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†ECONOMY & FINANCE†


The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt št gmail dotcom) on Sun Feb 19th, 2012 at 12:09:31 PM EST
China cuts banks' reserve ratios - FT.com

China's central bank made a long-awaited move at the weekend to support lending in the country's slowing economy with a cut to the amount of money banks must hold as reserves.

The People's Bank of China said it would lower the reserve requirement ratio by 50 basis points from February 24. The cut will bring the ratio down to 20.5 per cent for the largest banks, and is expected to free up about Rmb400bn ($64bn) for new lending.

The decision is part of Beijing's efforts to engineer a soft landing for the economy as growth slows while inflation remains stubbornly high.

"Both the pressure of growth moderation and that of price rises exist at the same time," Jin Qi, assistant to the PBOC governor, said according to a press release on Sunday. "The overall tone of the monetary policy will stay prudent."



The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt št gmail dotcom) on Sun Feb 19th, 2012 at 12:46:21 PM EST
[ Parent ]
Japan, China to Help Europe Solve Crisis - Bloomberg

Japanese Finance Minister Jun Azumi said his nation and China will work together to help Europe solve its debt crisis through the International Monetary Fund.

Europe needs a bigger so-called firewall of added funding to contain the crisis, even as Greece shows some improvement in solving its financial woes, Azumi told reporters in Beijing yesterday after meeting Chinese Vice Premier Wang Qishan. Azumi, who met Chinese Finance Minister Xiu Xuren during his visit, also said he asked China to make its currency more flexible.

"We shared the view that Europe needs to make more efforts to create a bigger firewall," Azumi said. "We also agreed to act together as the IMF will probably ask the U.S., Japan and China" to help boost its lending capacity.

The IMF proposed last month to boost its lending funds by as much as $500 billion to insulate the global economy against any deterioration of Europe's sovereign crisis. That would be similar to a G-20 decision in April 2009 to triple the fund's resources as part of plans to pull the world out of recession. At that time, the U.S. and Japan each contributed $100 billion, the EU $178 billion and China $50 billion.



The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt št gmail dotcom) on Sun Feb 19th, 2012 at 12:46:36 PM EST
[ Parent ]
Greece sets date for €200bn debt swap - FT.com

Greece plans to launch a debt swap next month for private bondholders as part of a second €130bn bail-out expected to be approved on Monday by eurozone finance ministers, a government official said on Saturday.

The official said the swap, which would cover €200bn of Greek sovereign debt, would take place between March 8 and March 11, only days before Athens is due to repay a €14.4bn bond maturing on March 20.

As a first step towards completing the deal, the Greek parliament is set to pass legislation next week on so-called collective action clauses, with the aim of forcing a minority of "holdout" investors to take losses of around 70 per cent on their holdings.

The debt swap would offer bondholders a cash sweetener of 10-15 per cent of their holdings, plus new 30-year bonds with a coupon of around 3.75 per cent, which could increase if Greece achieves higher than forecast growth rates



The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt št gmail dotcom) on Sun Feb 19th, 2012 at 12:47:09 PM EST
[ Parent ]
Libor Manipulation: Another Black Eye for UBS - Businessweek

For Switzerland's largest bank, the hits just keep coming. After years of being whacked with millions of dollars of fines for all sorts of infractions, UBS now appears to be at the center of the financial world's latest scandal: an alleged conspiracy by traders and brokers to rig the price of derivatives around the world by manipulating a key interest rate.

The Wall Street Journal reports that UBS has admitted to Canadian regulators that between 2007 and 2010, some of its traders and cash brokers conspired to manipulate the London interbank offered rate, also known as Libor. This is the rate that banks use to lend to each other, and it is essentially the backbone of half the world's fixed-income market, because it's also used to calculate the price of trillions of dollars of floating-rate securities every day, from car loans to corporate bonds and derivatives.

By allegedly conspiring to set Libor rates, traders and cash brokers appear to have been able to profit off of derivatives linked to it. Bloomberg News reports that UBS recently suspended a number of senior executives and traders in conjunction with the investigation.

