Death Star Economics



An attempt at revival

This week…

Things in Turkey continued to be messy, as Erdogan’s stern view of protesters continues to spark new anger among the masses and sent the Turkish Lira falling. read Bloomberg
On Thursday, Erdogan re-iterated that he was losing patience with the protestors. Today, the government and its counter movement reached an agreement, while Germany delayed further EU accession talks with Turkey. read WSJ

In Greece, the doors of Hellenic Broadcasting Corp closed, sending 2,500 former employees out onto the streets. It is meant to be relaunched later this year in a slimmed-down version. read WSJ

In the UK, jobless claims dropped, suggesting that the recovery is well on its way (remember how we’ve been here roughly 700 hundred times now..?). read Bloomberg

And then there was Wednesday, when literally everyone with an audience called the bond bubble, for example Jim O’Neill (formerly of Goldman Sachs) and Bill Gross (Pimco)

Around the same time, Iraqi officials said the country was looking to increase its oil production by 29% in 2014 and 159% by 2020, showing that a) they can and b) they have buyers. read Emerging Frontiers

Then there was a new price fixing scandal [yes, there are still some products left]; this time in FX. read Felix Salmon

Meanwhile on Wall Street, notes on correlations with Japan: read WSJ

In Brussels, important issues like the size and curviture of bananas and cucumbers has been pushed aside as Washington’s lobbyists walked in to ensure EU privacy regulations wouldn’t get so strict that they could hurt US investigations overseas. read FT

Rupert Murdoch is divorcing Wendy Deng, could this be the actual reason for splitting News Corp? read New Yorker

The week ahead…

The G8 meet on the outskirts of London on Monday and Tuesday; anti-globalization protesters will ironically stick to central London, where they will follow a scavenger hunt-like course through the West end, mapped out here. Please refrain from buying condiments at Fortnum & Mason until the weekend, as you may otherwise be questioned about the social legitimacy of your job.

Otherwise, it’s going to be a Bernanke-dominated week – again – as the Fed is meeting and press conferencing. Although Bernanke tried to nullify the comments about an end of easing, saying that it would take “considerable” time until that would happen, everybody seems to think the US is going to turn the money tap off. read WSJ

Have a good one.


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Election prep and Darwinian finance

With the US presidential election on the agenda for next week Tuesday, this weekend is used by all news outlets of the world and really anybody with a n opinion (thanks, internet…) to publish op-eds on said matter. So here we go.

– The Economist endorsed Obama as indirectly as possible (of course they did), read article

– The Washington Post’s Wonkbook looks at campaign expenditure, concluding that this election is the most expensive on record, read article

– Pimco’s Bill Gross is disgruntled about America and rewrites the Pledge of Allegianceread article

– The FT’s data blog looks at the importance of economic issues in the election read article

– Mayor Bloomberg, who is not member of any party, also endorsed Obama, saying that “Hurricane Sandy had reshaped his thinking, read article

Today’s US employment figures show that 3.57 million people are currently out of work in America as opposed to 4.11 million last year. Yet, the unemployment rate increased from September, amounting to 7.9%, exceeding the rate of January 2009. Estimates had seen 125,000 jobs added; the number was beaten by 46,000 new employees. read article

Commerzbank, Dexia and Lloyds TSB were removed from the list of G-SIFIs (global systemically important financial institutions) or G-SIBs (global systemically important banks) or “the world’s most dangerous banks” like the German FT calls it, due to diminishing “global systemic importance”. Ouch. That’s a weird insult, but an insult nontheless. After all, having the “evil” stipped off of them by a couple fo Swiss regulators, pushes them towards irrelevance, if you will. CitigroupDeutsche BankHSBC and JP Morgan are the four giants at the top of the list, required to hold an additional 2.5% in common equity to meet requirements set out by risk-management regulation Basel III. The general requirement amounts to 7% equity holdings as a percentage of risk-weighed assets. read article

The other big topic this week is the supposed end of investment banking as an industry/career/ethos. Triggered by UBS’ mass firing and essential termination of its fixed income unit on Tuesday, this a welcomed turn of events for those who either supported Occupy [insert location], or critically observed the developments in more stable housing. The WSJ bemoaned the death of fixed income, while the Economist compared core competencies. Gillian Tett wrote about a paper that examines the fluctuations in financial services as a career destination, and Harvard Business School announced that more of its graduates were now heading into consulting rather than investment banking. Because that’s what a world in shambles really need… more fucking consultants.

Election-unrelated weekend reading:

– Greece finds Medea: what happens when you talk about tax evasionread article

 Sandy and climate change on the cover of Businessweek, read article

– Felix Salmon‘s take on the above, read article

– Leaving China and going … where? read article

Have a good one.

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The world according to the IMF

Christine Lagarde is worried. After some sort of a post-summer break from public appearances and comment, this week has been all about her and the IMF’s view on the world. On Tuesday, the IMF cut its global growth forecast to 3.3% in 2012 and 3.6% in 2013. The main threats to growth is the eurozone crisisaccording to the report, and Lagarde stressed the need for increased fiscal integration in the EU to keep European banks from offloading assets. That, in turn, was the primary concern on Wednesday. The IMF is currently expecting European banks to offload a total of $2.8bn by the end of 2013. The number has increased by $200m since the April estimate. Worried Largarde even sees the number increase to $4.5bn, in case European authorities fail to deliver said fiscal integration.

Today, Lagarde is taking it a step further. During meetings with the World Bank in Tokyo (during which World Bank president Jim Yong Kim was asked to perform ‘Gangnam Style’), Lagarde said Greece should get another two years to meet its budget targets as set at the time of the first bailout. A ballsy move, as she’s walking straight into Angela Merkel’s fight club of European debt management. Let’s see how that pans out. read article

S&P downgraded Spain by two notches to BBB- (previously BBB), causing 10-year yields to rise and panic to strike. The downgrade is S&P’s way off telling Spain to get it together. Following the ESM approval on Monday, capital is in place to facilitate at least some sort of a bailout, but Spain still hasn’t filed an official request. Besides its borrowing costs and questionable budget proposal, the country is knee-deep in a political crisis (-> Catalonia) that could turn pretty ugly once the high unemployment rates meet the expected rise of food prices next year. read article

In other news, Cambridge University issued a 40-year £350m bond (it’s first) to fund a stem-cell research lab and new student accommodation and Brazil’s central bank has cut interest rates to an all-time low of 7.25%. Following the IMF’s growth cut, the country needs to stimulate the economy, but its 5.28% inflation rate is almost 1% above target. read article

In the case of regulatory authorities vs banks of the world, the US department of justice is suing Wells Fargo for $600m for irresponsible lending, while J.P. Morgan was fined $18m for “grossly negligent and reckless” handling of a client’s trust fund on the grounds that the 75-year old oil heiress who died in 1996, had not understood the derivatives she was sold.

And finally, stolen from Alphaville due to entertainment factor.

Our favourite paragraph today: “Goldman responded by launching an investigation into what was nicknamed internally “the muppet hunt”. The investigators interviewed dozens of staff and sifted through millions of emails, finding about 4,000 “muppet” references. But they said 99 per cent of those referred to last year’s movie of the same name.

Well, that was time and money well spent.

So long.

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