EUOBSERVER / BRUSSELS - Three new supervisory authorities in the areas of banking, insurance and securities look set to gain important powers under proposed legislation to be published by the European Commission this Wednesday (23 September). Current drafts of the legislation bestow the three authorities, whose job will be to supervise individual financial institutions, with a co-ordinating role in emergency cases such as the shutting down of stock markets or calling a halt to short selling following a terrorist strike. The new authorities look set to gain powers to settle disputes between national supervisors Final negotiations on the format of Wednesday's publications have yet to be finalised, with commission cabinet heads meeting this evening before commissioners give their final seal of approval on the texts. As the legislation currently stands, the authorities will also be mandated to rule on disputes between home and host national supervisors, for instance on the need to recapitalise a cross-border bank.
EUOBSERVER / BRUSSELS - Three new supervisory authorities in the areas of banking, insurance and securities look set to gain important powers under proposed legislation to be published by the European Commission this Wednesday (23 September).
Current drafts of the legislation bestow the three authorities, whose job will be to supervise individual financial institutions, with a co-ordinating role in emergency cases such as the shutting down of stock markets or calling a halt to short selling following a terrorist strike.
The new authorities look set to gain powers to settle disputes between national supervisors
Final negotiations on the format of Wednesday's publications have yet to be finalised, with commission cabinet heads meeting this evening before commissioners give their final seal of approval on the texts.
As the legislation currently stands, the authorities will also be mandated to rule on disputes between home and host national supervisors, for instance on the need to recapitalise a cross-border bank.
The European Union should go ahead with imposing limits on bankers' bonuses even if the United States does not after this week's G20 summit in Pittsburgh, European Commission president Jose-Manuel Barroso said on Sunday. "It would be interesting, important, useful to have if possible the same rules in the world (...) to have the Americans at our side," he told the France TV5 television station.
The European Union should go ahead with imposing limits on bankers' bonuses even if the United States does not after this week's G20 summit in Pittsburgh, European Commission president Jose-Manuel Barroso said on Sunday.
"It would be interesting, important, useful to have if possible the same rules in the world (...) to have the Americans at our side," he told the France TV5 television station.
In the grim period that followed Lehman's failure, it seemed inconceivable that bankers would, just a few months later, be going right back to the practices that brought the world's financial system to the edge of collapse. At the very least, one might have thought, they would show some restraint for fear of creating a public backlash. But now that we've stepped back a few paces from the brink -- thanks, let's not forget, to immense, taxpayer-financed rescue packages -- the financial sector is rapidly returning to business as usual. Even as the rest of the nation continues to suffer from rising unemployment and severe hardship, Wall Street paychecks are heading back to pre-crisis levels. And the industry is deploying its political clout to block even the most minimal reforms.The good news is that senior officials in the Obama administration and at the Federal Reserve seem to be losing patience with the industry's selfishness. The bad news is that it's not clear whether President Obama himself is ready, even now, to take on the bankers.
But now that we've stepped back a few paces from the brink -- thanks, let's not forget, to immense, taxpayer-financed rescue packages -- the financial sector is rapidly returning to business as usual. Even as the rest of the nation continues to suffer from rising unemployment and severe hardship, Wall Street paychecks are heading back to pre-crisis levels. And the industry is deploying its political clout to block even the most minimal reforms.
The good news is that senior officials in the Obama administration and at the Federal Reserve seem to be losing patience with the industry's selfishness. The bad news is that it's not clear whether President Obama himself is ready, even now, to take on the bankers.
FRANKFURT -- World leaders at the Group of 20 meeting this week should force banks to build up their reserves substantially to avoid another acute financial crisis, a leading association of regulatory experts said Monday. Lurking behind the appeal from the European Shadow Financial Regulatory Committee, a panel of academics and former regulators, is a fear that the political momentum for deep-seated reform may be waning as the financial crisis ebbs. Although a recent meeting of G-20 finance ministers in London discussed ideas for increasing the reserves that banks must hold against losses, there was little sense of urgency. Treasury Secretary Timothy F. Geithner said he wanted to see a final agreement by the end of next year.Harald Benink, a professor of banking and finance at Tilburg University in the Netherlands and a member of the shadow committee, said the global effort to revamp banking regulation had slowed badly as officials became bogged down in debates over executive pay. But only higher reserves will avoid future crises, he said."There is no point in doing anything but talking about how much capital banks need to have on hand," Mr. Benink said.
