Links: 2013-02-14
News links for 14 February 2013
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The case for helicopter money – FT.com
Interesting but not wholly convincing for me.
“First, it is impossible to justify the conventional view that fiat money should operate almost exclusively via today’s system of private borrowing and lending. Why should state-created currency be predominantly employed to back the money created by banks as a byproduct of often irresponsible lending? Why is it good to support the leveraging of private property, but not the supply of public infrastructure? I fail to see any moral force to the idea that fiat money should only promote private, not public, spending.
Second, in the present exceptional circumstances, when expanding private credit and spending is so hard, if not downright dangerous, the case for using the state’s power to create credit and money in support of public spending is strong. The quantity of extra central bank money required would surely be smaller than under today’s scattergun quantitative easing. Why not employ monetary financing to recapitalise commercial banks, build infrastructure or cut taxes? The case for letting fiscal deficits facilitate private deleveraging, without undue expansion in overt public debt, is surely also strong.”
Rand Paul: Drone program ‘very scary’ – Kevin Cirilli – POLITICO.com
“Sen. Rand Paul (R-Ky.) said Wednesday night that support for President Barack Obama’s drone program was “very scary and worrisome” and feared it could open a “Pandora’s box” about government’s power.
Paul was on CNN discussing his consideration of filibustering Obama’s nomination of John Brennan for CIA director, doubling down on his criticism of Brennan’s question-dodging regarding drone use at his confirmation hearing last week.”
Trading in Bankia shares suspended – FT.com
“Long-suffering shareholders in Bankia have been warned that they stand to suffer a “significant dilution” once the troubled Spanish lender is fully recapitalised, confirming fears that retail investors who bought into the heavily-marketed initial public offering two years ago may be wiped out almost entirely.
The warning came in a statement from Spain’s Fund for Orderly Bank Restructuring (Frob) on Thursday, and followed a decision by the country’s stock market regulator to briefly suspend trading in Bankia shares.”
HP to adopt Android for upcoming mobile devices | Android and Me
“Having failed to carve out a place for itself in the post-PC era, Hewlett-Packard is now taking drastic measures — by adopting Google’s Android OS for a series of upcoming mobile devices.
It’s a bit of a Hail Mary pass for HP, which has fallen years behind its rivals in the mobile space. It’s also a big win for Google, adding another powerful partner to the Android ecosystem.
HP’s first Android device will be a high-end tablet that is powered by NVIDIA’s Tegra 4 chip, and it could be announced soon, according to two sources familiar with the matter, who spoke on the condition that they not be named because they are not allowed to discuss unreleased products.”
Monte Paschi former finance chief held in Italy | Reuters
“Italian police arrested on Thursday the former head of Monte dei Paschi’s finance department, who is at the center of a probe into alleged fraud and bribery at Italy’s third largest bank, prosecutors said.”
Euro zone economy falls deeper than expected into recession | Reuters
“The euro zone slipped deeper than expected into recession in the last three months of 2012 after its largest economies, Germany and France, shrank at the end of a wretched year for the region.”
Jobless claims hint at firming job market conditions | Reuters
“The number of Americans filing new claims for unemployment benefits fell more than expected last week, offering hope that the sluggish labor market recovery may have picked up a step.”
In 2012, Pakistani Disapproval of U.S. Leadership Soars
“With President Barack Obama’s first term characterized by strained relations between Pakistan and the U.S., more than nine in 10 Pakistanis (92%) disapprove of U.S. leadership and 4% approve, the lowest approval rating Pakistanis have ever given.”
Brussels proposes €30bn ‘Tobin tax’ – FT.com
“Brussels proposed a €30bn-€35bn levy on financial transactions on Thursday, which will be collected by the eurozone’s biggest economies but apply to trades in all the world’s main financial centres.
Even before it was unveiled, the European Commission’s expansive plan for the world’s first regional Tobin tax faced attacks from Washington and Wall Street, which said it would be harmful for international investors.”
