Links: 2013-01-20


The safe asset shortage: A response to David Beckworth | The Economist

“I believe investors are trying to behave more responsibly but are being stymied by the failure of some governments to issue enough safe debt. To me, the huge decrease in the safe asset share since the early 1990s seems like a much bigger development than the relatively small increase that has occurred since 2008. Another way of looking at this is to examine the declining share of American “safe assets” issued by the public sector, as measured by Gary Gorton and Andrew Metrick”

A new Gold Standard is being born – Telegraph Blogs

“Personally, I doubt that Buba had any secret agenda, or knows something hidden from the rest of us. It responded to massive popular pressure and prodding from lawmakers in the Bundestag to bring home Germany’s gold. Yet that is not the end of the story. The fact that this popular pressure exists – and is well-organised – reflects a breakdown in trust between the major democracies and economic powers. It is a new political fact in the global system.”

Russia warns of global currency war | Investing | Financial Post

“The world is on the brink of a fresh “currency war,” Russia warned, as European policy makers joined Japan in bemoaning the economic cost of rising exchange rates.

“Japan is weakening the yen and other countries may follow,” Alexei Ulyukayev, first deputy chairman of Russia’s central bank, said at a conference today in Moscow.”

North America

Republicans to pass debt limit extension –

“Republicans in the House of Representatives vowed to pass a three-month extension of the US debt limit next week, reflecting their mounting concerns about bearing the blame of any new brush with default for the US economy.
Following a two-day retreat at a resort in Williamsburg, Virginia, House Republicans said they would support a short-term extension of the US borrowing limit to give Congress more time to pass a long-term budget.”

House GOP Leaders Divided on Debt Approach –

“Many of the leaders are anxious about a growing clamor among conservatives to use the need to raise the government’s $16.4 trillion debt limit as the vehicle to force spending cuts, according to leadership aides.

Some GOP lawmakers, who worry about the economic impact of the government’s possibly missing some payments, would prefer to use other coming fiscal deadlines to wage the battle.”

Debt Ceiling Crisis Overrated?

Good debate here with James Galbraith, mostly on Social Security, Medicare and Medicaid. The crux here is that retirees likely will get more in future value than they contribute by a wide margin. This is only sustainable via productivity growth, printing money, or increased taxation in the future. The liberal approach is to expect growth, as in the past, to help defuse much of this tension. The conservative approach is to prepare for slower growth and make cuts.

Analysis: Facing drought, U.S. farmers return to crop rotation | Reuters

“Farmers in top U.S. grain states are planning to rotate to other crops after repeated plantings of corn on the same fields, combined with a devastating drought in 2012, badly hurt yields.”

Cramer: Bernanke, Wake Up – YouTube

Here’s the video of Cramer predicting disaster in 2007.

Bait & Switch Ben: Was the Bernanke Put Just a Ruse?

This is about Bernanke…Bernanke needs to open the discount window – that’s how bad things are out there…Alan Greenspan told everyone to take a teaser rate and then raised the rate 17 times! And Bernanke is being an academic. This is no time to be an academic! It is time to get on the Bear Stearns conference call…LISTEN…open the darn Fed window. He has NO IDEA HOW BAD IT IS OUT THERE. NO IDEA! HE HAS NO IDEA! 

I have talked to the heads of almost every single one of these firms in the last 72 hours, and he has no idea what it’s like out there. NONE! And Bill Poole has no idea what it’s like out there. My people have been in this game for 25 years, and they are losing their jobs these firms are going to go out of business and he’s nuts! They’re NUTS! They know nothing! This is a different kind of market and the Fed is asleep!”

Jim Cramer Was Right—They Knew Nothing!

“Jim Cramer gave his famous “they know nothing” speech. The transcripts of the Federal Open Market Committee of the Federal Reserve released Friday show that Cramer was absolutely right. ”   

Fed official alleges Geithner may have alerted banks to rate cut | Reuters

BBC News – US Federal Reserve ‘underestimated financial crisis’

“The US Federal Reserve may have underestimated the looming 2007 global financial crisis, released transcripts from its meetings that year have shown.”

Fed’s 2007 Transcripts Show Shift to Alarm –

“Federal Reserve officials in 2007 seemed to underestimate the growing risks in the U.S. financial system before shifting to a state of high alarm, according to newly released transcripts from the central bank’s meetings that year.”

BBC News – AT&T takes $10bn pensions charge

“US telecoms giant AT&T will put aside $10bn (£6.25bn) in the fourth quarter to cover pension fund losses due to lower-than-expected interest rates.”

