shareholders' holdings. This was reason to sell financials. (...)
However, governments' scramble to act did have an effect where it was most needed. Credit markets suggest that the risk of default by financials remains far below its highs for the crisis. The cost of insuring against that risk barely rose. Money markets calmed slightly.
So Tuesday's sell-off is a bet that creditors (and depositors) will be spared, and that taxpayers and shareholders will share the cost of saving them from a banking collapse.
Rising CDS action increases the strain The failures of Glitnir and Landsbanki not only add to the grim international roll-call of banks burnt out by the wild bushfire of the global liquidity crisis, they also lengthen the list of costly and complex tasks facing the derivatives markets. The two leading Icelandic banks bring to six the number of finance companies that have triggered credit default swap contracts, which provide a kind of insurance against non-payment of corporate debt, in little more than a month. The first effect of these financial failures is that those who sold protection (in simple terms, insurance) through CDS contracts must pay those who bought protection.
The failures of Glitnir and Landsbanki not only add to the grim international roll-call of banks burnt out by the wild bushfire of the global liquidity crisis, they also lengthen the list of costly and complex tasks facing the derivatives markets.
The two leading Icelandic banks bring to six the number of finance companies that have triggered credit default swap contracts, which provide a kind of insurance against non-payment of corporate debt, in little more than a month.
The first effect of these financial failures is that those who sold protection (in simple terms, insurance) through CDS contracts must pay those who bought protection.
And as a side note:
LCH.Clearnet has completed the wind-down of $9,000bn worth of overthecounter interest rate derivatives held by Lehman Brothers when it collapsed, the London-based independent central clearing house, said on Wednesday. The cleanup of the Lehman Brothers Special Financing Inc portfolio, which involved hedging and auctioning off of 66,390 trades across five leading currencies, was achieved without any of the SwapClear members involved seeing any losses, although many banks put up traders and risk and operations people to help. "The default was managed well within Lehman margin held and LCH.Clearnet will not be using the default fund in the management of the Lehman default," LCH said.
The cleanup of the Lehman Brothers Special Financing Inc portfolio, which involved hedging and auctioning off of 66,390 trades across five leading currencies, was achieved without any of the SwapClear members involved seeing any losses, although many banks put up traders and risk and operations people to help.
"The default was managed well within Lehman margin held and LCH.Clearnet will not be using the default fund in the management of the Lehman default," LCH said.
That last bit is rather good news altogether. In the long run, we're all dead. John Maynard Keynes
The cost of borrowing in dollars for three months in London soared to the highest level this year as coordinated interest-rate reductions worldwide failed to revive lending among banks for any longer than a day. Attempts by policy makers to restore confidence to money markets are being stymied by almost daily crises among financial institutions. Iceland's government took over the nation's biggest lender today to keep the country's banking system working. American International Group Inc., the insurer taken over by the U.S. government, may need $37.8 billion of extra funds, the Federal Reserve Bank of New York said yesterday. ``To see little or no reaction in the fixings is very disappointing and reinforces the fact that Libor is broken and the transmission mechanism from central banks isn't working,'' said Barry Moran, a currency trader in Dublin at Bank of Ireland, the country's second-biggest bank. ``Things are still very stressed and we don't know what's going to fix it.'' The London interbank offered rate, or Libor, for three-month loans rose to 4.75 percent today, the highest level since Dec. 28. The Libor-OIS spread, a measure of cash scarcity, widened to a record. The overnight rate fell to 5.09 percent, still 359 basis points more than the Fed's 1.5 percent target rate. The European Central Bank today offered banks as much cash as they need for six days at its benchmark rate of 3.75 percent, bringing forward new measures to soothe money markets. It also loaned banks a record $100 billion in overnight dollar funds, allotting most of the cash at 5 percent, down from 9.5 percent yesterday.
Attempts by policy makers to restore confidence to money markets are being stymied by almost daily crises among financial institutions. Iceland's government took over the nation's biggest lender today to keep the country's banking system working. American International Group Inc., the insurer taken over by the U.S. government, may need $37.8 billion of extra funds, the Federal Reserve Bank of New York said yesterday.
``To see little or no reaction in the fixings is very disappointing and reinforces the fact that Libor is broken and the transmission mechanism from central banks isn't working,'' said Barry Moran, a currency trader in Dublin at Bank of Ireland, the country's second-biggest bank. ``Things are still very stressed and we don't know what's going to fix it.''
The London interbank offered rate, or Libor, for three-month loans rose to 4.75 percent today, the highest level since Dec. 28. The Libor-OIS spread, a measure of cash scarcity, widened to a record. The overnight rate fell to 5.09 percent, still 359 basis points more than the Fed's 1.5 percent target rate.
The European Central Bank today offered banks as much cash as they need for six days at its benchmark rate of 3.75 percent, bringing forward new measures to soothe money markets. It also loaned banks a record $100 billion in overnight dollar funds, allotting most of the cash at 5 percent, down from 9.5 percent yesterday.