Despite its systemic importance, Libor remains a strange throwback to an insular system of clubby bankers sitting around determining rates. Every morning at 11 a.m. in London, panels organized by the British Bankers' Association set the rate for 10 currencies, with a separate panel assigned to each currency. The agreed-on rate is supposed to represent a snapshot of banks' willingness to lend to each other that day, as they suss out their own short-term cash needs.



The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt št gmail dotcom) on Sun Feb 19th, 2012 at 01:15:38 PM EST
[ Parent ]
Free Kindle Edition of The New Robber Barons By Janet Tavakoli  H/T Jesse


   "The value of the e-book is that it has the embedded links in the book, unlike mainstream publishers. The other part about this book is that it is arranged chronologically by topic; one sees how much Congress and regulators have let us down, enabled cover-ups and then failed to act as evidence reached the public domain. We're seeing it all over again with MF Global."

    Janet Tavakoli

For today and on Tuesday (not on Monday) the $9.99 Kindle edition of The New Robber Barons by Janet Tavoli is free.

You must own a kindle, or have installed the kindle app for PC or mac, to download it. You can find it at Amazon US here, at Amazon UK here, or Amazon France here.

This e-book is a collection of her writings from various sources.



As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 19th, 2012 at 03:48:56 PM EST
[ Parent ]
Ok I'm not gonna be able to download it as I have no kindle, but she's more or less describing a done deal. The oligarchy own us and are destroying our lives, region by region, nation by nation, class by class, yet nobody dare call foul on them.

The Occupy movement across most of europe, particularly in the UK, has been neutered (spain and greece excluded). the plunder continues and we remain complacent in the face of it

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Mon Feb 20th, 2012 at 02:56:44 AM EST
[ Parent ]
I down loaded a free Kindle app on my computer and it works well. She does provide an indexed, step by step analysis of the crimes and the widespread refusal to see them by bought and paid for government.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 20th, 2012 at 10:26:14 AM EST
[ Parent ]
Meltdown Economics & Other Complex Catastrophes blog: Standing on the Toes of Giants (DECEMBER 24, 2011)
Let me start with Blinder's The Euro Zone's German Crisis in Dec. 13's Wall Street Journal (unfortunately, WSJ articles are inaccessible to anyone without a subscription). Blinder is on the mark in claiming that the Eurozone crisis is primarily due to Germany. Unfortunately, he makes this claim for entirely the wrong reasons. By examining the statistics on unit labor costs (ULC), he correctly identifies the competitiveness problem between Germany and the EZ periphery (it has been widely known that German unit labor costs are a lower outlier on the index ranking EZ ULC evolution). But by neglecting that unit labor costs are defined as a quotient of nominal wages and productivity, he jumps to the mistaken conclusion that this must be due to some "German productivity miracle." In fact, quite the opposite is the case: German productivity growth in the period 2001-2011 was at best mediocre. The low value of German ULC is almost entirely due to something I (among many others) had long ago identified as what one can variously call "wage restraint" or "wage dumping": German nominal wages have risen much slower than her productivity, and very much slower than her EZ trading partners. Essentially none of Germany's  ULC advantage is due to exceptional productivity growth.

...

To his great credit, Professor Blinder readily admitted to this mistake in his analysis in an email reply (I was apparently not the first one to point it out to him). It makes a world of a difference whether German competitiveness advantage is due to superior productivity growth or, if you'll pardon a Marxist terminological indulgence, superior exploitation of her workers. But before wallowing in Marxist self-righteousness I would qualify this observation in two ways. First, a mature open economy in which wage growth systematically lags productivity creates a conundrum for its trading partners, since it is out of long-run macroeconomic equilibrium and can only maintain employment levels by, e.g., generating export surpluses (i.e., it is underconsuming). This characteristic of the contemporary German economy - an excessively low consumption share - has been repeatedly highlighted by Professor Peter Bofinger (the "token" Keynesian on the German Council of Economic Advisers). Thus German employment is dependent on finding someone "willing" to be the consumer of last resort and overconsume, i.e., run a current account deficit (financed by German and other banks), and until 2008 that was to a large extent the EU periphery. This is exactly analogous to the relationship between China and the USA over the last 20 years. German workers may have been content with this "exploitative" relationship since it guaranteed them relatively higher employment rates (by EU standards).