FRANKFURT -- World leaders at the Group of 20 meeting this week should force banks to build up their reserves substantially to avoid another acute financial crisis, a leading association of regulatory experts said Monday.
Lurking behind the appeal from the European Shadow Financial Regulatory Committee, a panel of academics and former regulators, is a fear that the political momentum for deep-seated reform may be waning as the financial crisis ebbs. Although a recent meeting of G-20 finance ministers in London discussed ideas for increasing the reserves that banks must hold against losses, there was little sense of urgency. Treasury Secretary Timothy F. Geithner said he wanted to see a final agreement by the end of next year.
Harald Benink, a professor of banking and finance at Tilburg University in the Netherlands and a member of the shadow committee, said the global effort to revamp banking regulation had slowed badly as officials became bogged down in debates over executive pay. But only higher reserves will avoid future crises, he said.
"There is no point in doing anything but talking about how much capital banks need to have on hand," Mr. Benink said.
The struggling HSH Nordbank - itself a recipient of billions of euros of government aid - wired $45 million to the American investment bank Goldman Sachs, although a deadline for the payment had passed. According to a German public radio report, Goldman Sachs had purchased insurance from HSH Nordbank against defaulting credits of another American investment bank, Lehman Brothers. The HSH Nordbank was reportedly obligated to pay $45 million (30 million euros) in compensation directly following the Lehman collapse in September 2008. Goldman Sachs, however, failed to demand the payment in time, waiting until November - some three weeks after the deadline had gone by.
According to a German public radio report, Goldman Sachs had purchased insurance from HSH Nordbank against defaulting credits of another American investment bank, Lehman Brothers.
The HSH Nordbank was reportedly obligated to pay $45 million (30 million euros) in compensation directly following the Lehman collapse in September 2008.
Goldman Sachs, however, failed to demand the payment in time, waiting until November - some three weeks after the deadline had gone by.
Members of the Dutch royal family should have their budget cut, say many members of parliament. Sometimes a financial crisis also affects members of the royal family. Following the oil crisis in 1973, queen Juliana swapped her Cadillac for a much more economical Ford Granada. She did not think it appropriate to continue driving around in a gas guzzler. But she also had another motive, according to the 2001 book Royal Motoring: she hoped for more privacy in a smaller car. During last week's debate on the government's 2010 spending plans the question was raised as to whether the current financial crisis should also affect the royal family. Geert Wilders, leader of the populist Party for Freedom (PVV), began the discussion: "If everyone has to tighten their belt, does it apply to the royal family?" A 20 percent cut overall, which the government wants, must also be possible for the royals, said Wilders. "They're not the world's poorest." They certainly are not. Queen Beatrix will receive 5.1 million euros from the state in 2010. Of this, 843,000 euros is salary and 4.3 million euro for expenses such as staff and equipment. Prince Willem-Alexander and princess Máxima each receive 248,000 euros in 'salary' and a joint 1.5 million euros for expenses. But opposition parliamentarians were more concerned about the increase in their personal allowance. Beatrix's income will rise by 30,000 euros and both the prince and princess will receive an extra 7,000 euros.
Sometimes a financial crisis also affects members of the royal family. Following the oil crisis in 1973, queen Juliana swapped her Cadillac for a much more economical Ford Granada. She did not think it appropriate to continue driving around in a gas guzzler. But she also had another motive, according to the 2001 book Royal Motoring: she hoped for more privacy in a smaller car.
During last week's debate on the government's 2010 spending plans the question was raised as to whether the current financial crisis should also affect the royal family. Geert Wilders, leader of the populist Party for Freedom (PVV), began the discussion: "If everyone has to tighten their belt, does it apply to the royal family?" A 20 percent cut overall, which the government wants, must also be possible for the royals, said Wilders. "They're not the world's poorest."
