2--Abe’s BOJ Marching Orders: A Step Too Far?, WSJ
First, market players moved. Then, they scratched their heads.
Opposition leader Shinzo Abe’s remarks favoring aggressive monetary easing drew a positive reaction last week from financial markets. The comments by the man tipped to become Japan’s next prime minister also attracted kudos from experts who welcomed them as outlining a much-needed remedy to get the economy out of its long slump.
But now, he may have gone too far.
In ratcheting up his rhetoric against the Bank of Japan 8301.JA -0.93% at the weekend, Mr. Abe seemed to cross the boundary between aggressive easing steps and irresponsible public financing, as he called on the central bank to purchase government bonds to finance public works spending.
Critics say such a step would set Japan on a slippery slope toward undisciplined increases in its public debt load — already the largest among developed nations — and a loss of trust in its ability to repay its debts.
3--Why Another Financial Crash is Certain, archive, inteltrends
Here’s an excerpt from a special report on shadow banking by the Federal Reserve Bank of New York:
At the eve of the financial crisis, the volume of credit intermediated by the shadow banking system was close to $20 trillion, or nearly twice as large as the volume of credit intermediated by the traditional banking system at roughly $11 trillion. Today, the comparable figures are $16 and $13 trillion, respectively… The weak-link nature of wholesale funding providers is not surprising when little capital is held against their asset portfolios and investors have zero tolerance for credit losses.” (“Shadow Banking”, Federal Reserve Bank of New York Staff Report)So, between $4 to $7 trillion vanished in a flash after Lehman Brothers blew up. How many millions of jobs were lost because of inadequate regulation? How much was trimmed from output, productivity, and GDP? How many people are on now food stamps or living in homeless shelters or struggling through foreclosure because unregulated financial institutions were allowed to carry out credit intermediation without government supervision or oversight?
Ironically, the New York Fed doesn’t even try to deny the source of the problem; deregulation. Here’s what they say in the report: “Regulatory arbitrage was the root motivation for many shadow banks to exist.”
What does that mean? It means that Wall Street knows that it’s easier to make money by eliminating the rules… the very rules that protect the public from the predation of avaricious speculators.
The only way to fix the system is to regulate all financial institutions that act like banks. No exceptions
4--A Short History of Bubblenomics, counterpunch
Here’s how it all works according to Independent Strategy’s David Roche
"The reason for the exponential growth in credit, but not in broad money, was simply that banks didn’t keep their loans on their books any more ? and only loans on bank balance sheets get counted as money. Now, as soon as banks made a loan, they "securitized" it and moved it off their balance sheet.
There were two ways of doing this. One was to sell the securitized loan as a bond. The other was "synthetic" securitization: for example, using derivatives to get rid of the default risk (with credit default swaps) and lock in the interest rate due on the loan (with interest-rate swaps). Both forms of securitization meant that the lending bank was free to make new loans without using up any of its lending capacity once its existing loans had been "securitized."
So, to redefine liquidity under what I call New Monetarism, one must add, to the traditional definition of broad money, all the credit being created and moved off banks’ balance sheets and onto the balance sheets of nonbank financial intermediaries. This new form of liquidity changed the very nature of the credit beast. What now determined credit growth was risk appetite: the readiness of companies and individuals to run their businesses with higher levels of debt." ("The Global Money Machine", David Roche, Wall Street Journal)
5--The way forward in Egypt, WSWS
6---Big investment firm buys hundreds of houses in Sacramento area, Sac Bee
7---Some securities purchases but no QE from the Fed yet, sober look
The Fed's latest securities purchases are still not having much of an impact on bank reserves (see discussion). The net effect of Fed's recent activities is equivalent to sterilization, although this is probably not what the central bank had intended. The result is similar to the ECB's SMP (Securities Markets Programme), which was (usually) sterilized by auctioning off term deposits (securities purchases increase reserves, while term deposits "drain" them).
8---Loan modification defaults soar 24%, can-kicking fails, oc housing