How Serious is China’s Shadow Banking/Wealth Management Products Problem?
George Soros has caused a bit of a frisson by calling China the greatest risk to the global economy. The Chinese shadow banks are the trouble spot to watch.
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David Dayen: Elizabeth Warren, Tom Coburn Introduce “Naked Capitalism Was Right About the Corruption of Financial Regulators Act” (Not Actually Called That)
I’ve been going out of my mind the past few days seeing the easily duped traditional media uncritically printing statistical analysis from JPMorgan Chase’s roundelay of get-out-of-jail-almost-free settlements. The gist of it, and this must have been in a Department of Justice release somewhere, is that JPM has “paid” $20 billion over the last calendar year to resolve a variety of disputes, the most recent being their admission that they knew the bogus nature of Bernie Madoff’s business and never generated any suspicious activity reports or raised red flags for regulators (the fact that they took their money out of Madoff feeder funds right before he was arrested being a smoking gun)… $20 billion is a FAKE NUMBER.
Read more...Yanis Varoufakis: Why Reinhart and Rogoff are Wrong About the Eurozone’s Debt Structure and the Costs of Debt Mutualisation
Yves here. I don’t know whether to be relieved or annoyed to see Carmen Reinhart and Ken Rogoff retreat from their pro-austerity stance and endorse debt restructuring, since their prior view (that budget-cutting was necessary and productive) served to justify considerable and unnecessary pain being inflicted on periphery Eurozone countries to preserve the illusion of health of French and German banks.
But as Yanis Varoufakis points out, although Reinhart and Rogoff are retreating from much of their erroneous thinking, they haven’t renounced all of it.
Read more...Gambling for Resurrection in Iceland
Yves here. This is a nice piece of crisis-related forensic work. Too bad we’ve seen so little of this sort of thing.
Read more...The Misdirected Outrage Over The Wolf of Wall Street
Martin Scorsese’s film about a boiler-room stockbroker who managed to reach the major leagues of financial services industry swindling, The Wolf of Wall Street, has garnered both strong box office sales and heated denunciations.
Read more...Simon Johnson Reminds Us That the Banks’ Quiet Coup is Still Very Much in Place
Simon Johnson wrote a remarkably blunt article for the Atlantic in May 2009 titled The Quiet Coup. In case you managed to miss it, it remains critically important reading. He provided an update of sorts in a New York Times column today.
Read more...Ilargi: The Taper And The China Credit Power Struggle Squeeze
Yves here. We described the funding mismatch with Chinese wealth management products during the first liquidity crunch earlier in the year, but given that most readers aren’t familiar with these structures, it’s good to have another summary as to how they work and more discussion of why they pose a risk to the Chinese economy. They are troublingly similar to structured investment vehicles, which were one of the detonators of the credit crisis in the US and UK.
Read more...Philip Pilkington: Interest Rates and Animal Spirits – A Response to JW Mason
Clarifying what believing in risk versus uncertainty means for how you view the role of interest rates.
Read more...Essays in Monetary Theory and Policy: On the Nature of Money (Continued)
Yves here. I thought this essay on money was useful in and of itself, and it also contains a useful primer on the views of major schools of thought in orthodox economics.
Read more...Amar Bhidé on How Following Hayek Leads to Regulating Banks Like Utilities, Looking Askance at Liquidity and Securitization
I highly recommend this short interview by John Authers of the Financial Times with Amar Bhidé, a professor at Tufts, in which he argues that a proper reading of Friedrich Hayek would lead to considerable skepticism about whether most of the changes in finance over the last three decades actually represent progress.
Read more...Epic Duel In Spain Between The Politically Connected CEO Of A Collapsed Bank And A Judge
In this interminable post-crisis reality we are living, one thing has become crystal clear: regardless of the crime, senior bankers never do the time — at least not in most Western countries. One country that tried to buck this trend was Spain.
Read more...The Fed’s Taper and Market Fealty
The Fed’s announcing the taper was supposed to be an earth-shaking event. But that actually sorta happened last summer when Bernanke first used the “t” word and interest and mortgage rates made an impressive upward march in a short period of time.
From my considerable remove, what was noteworthy about the Fed’s announcement yesterday is how terrified it seems to be of creating an upset.
Read more...Yes Virginia, Obama and the Democrats Are Mussolini-Style Corporatists, Just Like the Republicans
Reader dSquib flagged a “bizarre” article by Mike Konczal in the New Republic titled, “Corporatism” is the Latest Hysterical Right-Wing Accusation: The secret history of a smear.” dSquib seemed quite perplexed that anyone would deem calling Obama a corporatist, which as we’ll demonstrate is patently true, a smear.
Read more...Tom Adams: Citigroup is the Real Reason We Need the Volcker Rule
In my view the real purpose of the Volcker Rule is to prevent another Citigroup bailout and therefore the measure of its effectiveness is whether the rule would accomplish this.
Read more...Ilargi: Debt Rattle – E/U in 2014?
A look at some predictions for Europe in 2014.
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