They certainly are not. Queen Beatrix will receive 5.1 million euros from the state in 2010. Of this, 843,000 euros is salary and 4.3 million euro for expenses such as staff and equipment. Prince Willem-Alexander and princess Máxima each receive 248,000 euros in 'salary' and a joint 1.5 million euros for expenses. But opposition parliamentarians were more concerned about the increase in their personal allowance. Beatrix's income will rise by 30,000 euros and both the prince and princess will receive an extra 7,000 euros.
"[S]he hoped for more privacy in a smaller car." He hoped for more privacy at sea.
Royals win holiday photo court case, ahem, LOL Diversity is the key to economic and political evolution.
A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose -- on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.
Gordon Brown is to set out proposals at the G20 this week aimed at boosting Chinese consumer demand and ending the global economy's reliance on the American shopper.The plan is one of the centrepieces of Brown's four-day economic and diplomatic blitz in the US at the UN general assembly in New York and the G20 in Pittsburgh.Economists have long warned of the dangers of imbalances in the global economy - specifically huge trade surpluses and currency reserves built up by exporters such as China, and big deficits in the US and other economies.Brown, Barack Obama and the IMF have been looking jointly at ways in which new global systems can be put in place to encourage the Chinese to stop accumulating large reserves, built up to inoculate themselves from volatile capital flows."The 15-year period when the world economy can rely on the American consumer to drag the world out of recession is over," said one British official. "We need a new motor for growth."Brown's aides are hoping the world stage can still provide the right personal backdrop for a desperately needed triumph at the Labour conference next week.Brown is this year's chairman of the G20, although the G20 meeting in Pittsburgh on Thursday and Friday is being chaired by Obama.Brown's officials have been looking at an insurance pool for the G20 largest economies that would reduce incentives for build-ups of reserves. Under one model the insurance pool would function like a reserve fund, offering participants a short-term credit line they could call upon during a crisis.Brown's ideas have been developed with Obama and the IMF, and it is hoped the insurance scheme would be a way of encouraging China to reduce its trade surplus and revalue its currency.Obama said this weekend: "We can't go back to the era where the Chinese or the Germans are selling everything to us, we're taking out a bunch of credit card debt or home equity loans, but we're not selling anything to them."He said making sure there was a more balanced economy in future was a key aim of the G20 meeting, just as much as co-ordinating strategies to exit from the current round of fiscal stimulus.G20 officials have also been discussing an annual G20-led peer review process by which they would hold each other accountable for implementing economic policies that led to more balanced growth.But Brown's officials argue that if no insurance funds are available, countries have every incentive to build up current account trade surpluses so as to create large currency reserves, leading them to lock up their wealth in unproductive low-return liquid government bonds. China owns $2.1tn (£1.3tn) in foreign currency reserves, much of which is believed to be in US dollars.
Gordon Brown is to set out proposals at the G20 this week aimed at boosting Chinese consumer demand and ending the global economy's reliance on the American shopper.
The plan is one of the centrepieces of Brown's four-day economic and diplomatic blitz in the US at the UN general assembly in New York and the G20 in Pittsburgh.
Economists have long warned of the dangers of imbalances in the global economy - specifically huge trade surpluses and currency reserves built up by exporters such as China, and big deficits in the US and other economies.
Brown, Barack Obama and the IMF have been looking jointly at ways in which new global systems can be put in place to encourage the Chinese to stop accumulating large reserves, built up to inoculate themselves from volatile capital flows.
"The 15-year period when the world economy can rely on the American consumer to drag the world out of recession is over," said one British official. "We need a new motor for growth."
Brown's aides are hoping the world stage can still provide the right personal backdrop for a desperately needed triumph at the Labour conference next week.
Brown is this year's chairman of the G20, although the G20 meeting in Pittsburgh on Thursday and Friday is being chaired by Obama.
Brown's officials have been looking at an insurance pool for the G20 largest economies that would reduce incentives for build-ups of reserves. Under one model the insurance pool would function like a reserve fund, offering participants a short-term credit line they could call upon during a crisis.
Brown's ideas have been developed with Obama and the IMF, and it is hoped the insurance scheme would be a way of encouraging China to reduce its trade surplus and revalue its currency.
