Saturday, January 12, 2008
British Treasury between a Rock and a hard place
Robert Peston, the BBC's business editor, reports that "a full plan for nationalisation of [Northern Rock] is in place." Of course the Treasury is making every effort to avoid it. A black eye on free-market capitalism, you know—not to mention the government's failure to exercise its regulatory authority in the lead-up to the bank's debacle.
Now a hedge fund holding 9.9% of "the Rock" is threatening to sue the government under a 1998 "Human Rights Act" if the bank is expropriated for less than "the book value of Northern Rock's assets at the last balance-sheet date - or more than 400p [$8] a share." I'm always gladdened when hedge funds develop an interest in "human rights."
Well, there's more. Alistair Darling, Chancellor of the Exchequer (equivalent to the U.S. Secretary of the Treasury), "pointedly refuses to give the ... commitment that he won’t erode the Bank of England’s powers relating to the maintenance of the stability of the financial system." It's as if Treasury Secretary Paulson had announced that the Treasury Department would be taking back some powers from the Federal Reserve.
It would be ironic if the British government decided to do the sort of thing Hugo Chávez is voluntarily attempting in Venezuela to the gnashing of teeth of neoliberal economists and the Bush administration.
What you may conclude from all this is that the British (and international) banking system is extraordinarily "fragile," as Fed Chairman Bernanke so delicately described the "financial situation" on Thursday.
Thursday, January 10, 2008
Understatement of the Day
On the whole, despite improvements in some areas, the financial situation remains fragile, and many funding markets remain impaired.
Impaired, my Aunt Fanny! They're on oxygen.
Here are a few more gems I've extracted from the crude ore of Bernanke's financialese—
- More expensive and less available credit seems likely to impose a measure of financial restraint on economic growth.
It never seems to restrain me when I have a credit card.
- The recent developments in U.S. and foreign financial markets will stimulate considerable review and analysis in the months and years to come.
As did the market crash of 1929.
- Adverse economic or financial news has the potential to increase financial strains and to lead to further constraints on the supply of credit to households and businesses.
Keep the conversation light and the tone cheerful. That's the way I talk to the credit card company when I'm trying to raise my limit.
- Last week's report on labor-market conditions in December was disappointing, as it showed an increase of 0.3 percentage point in the unemployment rate and a decline in private payroll employment.... It would be a mistake to read too much into any one report. However, should the labor market deteriorate, the risks to consumer spending would rise.
I won't let it stop me. I promise.
- Thus far, inflation expectations appear to have remained reasonably well anchored, and pressures on resource utilization have diminished a bit. However, any tendency of inflation expectations to become unmoored or for the Fed's inflation-fighting credibility to be eroded could greatly complicate the task of sustaining price stability and reduce the central bank's policy flexibility to counter shortfalls in growth in the future.
Like the Wizard of Oz, the Fed's power over the economy appears to depend upon our belief in it. Why, I wouldn't have considered the possibility that lowering the interest rate on money might usher in inflation ("stagflation," to be more exact) if Bernanke hadn't mentioned it. Who would be so irresponsible as to run around talking such nonsense? Oh. Ron Paul, you say?
- The Committee1 will, of course, be carefully evaluating incoming information bearing on the economic outlook. Based on that evaluation, and consistent with our dual mandate, we stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks.
I feel better already. More confident. No downside risks. I think I'll go shopping—or maybe buy some bank stock.
Tuesday, January 08, 2008
News of note — Jan 8 08
- By a 5-4 vote the Supreme Court decided that the police really don't have to knock to execute a warrant. If they just break in it will be okay. But Justice Kennedy, among the majority, thought it shows bad form: "it bears repeating that it is a serious matter if law enforcement officers violate the sanctity of the home by ignoring the requisites of lawful entry." Why, yes. It is a serious matter. So why did he vote to allow it? CBS News calls it "a huge government victory."
- Is there anyone not related to Barack Obama? First there was Dick Cheney. Now comes Raila Odinga, leader of the Kenyan opposition and member of the Luo tribe, claiming Obama is his cousin. Obama's father is also a member of the tribe, where the joke going round is that a Luo "stands a better chance of becoming president of the United States than being elected president of Kenya."
- Starbucks, which lost half its value in 2007, has fired its CEO. The BBC reports that "... consumers hit by the slowdown have cut back their spending on expensive coffee. There has also been increased competition with the likes of Dunkin' Donuts and McDonald's introducing their own lines of gourmet coffee."
- India's stock index, the Sensex, hit a new high yesterday. The BBC says that "Foreign investment has been continuing to flood into India. This is both because of the country's economic boom, but also because of the continuing weakness of the US economy and dollar, which makes India and the rupee an even more attractive investment." When I last called BellSouth with a problem, the customer service representative seemed inordinately cheerful.
- Religious violence in Palestine. Just after Christmas Greek Orthodox and Armenian Apostolic priests and deacons got into a brawl in Bethlehem's Church of the Nativity that had to be broken up by Palestinian police. The Orthodox were said to have encroached upon the Armenians' territory within the jointly-run church. Fortunately it concerned the placement of a ladder and not a wall. Should we call such violence in microcosm "fractal violence"?
I have an idea! Why don't they merge?! Call it StarDunkin or McStarbucks. Oh, I forgot. There's no money for mergers.
Tags: news and politics
Gored Ox of the Day
Epiphany follows Christmas, and it appears that a Ron Paul libertarian has had his own little epiphany concerning a trusted news source—
It's amazing that I once considered Fox to be less biased, or at least biased more in my direction. It turns out that if you deviate from their party line at all — that is, the neoconservative Republican establishment ... — all pretense of journalistic objectivity goes straight out the window.
I'm devastated. Now who's going to tell me what to think?