Author Archives: Yves Smith

China Attacks Oz Banks for Laundering Flight Capital

Yves here. China is cracking down on flight capital, starting with Australian banks. As the most casual readers of the business press know, the international wealthy, particularly Russians and Chinese, have been using residential real estate in “world cities” as their favorite lockbox. As we’ve written, it’s stunning to see how much real estate has been hoarded in London. Mayfair was depopulated during the petrodollar recycling of the 1970s; now much of Belgravia, Chelsea near Sloan Square, and Kensington are visibly underpopulated. Vancouver has been bid to the sky by Chinese flight capital. New York is a big destination for Russian and Chinese investors, and Chinese money has been pouring into Australian real estate.

The Chinese move may be an admission of stress on the financial system.

Wolf Richter: IPO Hype-Miracle Gets Crushed by Reality

Yves here. While IPO-related cheerleading is getting more stained than ever, also notice how lousy the mood is among retailers. This does not bode well for a consumption-driven economy.

Links 7/9/14

How Mandatory Arbitration Cheats Consumers

A few weeks ago, the topic of arbitration clauses became a contretemps when General Mills tried the remarkably cheeky stunt of trying to assert that consumers who had downloaded coupons or simply liked the company on Facebook had given up their right to sue if they were harmed by using its products and could seek remedy only through “informal negotiation via email” or arbitration. The firestorm of criticism forced the food giant to back down.

But consumers and other customers, like small businesses, are increasingly being denied access to courts though the use of mandated “pre-dispute” arbitration clauses and these are often paired with class action waivers.

Gaius Publius: IPCC’s “Carbon Budget” Gives One-in-Three Chance of Failure

All of the talk in the lead-up to this year’s meeting in Paris of the United Nations Framework Convention on Climate Change will be about how much “burnable carbon” we can still emit. In other words, what’s our remaining “carbon budget”? Or more to the point, how much more money can Exxon make and still be one of the good guys?

Are Neocons in Iraq Thinking Like the Banks that Blew up the Global Economy?

Yves here. For the normally anodyne OilPrice to run an article, Obama Fiddles While Iraq Burns, that is openly frustrated with US conduct suggests that there is considerable consternation in the oil industry about the lack of a coherent policy in Iraq. One school of thought has been that the US wanted a breakup, but history like the dissolution of Yugoslavia shows that they are ugly, bloody affairs that hurt the population and infrastructure. Both are bad for business, such as drilling for and refining oil, which was apparent reason we occupied Iraq in the first place.

I’ve discussed with Lambert the difficult of coming up with a coherent rationale for the US stance towards Iraq.

The Corporate Illogic of Outsourcing and Offshoring

You must go, now, and read a critically important piece questioning the logic of sending American manufacturing jobs offshore. It’s titled Losing Sparta (hat tip Dikaios Logos) by Ester Kaplan in VQR. We have written regularly about how we have been repeatedly told by managers and executives that the case for offshoring was often not compelling, particularly when risks, such as higher financing and shipping costs, exposure to foreign exchange losses, and inventory risk were included. This makes perfect sense when you consider that for most manufactured goods, factory labor is a mere 10-15% of total wholesale cost, and any savings in factory labor will be offset by higher shipping and greater managerial costs (more coordination, performed by much more highly paid workers). It is thus more accurate to regard a lot of offshoring as not being about cost savings, but a transfer from ordinary workers to managers and executives.

The article focuses on a world class manufacturing plant in Sparta, Tennessee, owned by Phillips that made florescent light bulbs.

Links 7/8/14

Maine Supreme Court Hands Major Defeat to MERS Mortgage Registry

Yesterday, we wrote about a major loss by the electronic mortgage registry, MERS, in a major Federal court case in Pennsylvania. MERS suffered an additional blow via an important adverse decision in the Maine Supreme Court, against Tom Cox, the attorney who first made robosigning a national issue.

Sacramento Bee Takes Up Our Fight Against Private Equity Firms’ Secrecy

On Monday, the Sacramento Bee published an editorial that took up many of the issues that we’ve raised in recent months about private equity firms’ fee abuses and the extraordinary shroud of secrecy that the industry has thrown over most of its activities.

Ilargi: Overshoot Loop and Evolution

Yves here. As Ilargi himself acknowledges, even by the standards of his fare, this post on “overshoot” is plenty sobering. We do seem to be on our way to precipitating a mass species die off (as in it’s underway already and humans seem remarkably unwilling to take sufficiently stern measures to stop it). The end of civilization as we know it seems almost inevitable, given that most “advanced” economies are seeing serious erosion of their social fabric, as reflected in falling social well-being measures.

However, the provocative point that Jay Hanson argues is that our hard-wired political habits guarantee our undoing.

San Francisco Meetup at the End of July?

I’ll be in San Francisco at the end of July, on a family holiday of sorts. My brother will be running in the marathon, and his family (wife and daughters) will stay the week after. His mother in law and my mother will be in town then as well.

I’ll arrive Wednesday, July 30, in the early afternoon. The best day for a meetup would be that day, say starting at 5:30 PM or 6:00 PM. Please let me know how many might be game and suggest venues.

MERS Loses Major Case in Pennsylvania

As Georgetown law professor, Adam Levitin, said succinctly by e-mail, “MERS hasn’t lost a case like this before.”

France Has Hissy Fit Over BNP Paribas Fine and Dollar Dominance

France appears to have taken its public relations strategy for dealing with $8.9 billion fine against BNP Paribas from an old saying among lawyers: “If you have the facts on your side, pound the facts. If you have the law on your side, pound the law. If you have neither on your side, pound the table.” Here’s the guts of the French compliant, which is that the US is abusing the power of dollar dominance:

Links 7/5/14