Obama said this weekend: "We can't go back to the era where the Chinese or the Germans are selling everything to us, we're taking out a bunch of credit card debt or home equity loans, but we're not selling anything to them."
He said making sure there was a more balanced economy in future was a key aim of the G20 meeting, just as much as co-ordinating strategies to exit from the current round of fiscal stimulus.
G20 officials have also been discussing an annual G20-led peer review process by which they would hold each other accountable for implementing economic policies that led to more balanced growth.
But Brown's officials argue that if no insurance funds are available, countries have every incentive to build up current account trade surpluses so as to create large currency reserves, leading them to lock up their wealth in unproductive low-return liquid government bonds. China owns $2.1tn (£1.3tn) in foreign currency reserves, much of which is believed to be in US dollars.
Keynes International Clearing Union approach was that both those with positive (the Gesellian approach) and negative "Bancor" balances should pay a charge, which would implicitly have been into such a pool.
This proposal seems not a million miles away from the Guarantee Society and credit clearing ideas I've been working on for about four years. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
The one risk that it can't control is that of deregulation ideologues successfully lobbying for a reduction of the tax rate or a pay out of the reserves on the grounds that they are a drag on the economy. Had we been able to resist that kind of deregulatory pressure we would likely not be here today for reasons other than a Keynes Clearing Union, but such an arrangement cannot hurt the stability of world trade. The transition to such a Union today would be interesting, to say the least.
Thanks for the timely explanation. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
Monbiot.com » Clearing Up This Mess (November 18, 2008)
When Keynes began to explain his idea, in papers published in 1942 and 1943, it detonated in the minds of all who read it. The British economist Lionel Robbins reported that "it would be difficult to exaggerate the electrifying effect on thought throughout the whole relevant apparatus of government ... nothing so imaginative and so ambitious had ever been discussed"(5). Economists all over the world saw that Keynes had cracked it. As the Allies prepared for the Bretton Woods conference, Britain adopted Keynes's solution as its official negotiating position. But there was one country - at the time the world's biggest creditor - in which his proposal was less welcome. The head of the US delegation at Bretton Woods, Harry Dexter White, responded to Lord Keynes's idea thus: "We have been perfectly adamant on that point. We have taken the position of absolutely no"(6). Instead he proposed an International Stabilisation Fund, which would place the entire burden of maintaining the balance of trade on the deficit nations. It would place no limits on the surplus that successful exporters could accumulate. He also suggested an International Bank for Reconstruction and Development, which would provide capital for economic reconstruction after the war. White, backed by the financial clout of the US Treasury, prevailed. The International Stabilisation Fund became the International Monetary Fund. The International Bank for Reconstruction and Development remains the principal lending arm of the World Bank. The consequences, especially for the poorest indebted countries, have been catastrophic. Acting on behalf of the rich world, imposing conditions which no free country would tolerate, the IMF has bled them dry. As Joseph Stiglitz has shown, the Fund compounds existing economic crises and creates crises where none existed before. It has destabilised exchange rates, exacerbated balance of payments problems, forced countries into debt and recession, wrecked public services and destroyed the jobs and incomes of tens of millions of people(7).
But there was one country - at the time the world's biggest creditor - in which his proposal was less welcome. The head of the US delegation at Bretton Woods, Harry Dexter White, responded to Lord Keynes's idea thus: "We have been perfectly adamant on that point. We have taken the position of absolutely no"(6). Instead he proposed an International Stabilisation Fund, which would place the entire burden of maintaining the balance of trade on the deficit nations. It would place no limits on the surplus that successful exporters could accumulate. He also suggested an International Bank for Reconstruction and Development, which would provide capital for economic reconstruction after the war. White, backed by the financial clout of the US Treasury, prevailed. The International Stabilisation Fund became the International Monetary Fund. The International Bank for Reconstruction and Development remains the principal lending arm of the World Bank.
The consequences, especially for the poorest indebted countries, have been catastrophic. Acting on behalf of the rich world, imposing conditions which no free country would tolerate, the IMF has bled them dry. As Joseph Stiglitz has shown, the Fund compounds existing economic crises and creates crises where none existed before. It has destabilised exchange rates, exacerbated balance of payments problems, forced countries into debt and recession, wrecked public services and destroyed the jobs and incomes of tens of millions of people(7).