US banks attack Europe’s ‘Tobin Tax’ – Telegraph
“American businesses and banks have objected to the introduction of a eurozone financial transaction tax, claiming it would flout international treaties.”
“Heinz shareholders to receive $72.50 per share in cash. Transaction valued at $28 billion, largest ever in food industry. Following the transaction, Heinz will remain headquartered in Pittsburgh as a private company”
Contraction in Portuguese economy doubled last year | In English | EL PAÍS
“According to flash estimates released Thursday by the National Statistics Institute (INE), GDP contracted 1.8 percent on a quarterly basis in the fourth quarter after a decline of 0.9 percent in the previous three months. On an annual basis the drop in output accelerated to 3.8 percent from 3.5 percent in the third quarter.
For the whole of last year the contraction in the economy doubled to 3.2 percent from 1.6 percent. That was slightly worse than the Bank of Portugal’s estimated 3.0-percent decline.”
Portuguese unemployment hits new record high since euro introduced | In English | EL PAÍS
“The National Statistics Institute (INE) said the unemployment rate jumped to 16.9 percent in the fourth quarter of 2012 from 15.8 percent the previous three months and from 14.0 percent in the same period a year earlier. The average rate for last year was 15.7 percent, three percentage points higher than a year earlier.
The number of people out of a job as of the end of December stood at 923,200, up from 870,900 in the third quarter and 771,000 in the fourth quarter of 2011. Unemployment in the manufacturing and construction sectors climbed 12.8 percent from a year earlier and was up 1.9 percent in the services sector.”
Japan fourth-quarter GDP shows economy still in recession, pick-up eyed | Reuters
“Japan’s economy unexpectedly contracted in the fourth quarter, failing to escape a mild recession and playing into the hands of a government pushing for more aggressive monetary expansion that’s drawn international criticism.”
LinkedIn CEO gives Apple iPad minis to 3,500 employees
“Jeff Weiner, chief executive at professional networking site LinkedIn, handed out an iPad mini to each of his 3,500 employees on Wednesday in recognition of their contributions to the company.”
US and EU governments aiming to agree transatlantic free trade pact | Business | The Guardian
“The US and the European Union on Wednesday launched their most ambitious attempt to liberalise transatlantic trade following Barack Obama’s commitment to a new pact outlined in his state of the union address.
A joint statement from Obama and the presidents of the European council and commission, Herman Van Rompuy and José Manuel Barroso, said they would kickstart moves in the US Congress and among the 27 EU governments to open negotiations on a new free trade pact seeking to eliminate or minimise barriers everywhere from the car to the pharmaceuticals industries, to services, agriculture and investment.
Britain said the talks should start this year. In Brussels, leaders said they wanted the negotiations launched by June and envisaged a two-year process, although Karel De Gucht, the EU trade commissioner, hoped the talks could be concluded by next year.”
Buffett’s Favorite Valuation Metric Surges Over the 100% Level – PRAGMATIC CAPITALISM
“For the first time since the recovery began, Warren Buffett’s favorite valuation metric has breached the 100% level. That, of course, is the Wilshire 5,000 total market cap index relative to GNP. See the chart below for historical reference.
I only point this out because it’s a rather unusual occurrence and the recent move has been fairly sizable. It happened during the stock market bubble of the late 90′s, but then occurred again just briefly during the 2006-2007 period when the valuation broke the 100% range in Q3 2006 and stayed above that range for about a year. We all know what followed the 2007 peak in stock prices.”
Safe assets, again: One consequence of better-capitalised banks | The Economist
“a working paper by Arvind Krishnamurthy and Annette Vissing-Jorgensen shows, through careful empirical study, that financial firms will create risky “safe” debt when the government does not create genuinely safe debt. Unsurprisingly, they found that government borrowing can “crowd out” excessive short-term borrowing by banks. They also found that the share of short-term debt issued by banks and other intermediaries is a good predictor of crises.”
