Saturday, February 23, 2013

Today's links

1--The Never Ending Shrinking European Economy, economic populist

2---They Bailed On Their Homes - Now They Want Back In, CNBC

3---Osborne vows to stick to Coalition's economic plan despite loss of Britain's triple A credit rating, Telegraph (The stupidest man on earth?)
George Osborne has vowed to stick to the Coalition’s economic plans even after Britain lost its cherished AAA credit rating amid concern about weak growth and rising debt.

4---Eurozone crisis as it happened: EC admits recession will be deeper than feared, Guardian

 
 
Does the arrival of the latest wave signal another bubble in the making?
       
Assuming it continues, the current merger boom is still in its early stages, far from the excesses that characterized previous peaks. The wave that began in 2005 lasted nearly three years before cratering.
“We’re nowhere near the frothy part of the cycle,” Mr. Schwarzman said. “People are doing sensible things.”
He pointed to this week’s announcement of talks between OfficeMax and Office Depot, a classic example of a merger between two companies in the same business that would save costs and reduce competition.
The same could be said of the proposed US Airways-American Airlines merger. The cable giant Comcast is buying the rest of NBCUniversal. And there are obvious synergies between a food company like Heinz and 3G Capital, which owns Burger King. None of these deals are being driven by high debt or dubious financing.
Joshua M. Brown, vice president for investments at Fusion Analytics, went so far as to call this the “healthiest M.& A. boom in decades” on his “Reformed Broker” blog. “People are so pessimistic that the second anything positive happens, they call it a bubble. But this is not 2007. Most of these are cash deals. They’re very responsible. What would be irresponsible would be for Warren Buffett to sit around on $20 billion in cash which is earning nothing.” ...
 
The warning signs are always the same,” Mr. Schwarzman said. “High prices, very high multiples, low cost of money, stock deals rather than cash, companies buying businesses they know nothing about, and sometimes very high leverage.”
 
 
The window of opportunities to reach consent on the US missile shield in Europe is elapsing, PM Dmitry Medvedev told Cuban media, as Russia will have to retaliate to protect national strategic interests - no matter who is in charge in the Kremlin.
Russia and the US should reach an agreement on the American missile shield being deployed in Europe before 2020, or it will become meaningless, said Medvedev in an exclusive interview to Prensa Latina news agency.

“While serving my presidential term I specified that we’re approaching the event horizon for this decision, which is the end of this decade, maybe even a bit earlier,” Medvedev said.

“If we cannot make a deal, the consequences for the international relations are going to be highly unpleasant, because we will have to adopt retaliatory measures. Any Russian government or head of state will riposte, simply because this is in our strategic interest,” Russian PM explained.

Dmitry Medvedev acknowledged that the missile shield issue remains the main stumbling block in Russia-US relations and little progress has been reached so far.

“Unfortunately, all our efforts to explain to the Americans that European missile shield in its current form is aimed against Russia, its nuclear capabilities and undermines world’s nuclear balance have been in vain. Our arguments have been heard neither in America nor in NATO,” Medvedev said.

“They try to soothe us saying this is against ‘some other states’. Unfortunately, such speculation does not appear convincing for us. We have delivered our arguments before,” Russian PM argued.

7---America’s most contaminated: Radioactive waste leaks into northwestern river, RT

Radioactive waste is leaking from six underground tanks at America’s most-contaminated facility in Washington, the state’s government announced on Friday. Just how much toxic stew got into the Columbia River’s underground basin is unclear.
The leak at the Hanford Nuclear Reservation has so far not posed an immediate health risk to the public, Governor Jay Inslee said, because it will take a long time, years perhaps, for the waste to reach the groundwater. But the leakages have not been stopped yet.

The US Department of Energy spokeswoman Lindsey Geisler promised federal officials will to collaborate with Washington State to deal with the emergency.

US Senator Ron Wyden from Oregon, who chairs the Senate's Energy and Natural Resources Committee, said that “This should represent an unacceptable threat to the Pacific Northwest for everybody. There are problems that have to be solved, and the Department of Energy cannot say what changes are needed, when they will be completed, or what they will cost

8---Winding down the Fed's balance sheet? No problem says Dean Baker, CEPR

First, the Fed does not have to sell off the bonds. It can simply hold its bonds until maturity as those of us who are a few years ahead of mainstream economists pointed out a while back.

If the Fed were to go this route it could reach its targets for restricting money supply expansion by raising reserve requirements. This shouldn't be that hard a concept to understand, the option appears in every intro textbook. While changing the base of reserves, rather than the money multiplier by changing the reserve requirement, is the preferred manner for the conduct of monetary policy, a set of higher reserve requirements scheduled long in advance should not be too disruptive to the banking system. We did use to have much higher reserve requirements. Also, China's central bank routinely uses reserve requirement changes to conduct its monetary policy.

The other point that should jump out at folks is that the projected drop in bond prices, which is the reason that the Fed is projected to lose money, presents a great opportunity for the government to reduce its debt burden. The idea is that long-term bonds issued at the current low interest rates will sell at sharp discounts later in the decade, if interest rates rise as projected.

These discounted prices will give the government the opportunity to reduce its debt by hundreds of billions of dollars -- perhaps more than $1 trillion -- simply by buying these bonds back at lower prices. Such a move would be utterly pointless since it would not change the country's interest burden at all, but since we currently live in a political environment where the debt to GDP ratio is an object of worship, this would be a great way to appease that god. It sure beats big cuts to Social Security and Medicare.