Cash is king

“can these reserves flood the real economy and cause inflation? Yes and No. The dirty little secret is, the whole purpose of any financial asset is to buy stuff and services in the real economy at some point of time. So if you really really desire to buy a nice Rolex now it doesn’t matter at all what sort of financial asset you exchange for cash. What matters is your spending desire.”

Understanding the Permanent Floor—An Important Inconsistency in Neoclassical Monetary Economics – New Economic Perspectives

Once you turn base money into short-term debt, can you go back? | FT Alphaville

“FT Alphaville has long argued that IOER’s role as a sterilisation tool is under appreciated. (This, by the way, is why we believe it’s naive to argue that ECB liquidity operations are somehow less inflationary than Fed operations. Both are in reality sterilized.)

It’s the icing that entices banks to hold excess liquidity rather than chasing secured loans or safe assets. This is needed to compress rates during a crisis — that is, to bolster secured (collateralised) rates so that they don’t plunge below zero and therefore distance themselves from positive, near-zero unsecured rates.”



Alemania también sufre | Economía | EL PAÍS more from 

This is a very complete article in Spanish on the German economy. If you can’t read it in the original Spanish version, do use Google Translate to read it because I think it is quality reporting. 

Großbritannien : “Financial Times” steht angeblich zum Verkauf – Nachrichten Wirtschaft – DIE WELT

Rumours are flying that the Financial Times is up for sale by Pearson, its owner. Pearson denied these rumours to the Daily Telegraph but many still believe the for sale sign is stlll on the door.

Riksbanken har inte koll på guldet | SvD

“We have placed it at various central banks. Further than that, we do not want to say, says Sophie Degenne, head of the Riksbank’s department for asset management.

She says that a small portion of the gold is in Sweden, but did not want to disclose in which other countries the gold is physically stored.”  

La morosidad de la banca bate un nuevo récord en noviembre y se sitúa en el 11,38% –

A new record 11.38% of bank loans in Spain are sour. That puts the bad credit at 191.6 billion euros, up 43% from 134.2 billion just twelve months ago. Two ways to look at this: either the bad debts are getting recognized and that’s good or they are increasing and that’s bad. If house prices continue to fall in Spain, more bad debt is coming.

Deutsche Bundesbank – Historisches – Entwicklung der Goldbestände

“Deutschland verfügt mit 3.391 Tonnen (zum 31.12.2012) über den weltweit zweitgrößten Goldbestand nach den Vereinigten Staaten. Der Goldbestand deckt zwei Drittel der deutschen Währungsreserven ab.”



BOJ eyes open-ended asset buying, agrees new inflation goal | Reuters

“Japan’s government and central bank have agreed to set 2 percent inflation as a new target next week, when the Bank of Japan will also consider making an open-ended commitment to buy assets until the target is in sight, sources familiar with the BOJ’s thinking told Reuters”


SurveyMonkey’s funding highlights fading allure of IPOs | Reuters

“Online survey company SurveyMonkey said on Thursday it has started an $800 million recapitalization that will allow it to cash out early shareholders and investors.”

Facebook Rolls Out VoIP Calling To U.S. iOS Messenger Users | TechCrunch

“Facebook originally started testing a new free (minus and data usage fees you incur from your carrier) calling feature for users of its Facebook Messenger app for iPhone in Canada early this year, and now the service is available to U.S. users as well. The free call button app now shows up in the app for U.S. users, in any conversation where both parties are using the Facebook Messenger app.”   

Huge smartphones will be all the rage this year, says iSuppli | CITEworld

“Shipments of smartphones with screens 5 inches or larger will more than double this year, as consumers are increasingly attracted to the large screen sizes offered by the phones, according to a prediction from IHS iSuppli.

The company said it expects shipments of such phones to reach just over 60 million units in 2013, up from 25 million units in 2012. The entire smartphone market is expected to be around 836 million handsets, which means the large-screen phones will make up about 7 percent of the market. In 2012, large-screen phones accounted for about 4 percent of all smartphones, said IHS iSuppli.

Demand for large-screen handsets is strongest in Asia, where customers find the screen size easier for Asian text input, said Vinita Jakhanwal, director of mobile and emerging display research at the company.”

The Onion’s Searing Parody Of Social Media Experts | TechCrunch

“The Onion has another hit parody on its hands: a clever take on social media “experts” that is sure to hit too close to home for many public relations firms. “Social media is the driving force behind the economy. What does that mean? Nobody knows,” says the faux social media guru, in a TED-style talk, complete with PowerPoint.”



BBC News – Algeria crisis: Hostage death toll ‘could rise’   

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