The head of the US delegation at Bretton Woods, Harry Dexter White, responded to Lord Keynes's idea thus: "We have been perfectly adamant on that point. We have taken the position of absolutely no"
Finance & Development September 1998 - Harry Dexter White and the International Monetary Fund
Where the two founding fathers differed most was on the third theme: how independent and how powerful should the IMF be? To Keynes, what the world needed was an independent countervailing balance to American economic power, a world central bank that could regulate the flow of credit both in the aggregate and in its distribution. To White, what was needed was an adjunct to American economic power, an agency that could promote the balanced growth of international trade in a way that preserved the central role of the U.S. dollar in international finance. Because White prevailed in that argument, and the IMF became a dollar-based institution, the Bretton Woods system contained a fatal flaw. For international reserves to keep pace with the growth in world trade required an ever-expanding supply of dollars, which as the economist Robert Triffin observed in the late 1950s was incompatible with the preservation of a stable value for the dollar.
Where the two founding fathers differed most was on the third theme: how independent and how powerful should the IMF be? To Keynes, what the world needed was an independent countervailing balance to American economic power, a world central bank that could regulate the flow of credit both in the aggregate and in its distribution. To White, what was needed was an adjunct to American economic power, an agency that could promote the balanced growth of international trade in a way that preserved the central role of the U.S. dollar in international finance.
Because White prevailed in that argument, and the IMF became a dollar-based institution, the Bretton Woods system contained a fatal flaw. For international reserves to keep pace with the growth in world trade required an ever-expanding supply of dollars, which as the economist Robert Triffin observed in the late 1950s was incompatible with the preservation of a stable value for the dollar.
"The 15-year period when the world economy can rely on the American consumer to drag the world out of recession is over," said one British official.
So the world economy since the early '90s has essentially been in recession, only "dragged out" of it by US consumer debt? That's an amazing admission from a British official, considering that New Labour's sizzling neolib economy that was such an example to fuddy-duddy Europe is entirely contained in those fifteen years.
And so we also get this other kind of rewriting of history:
ChrisCook:
Have they now? If my memory serves me well, there were no audible warnings before we hit the wall.
(Sorry, Chris, it's meta, I know...)
And so we also get this other kind of rewriting of history: ChrisCook:Economists have long warned of the dangers of imbalances in the global economy - specifically huge trade surpluses and currency reserves built up by exporters such as China, and big deficits in the US and other economies. Have they now? If my memory serves me well, there were no audible warnings before we hit the wall.
Correcting Global Imbalances -- Avoiding the Blame Game, Remarks by Rodrigo de Rato, Managing Director, IMF (February 23, 2005)
For my remarks tonight, I have chosen to focus on the issue of global imbalances. In doing this, I shall also deal with a theme that FPA members like yourselves will relate to naturally, and that is the theme of international cooperation. As you will appreciate, it is such cooperation that will help us deal with the imbalances problem. ... Looking ahead, last year's momentum should ensure that global growth remains robust in 2005. This is all good news so far. However, within these positive signs lie serious threats and challenges. We are all aware of the large US current account and fiscal deficits. These are matched--or financed, if you will--by growing surpluses in Japan, emerging Asia, and certain oil-exporting countries. This constellation of large deficits in one country, with counterpart surpluses being concentrated in a few others, is what we mean when we speak of global imbalances. Related to these imbalances, and to complicate matters further, global growth has been, and remains, unduly dependent on the United States and China. Non-oil exports to the US in 2004, for example, accounted for 18 percent of global trade. In the euro area and Japan--which together account for nearly one-quarter of global output--under-performance continues to be the order of the day. If this trend persists, it will further widen existing imbalances, and increase the risks for abrupt disruptions to global growth. Yet, things need not be this way.
...