Second, German competitiveness also really does derive from the fact that Germany continues to enjoy an advantageous specialization pattern: it still produces the things high-growth countries demand, both in the rest of the EU during the housing boom, and even now in emerging markets, and that they cannot (yet) produce themselves - specialized capital goods and producer intermediates like chemicals, and high-end automobiles. So hats off to Germany for defending her industrial comparative advantage, but there is no justification in calling this a "productivity miracle." Rather, you can take your pick of "obsessive wage restraint," "wage dumping,", or "super exploitation."



tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Sun Feb 19th, 2012 at 05:03:08 PM EST
[ Parent ]
Eurointelligence: Second bailout for Greece expected to be approved today (20.02.2012)
Mark Schieritz on Target 2

The debate on the meaning of Germany's Target 2 balances has been going on for some time, and was recently rekindled by a long interview with Hans-Werner Sinn in Frankfurter Allgemeine. Mark Schieritz, writing in Herdentrieb, looks at Sinn`s central argument that Germany's Target 2 balances present a counterparty risk in the case of a breakdown of the euro. Schieritz says the counterfactual would be a breakdown of the euro where Germany's claims would be against foreign commercial banks. In this case they would be just as worthless. The whole point of the rescue operations is to prop up the solvency of Germany's export clients.



tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 04:19:38 AM EST
[ Parent ]
Herdentrieb: Einspruch, Professor Sinn!
Also: Sinn hat eine ganze Seite in der FAZ für seine Fundamentalkritik der Währungsunion freigeräumt bekommen. Das Interview enthält viele kluge Gedanken aber  eben auch eine ganze Reihe von Halbwahrheiten und Zuspitzungen, die die Lage dramatisieren und Ressentiments schüren. Sinn hat das eigentlich nicht nötig. Fangen wir an.
Objection, Professor Sinn!
So: Sinn has been given free use of a whole page of the FAZ for his fundamental critique of the Monetary Union. The Interview contains many clever thoughts but also a whole series of helf-truths and exaggerations, which dramatise the matter and stoke resentments. That was absolutely not necessary on Sinn's part. Let us begin.
In other words, Sinn is Wulffing with abandon. Also: private:good, public:bad!
Damit wären wir auch schon beim Kern des Interviews. Sinn argumentiert, dass die großzügigen Refinanzierungskredite der EZB die privaten Kapitalströme in den Süden ersetzen. Das hält er für schlecht, weil die deutschen Auslandsforderungen immer weniger aus Forderungen an Private und immer mehr aus Forderungen an das Eurosystem bestünden.
Thus we get to the heart of the interview. Sinn argues that the large refinancing credits from the ECB are replacing the private capital flows into the South. He considers this bad, because German foreign claims consist ever less of claims on the private sector and more of claims on the Eurosystem.
And, finally, it's sad that these things need to be stressed:
Man könnte übrigens genauso gut zum gegenteiligen Ergebnis kommen: Die Rettungspolitik hält unsere Handelspartner zahlungsfähig und SICHERT so unsere Auslandsforderungen. Denn irgendwann wird das Geld ja wieder in den Süden fließen, dann verschwinden auch die Target-Salden wie von Zauberhand und die EZB kann ihre Refinanzierungsgeschäfte zurückfahren. Und: Wir leben in einer Währungsunion. Die EZB ist nicht unsere Notenbank, sondern die ganz Europas - und wir können es den italienischen Banken nicht verbieten, wenn sie in der Not auf ihre Zentralbank zurückgreifen. Dafür sind Zentralbanken da.
One could just as well come to the contrary conclusion: the rescue policies improves our trading partners' ability to pay and therefore SECURES our foreign claims. Because the money will one way or the other flow into the South, then the Target balances will disappear as if by magic, and the ECB can withdraw its refinancing facilities. And: we live in a currency union. The ECB is not our Central Bank, but that of the whole of Europe - and we cannot forbid the Italian banks to resort to their Central Bank when in need. That's what Central Banks are there for.


tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Mon Feb 20th, 2012 at 06:48:40 AM EST
[ Parent ]

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