9---What Is The Purpose of QE?, Big Picture

what is QE supposed to do? Bernanke told us in his speech over the summer in Jackson Hole:
“After nearly four years of experience with large-scale asset purchases, a substantial body of empirical work on their effects has emerged. Generally, this research finds that the Federal Reserve’s large-scale purchases have significantly lowered long-term Treasury yields. For example, studies have found that the $1.7 trillion in purchases of Treasury and agency securities under the first LSAP program reduced the yield on 10-year Treasury securities by between 40 and 110 basis points. The $600 billion in Treasury purchases under the second LSAP program has been credited with lowering 10-year yields by an additional 15 to 45 basis points.12 Three studies considering the cumulative influence of all the Federal Reserve’s asset purchases, including those made under the MEP, found total effects between 80 and 120 basis points on the 10-year Treasury yield.13 These effects are economically meaningful.
 
LSAPs also appear to have boosted stock prices, presumably both by lowering discount rates and by improving the economic outlook; it is probably not a coincidence that the sustained recovery in U.S. equity prices began in March 2009, shortly after the FOMC’s decision to greatly expand securities purchases. This effect is potentially important because stock values affect both consumption and investment decisions.
 
 
Several major banks are desperately trying to free up billions of dollars in capital by finally selling what is left of the complex credit portfolios that brought Wall Street to its knees in the 2008 crisis.
...
These books typically consist of credit default swaps used to create exposure to banks and companies, often as synthetic collateralised debt obligations.
     

Still around

CDOs epitomised the excessive financial engineering that helped to lead to the financial crisis, and it may seem surprising that banks still hold billions of dollars worth of them. But as correlation soared in 2008, bank credit desks began haemorrhaging money and many institutions opted to hold on to their positions and hope for improvement, rather than conduct a fire sale....

So even as the total outstanding volume of synthetic CDOs has shrunk to US$25bn from US$105bn in 2007, those still lurking on balance sheets are continuing to wreak havoc – even though correlation has fallen, and most are now in the black....

Some banks may seek to shed assets in a more piecemeal fashion given the difficulty of executing large-scale deals. Either way, CDOs may continue to be a thorn in banks’ sides for a couple more years to come.

11--The Greek Trap, Real News video

12--US blocks UN resolution condemning Damascus terror bombings, wsws

Yesterday US officials blocked a Russian-sponsored resolution at the United Nations Security Council condemning Thursday’s multiple terror bombings in the Syrian capital, Damascus.
The death toll of the bombings, which came amid the ongoing US-led proxy war to oust Syrian President Bashar al-Assad, rose to 83 yesterday, with over 200 wounded. Some 22 people died in three car bombings in northern Damascus. The main car bomb in central Damascus near the ruling Baath Party headquarters and a school killed 63, including many children.

Though no one has taken responsibility for the bombing, it was widely suspected to be the work of the Al Nusra Front, an Al Qaeda-linked group active in the US-backed opposition to Assad, which recently declared that it would launch an offensive to “liberate Damascus.”

When Russian officials presented a UN Security Council Resolution condemning the Damascus terror bombings, the US delegation refused to pass it. Whatever tactical differences exist in Washington over how extensively to arm Al Qaeda and the broader, Islamist-dominated Syrian opposition, the US government stands behind terrorism and mass murder as tools of its Middle East policy.

13--Forecasting more recession and unemployment, the EU demands more austerity, wsws

Cutting the deficit in order to fill the coffers of the banks and major corporations is a shared global imperative—whatever the formal political colouration of governments. Indeed, Rehn’s declaration the previous day that more attention needed to be paid to long-term recovery, and his proposal, in line with IMF recommendations, that repayment schedules for some countries be extended by a year, met with criticism from the European Central Bank, Germany and Austria....

Europe required “reform for the sake of sustainable growth and job-creation, and reform to reinforce the competitiveness of European industry,” said Rehn, alluding not only to the gutting of social welfare programmes, but also to labour market “reforms” that will eliminate protections against layoffs and speedup.
“Constructive social dialogue” between employers and the trade unions “has been a key factor in the successful management of economic crises and structural change,” he continued, calling for the creation of an EU tripartite format involving governments, corporations and trade unions....
      
The European Commission (EC), the administrative arm of the European Union (EU), issued a grim economic report Friday. Its Winter Forecasts predicted that 2013 will mark the second straight year of negative growth in the 17-nation euro zone and a mere 0.1 percent increase in the gross domestic product (GDP) of the whole of the 27-nation EU.
Unemployment will hit a new record of 10.7 percent for the EU in 2013, up from 10.3 percent in 2012, and rise further to 11.0 percent in 2014, the EC said. Joblessness in the nations using the euro currency will hit 12.2 percent this year, with the unemployment rate in Spain rising to 26.9 percent.
All of the economic growth projections were revised downward from those contained in a November report, and the unemployment figures were revised upward. The numbers provide only a pale reflection of social misery and impoverishment already on a scale not seen since the 1930s and about to increase.
Acknowledging that the deepening slump was caused mainly by depressed consumption resulting from severe austerity measures, making it impossible for nations such as France to meet their deficit-reduction targets, Olli Rehn, the European commissioner for economic and monetary affairs, nevertheless demanded that EU member states “stay the course of reform and avoid any loss of momentum.”
Rehn hardly bothered to conceal his role as spokesman for the banks and financial interests, declaring that easing off on the dismantling of social services and slashing of jobs, wages and pensions “could undermine the turnaround in confidence that is underway.” He called the EC Winter Forecasts a “building block” in the effort to regain the trust of investors.
The EC predicted that euro zone GDP will shrink by 0.3 percent in 2013, as against the 0.1 percent growth previously anticipated. Euro zone GDP contracted by 0.6 percent in 2012, belying EC predictions of a 0.1 percent expansion.
The new forecast has economic growth crawling along in 2014 at 1.6 percent for the EU as a whole and 1.4 percent for the euro zone

No comments:

Post a Comment