Looking ahead, last year's momentum should ensure that global growth remains robust in 2005. This is all good news so far. However, within these positive signs lie serious threats and challenges. We are all aware of the large US current account and fiscal deficits. These are matched--or financed, if you will--by growing surpluses in Japan, emerging Asia, and certain oil-exporting countries. This constellation of large deficits in one country, with counterpart surpluses being concentrated in a few others, is what we mean when we speak of global imbalances.
Related to these imbalances, and to complicate matters further, global growth has been, and remains, unduly dependent on the United States and China. Non-oil exports to the US in 2004, for example, accounted for 18 percent of global trade. In the euro area and Japan--which together account for nearly one-quarter of global output--under-performance continues to be the order of the day. If this trend persists, it will further widen existing imbalances, and increase the risks for abrupt disruptions to global growth. Yet, things need not be this way.
However, nobody was listening. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
How Did Economists Get It So Wrong? - NYTimes.com
There was a telling moment in 2005, at a conference held to honor Greenspan's tenure at the Fed. One brave attendee, Raghuram Rajan (of the University of Chicago, surprisingly), presented a paper warning that the financial system was taking on potentially dangerous levels of risk. He was mocked by almost all present -- including, by the way, Larry Summers, who dismissed his warnings as "misguided." ... Take, for example, the precipitous rise and fall of housing prices. Some economists, notably Robert Shiller, did identify the bubble and warn of painful consequences if it were to burst. Yet key policy makers failed to see the obvious. In 2004, Alan Greenspan dismissed talk of a housing bubble: "a national severe price distortion," he declared, was "most unlikely." Home-price increases, Ben Bernanke said in 2005, "largely reflect strong economic fundamentals." ... But there was something else going on: a general belief that bubbles just don't happen. What's striking, when you reread Greenspan's assurances, is that they weren't based on evidence -- they were based on the a priori assertion that there simply can't be a bubble in housing. And the finance theorists were even more adamant on this point. In a 2007 interview, Eugene Fama, the father of the efficient-market hypothesis, declared that "the word `bubble' drives me nuts," and went on to explain why we can trust the housing market: "Housing markets are less liquid, but people are very careful when they buy houses. It's typically the biggest investment they're going to make, so they look around very carefully and they compare prices. The bidding process is very detailed."
Take, for example, the precipitous rise and fall of housing prices. Some economists, notably Robert Shiller, did identify the bubble and warn of painful consequences if it were to burst. Yet key policy makers failed to see the obvious. In 2004, Alan Greenspan dismissed talk of a housing bubble: "a national severe price distortion," he declared, was "most unlikely." Home-price increases, Ben Bernanke said in 2005, "largely reflect strong economic fundamentals."
But there was something else going on: a general belief that bubbles just don't happen. What's striking, when you reread Greenspan's assurances, is that they weren't based on evidence -- they were based on the a priori assertion that there simply can't be a bubble in housing. And the finance theorists were even more adamant on this point. In a 2007 interview, Eugene Fama, the father of the efficient-market hypothesis, declared that "the word `bubble' drives me nuts," and went on to explain why we can trust the housing market: "Housing markets are less liquid, but people are very careful when they buy houses. It's typically the biggest investment they're going to make, so they look around very carefully and they compare prices. The bidding process is very detailed."
How many divisions bonuses does the IMF manage?
FRB: Speech, Bernanke -- The Global Saving Glut and the U.S. Current Account Deficit -March 10, 2005 En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
What is remarkable is that the same causes of the currency fluctuations were quoted back then (large amounts of loans in foreign currencies) and nobody has done anything about it. Our friend Ambrose again (he seems to be the only one to have talked about that mythical unpublished report "deja vu all over again" from the IMF).Borrowers have rushed to take out loans in francs and other currencies, but murmurs over the exchange risks are growing, reports Ambrose Evans-Pritchard in Budapest (21 Sep 2006) ... Over 60pc of total loans to businesses and households are now in foreign currencies, and damn the exchange risk. Though Hungary is the region's pioneer with some $2bn a year in Swiss franc loans, Poland, Croatia, Romania, and lately Turkey are catching up fast. This is Europe's "carry trade", every bit as creative as the better-known yen trade that has juiced the world's asset markets with liquidity at near zero interest rates from the Bank of Japan. ... "There is nothing we can do to stop foreign exchange borrowing, and we don't even try. As members of the European Union, we have to respect the free flow of capital," he [Hamezc Istvan, director of Hungary's Central Bank] said.The Central Banker blames the government '4 years ago' (that would be 2002) for making a mess of the economy. Who was in power in 2002? A fistful of Euros also carried the story.