Equity capital requirements: The people versus the bankers | The Economist
“MOST of what we call money is actually short-term debt created by banks when they make loans. This means that banks are the stewards of our savings and manage the payments system. As a result, they have a privileged place in our society: governments never deliberately choose to liquidate the banking system. It always appears preferable, in the short term at least, to preserve the incumbent institutions and personnel through bail-outs. (Lending to “solvent but illiquid” firms at below-market rates is another kind of bail-out, even if it is not always called one by the authorities.)
Bankers thus have every incentive to become as “systemic” as possible and to take as much as risk as possible—they know that they can almost always get these bail-outs when they need them. “
Low growth forces Hollande retreat – FT.com
“France’s socialist government has signalled that it will not hit its targets for cutting the deficit as the economy falters, in a challenge to EU-enforced fiscal rules championed by Berlin.
With figures due on Thursday for growth in the last quarter of 2012 expected to be negative, President François Hollande said publicly this week: “There is no point in sticking to objectives if they are not going to be achieved.”
The remark was widely interpreted as a signal that the government would soon revise downwards its optimistic target of 0.8 per cent growth this year.”
Switzerland imposes capital buffer on banks – FT.com
“Switzerland has become the first big financial centre to make banks hold extra capital to calm overheating parts of the economy, as the country’s decade-long housing market boom continues.
Swiss house prices have risen 77 per cent in the past 10 years, fuelled by surging immigration and, more recently, the rock-bottom interest rates put in place by the Swiss National Bank as it tried to stem the appreciation of the franc.
Mortgage volumes, meanwhile, have swelled to about 135 per cent of national output.”
Thomson Reuters to shed 2,500 jobs | Media | The Guardian
“New York-based news and financial information company to downsize division which rents terminals to financial industry”
Apple’s 4.8-inch iPhone 6 won’t launch till June 2014 due to screen yield issues
“Apple plans to introduce an iPhone with a 4.8-inch display and additional processing cores to help stem market share losses to rivals like Samsung but has been unable to accelerate the launch of the product into the 2013 calendar year due to challenges in producing enough of the larger displays, one investment research firm said Wednesday.”
Euro-Zone Worries Intensify – WSJ.com
“The euro zone’s weakness goes much further than industrial production. Consumer spending in the bloc has been weak for much of 2012, while unemployment has breached fresh highs with each passing month. The early signs for 2013 are a little more encouraging, but a number of member countries have some way to go, with Spain, Portugal, Italy and Greece all struggling with tough government spending cuts. This means unemployment will likely continue worsen in these countries, creating a growing divergence between Southern Europe and a slowly recovering German economy.
A fall in euro-zone GDP in the fourth quarter would mark the third consecutive quarterly contraction for the region. In the third quarter, GDP fell 0.1%, after shrinking 0.2% between April and June, sending the bloc into recession based on a commonly used definition. Preliminary fourth-quarter GDP figures will be released on Thursday; industrial output accounts for about one fifth of total GDP.”
Retail sales growth pauses as higher taxes kick in | Reuters
“Retail sales barely rose in January as tax increases and higher gasoline prices restrained spending, suggesting a slowdown in the pace of consumer spending early in the first quarter.”
Jeremy Grantham to join Keystone pipeline protest – The Term Sheet: Fortune’s deals blogTerm Sheet
“Jeremy Grantham, 74-year-old chief investment strategist of the $106 billion Boston-based investment-management firm GMO LLC, says he will participate in a surprise show of civil disobedience planned by the Sierra Club in Washington Wednesday morning protesting the completion of TransCanada Corp.’s (TRP) controversial Keystone XL Pipeline.
It is an unusual move for a fund manager, but Grantham’s reputation as an outspoken climate-change activist precedes him. While he does not expect to be arrested, Sierra Club National Press Secretary Maggie Kao says the environmental group’s board voted to allow acts of “civil disobedience” for the first time in its 120-year history as part of Wednesday’s action”
“Frank Lecerf finally came to a stop in a ditch in Belgium when his Renault Laguna ran out of petrol after 200km trip”
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