Borrowers have rushed to take out loans in francs and other currencies, but murmurs over the exchange risks are growing, reports Ambrose Evans-Pritchard in Budapest (21 Sep 2006) ... Over 60pc of total loans to businesses and households are now in foreign currencies, and damn the exchange risk. Though Hungary is the region's pioneer with some $2bn a year in Swiss franc loans, Poland, Croatia, Romania, and lately Turkey are catching up fast. This is Europe's "carry trade", every bit as creative as the better-known yen trade that has juiced the world's asset markets with liquidity at near zero interest rates from the Bank of Japan. ... "There is nothing we can do to stop foreign exchange borrowing, and we don't even try. As members of the European Union, we have to respect the free flow of capital," he [Hamezc Istvan, director of Hungary's Central Bank] said.
Over 60pc of total loans to businesses and households are now in foreign currencies, and damn the exchange risk. Though Hungary is the region's pioneer with some $2bn a year in Swiss franc loans, Poland, Croatia, Romania, and lately Turkey are catching up fast. This is Europe's "carry trade", every bit as creative as the better-known yen trade that has juiced the world's asset markets with liquidity at near zero interest rates from the Bank of Japan.
"There is nothing we can do to stop foreign exchange borrowing, and we don't even try. As members of the European Union, we have to respect the free flow of capital," he [Hamezc Istvan, director of Hungary's Central Bank] said.
We know it could be foreseen because it was foreseen by economists (not just by bloggers), who did voice their concerns about the global imbalances. Even Greenspan talked about "irrational exuberance" in the 1990's. Krugman thought the depression woud hit after the .com crash. And so on.
The fact is that these warnings were not heeded, not even by the people with the power to do anything about it (such as Greenspan ca. 2003). En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? And how do we factor that assessment into monetary policy? We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs, and price stability. Indeed, the sharp stock market break of 1987 had few negative consequences for the economy. But we should not underestimate or become complacent about the complexity of the interactions of asset markets and the economy. Thus, evaluating shifts in balance sheets generally, and in asset prices particularly, must be an integral part of the development of monetary policy.
As I suggested to Melanchthon, most were content to leave those who did speak out to carry on as voices in the wilderness.
(PS Greenspan doesn't count as one who "spoke out" ;)).
how many economists were content to let them be seen as doom merchants, or politically motivated, or fringe?
there were no audible warnings before we hit the wall.
Main headline
WE'RE SCREWED
According to a high tech study commissioned by a concerned Mayor Bloomberg and generously funded by the Rockefeller Foundation, climate change caused by human-created greenhouse gases is threatening the health, livelihood and security of New Yorkers--especially those who take the subway to work. Congress to New York: "Swim for it!" Pentagon top brass warn: Act now, or pay later with `lives' O's Grandma Goes Solar Crap and Trade No Fire Without Smoke Universal Pictures and Illumination Entertainment have teamed up to bring Dr. Seuss's environmental tale, The Lorax, to a big screen near you on Seuss's birthday in 2012. The film will be animated and is slated to be written by the duo behind Horton Hears a Who. The story features a selfish entrepreneur who clear-cuts the forest of all of its Truffala trees leaving no homes for the animals.
Congress to New York: "Swim for it!"
Pentagon top brass warn: Act now, or pay later with `lives'
O's Grandma Goes Solar
Crap and Trade
No Fire Without Smoke
Universal Pictures and Illumination Entertainment have teamed up to bring Dr. Seuss's environmental tale, The Lorax, to a big screen near you on Seuss's birthday in 2012. The film will be animated and is slated to be written by the duo behind Horton Hears a Who. The story features a selfish entrepreneur who clear-cuts the forest of all of its Truffala trees leaving no homes for the animals.
We're Screwed Crap and Trade Cap and trade. It sounds like a kind of street hustle. And in its way it is. But the street is Wall Street and the hustle is designed to collect a lot more than nickels and dimes from gullible passersby. 10:07 AM Pentagon top brass warn: Act now, or pay later with `lives' The Pentagon has run the numbers. And they've decided global warming is real, it's happening now, and it's a US national security threat. Unless we take action now, the US military will be drawn into wars fueled by climate change. 8:59 AM Congress cops out on climate Danger is in our CO2-laden air--the danger that Obama will head to the Copenhagen Climate Change Conference this December without a climate bill from Congress in his pocket. 8:55 AM No Fire Without Smoke The Obama administration is spending $2.4 billion on "clean coal" carbon capture and storage projects. But the Post has learned that the coal industry's claims about "clean coal" technology are misleading. 8:45 AM Congress to New York: "Swim for it!" Congress isn't taking the action that's needed to prevent global warming. And according to state-of-the-art scientific research by the Pentagon, as well as a blue-chip panel commissioned by Mayor Bloomberg, the disastrous results of that climate change could soon be coming to a metropolitan area near you.
Crap and Trade Cap and trade. It sounds like a kind of street hustle. And in its way it is. But the street is Wall Street and the hustle is designed to collect a lot more than nickels and dimes from gullible passersby. 10:07 AM
Pentagon top brass warn: Act now, or pay later with `lives' The Pentagon has run the numbers. And they've decided global warming is real, it's happening now, and it's a US national security threat. Unless we take action now, the US military will be drawn into wars fueled by climate change. 8:59 AM
Congress cops out on climate Danger is in our CO2-laden air--the danger that Obama will head to the Copenhagen Climate Change Conference this December without a climate bill from Congress in his pocket. 8:55 AM
No Fire Without Smoke The Obama administration is spending $2.4 billion on "clean coal" carbon capture and storage projects. But the Post has learned that the coal industry's claims about "clean coal" technology are misleading. 8:45 AM
Congress to New York: "Swim for it!" Congress isn't taking the action that's needed to prevent global warming. And according to state-of-the-art scientific research by the Pentagon, as well as a blue-chip panel commissioned by Mayor Bloomberg, the disastrous results of that climate change could soon be coming to a metropolitan area near you.
Frank Delaney ~ Ireland
It's not every day you see a correlation quite like this:
Indeed, as the chart's providers, RBC Capital Markets, noted on Tuesday -- net speculative long positions on Comex reached a new all-time high of 28.5 MMoz last week, while aggregate gold ounces under management of the six largest gold ETFs increased only slightly week over week to 49.1 MMoz. All of which foretells, according to RBC: The weak physical demand for gold combined with the rapid rise in the speculative activity could give rise to a sharp correction, especially if the US dollar rallies.
Indeed, as the chart's providers, RBC Capital Markets, noted on Tuesday -- net speculative long positions on Comex reached a new all-time high of 28.5 MMoz last week, while aggregate gold ounces under management of the six largest gold ETFs increased only slightly week over week to 49.1 MMoz.
All of which foretells, according to RBC: The weak physical demand for gold combined with the rapid rise in the speculative activity could give rise to a sharp correction, especially if the US dollar rallies.
The weak physical demand for gold combined with the rapid rise in the speculative activity could give rise to a sharp correction, especially if the US dollar rallies.
The global financial crisis has revived the old debate on optimal regulation in the money and credit markets. The current debate is centred on how to regulate highly sophisticated financial markets, yet the pros and cons are similar to those observed a few centuries ago, when paper money emerged and became the state of the art in the money market. Actually, problems of regulation appear whenever financial innovations change the ways capital markets operate. Looking at this history, e.g. the study of Davis (1896) on banking in Massachusetts, can help us understand the turbulent recent developments. In recent work, we touch on these issues by studying the evolution of paper money and its influence on economic efficiency and financial stability (Levintal and Zeira 2009).
Looking at this history, e.g. the study of Davis (1896) on banking in Massachusetts, can help us understand the turbulent recent developments. In recent work, we touch on these issues by studying the evolution of paper money and its influence on economic efficiency and financial stability (Levintal and Zeira 2009).
