Category: Countries & Regions

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Of course it’s right to ringfence rogue universals – Martin Wolf

Thank you, UBS. As a member of the UK’s Independent Commission on Banking, under Sir John Vickers, I could not have asked for a better illustration of the unregulatable risks to which investment banks are exposed than Thursday’s announcement of a loss of $2bn in “unauthorised trading”. No sane country can allow taxpayers to stand behind such risks.

That is the kernel of the case for ringfencing of retail banking from investment banking, recommended in the ICB’s final report.

via Of course it’s right to ringfence rogue universals – FT.com.

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IMF Urges European Banks to Raise Capital – WSJ.com

European banks face about €300 billion about $409 billion in potential losses from the euro-zone debt crisis, the International Monetary Fund said Wednesday as it urged banks to raise capital to protect the global economy from more turmoil.The fund said fiscal strains emanating from weaker euro zone members have had a direct impact of about €200 billion on banks in the European Union since its debt crisis started last year. In addition to the holdings of government debt, lower bank asset prices raised credit risks between banks for an overall hit of €300 billion.

via IMF Urges European Banks to Raise Capital – WSJ.com.

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Barack Obama, Home Alone – Rich Lowry

In his new book on the Obama economic team, Ron Suskind quotes former administration official Larry Summers complaining: “We’re home alone. There’s no adult in charge. Clinton would never have made these mistakes.”

via Barack Obama, Home Alone – Rich Lowry – National Review Online.

Larry Summers “We’re home alone” comment could damage Barack Obama’s already slim chances of re-election. Already slim because there is little he can do that will create jobs before November next year.

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How to Prevent a Depression – Nouriel Roubini – Project Syndicate

The risks ahead are not just of a mild double-dip recession, but of a severe contraction that could turn into Great Depression II, especially if the eurozone crisis becomes disorderly and leads to a global financial meltdown. Wrong-headed policies during the first Great Depression led to trade and currency wars, disorderly debt defaults, deflation, rising income and wealth inequality, poverty, desperation, and social and political instability that eventually led to the rise of authoritarian regimes and World War II. The best way to avoid the risk of repeating such a sequence is bold and aggressive global policy action now.

via How to Prevent a Depression – Nouriel Roubini – Project Syndicate.

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Home building down 5% in August as slide continues – latimes.com

U.S. builders broke ground on fewer homes in August, more evidence that the housing market remains depressed.

The Commerce Department said Tuesday that builders began work on a seasonally adjusted annual rate of 571,000 homes last month, a 5% decline from July and a three-month low. That’s less than half the 1.2 million homes that economists say is consistent with healthy housing markets.

via Home building down 5% in August as slide continues – latimes.com.

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Japan Unveils Measures on Yen Strength – WSJ.com

The government aims to “soften the pain” from the strong yen and keep it from leading to more “hollowing out” of Japanese industry, the plan says. It calls for expanding and extending funds for key industries that create jobs, as well as expanding training for workers and the unemployed.

It also urges expansion of financial support for small- and medium-sized businesses, many of which have been hit hard by the currency’s surge.

The government also revealed measures intended to exploit the strong yen’s merits, implicitly acknowledging the limits on Tokyo’s ability to weaken the currency.

The plan proposes support for Japanese companies conducting mergers and acquisitions overseas, as well as for development of overseas natural resources and energy supplies, which the strong yen could help make cheaper.

Tokyo also wants to make the benefits of the strong yen apparent to consumers in areas such as electricity and gas utility prices, and calls for the implementation of a survey of consumers on the merits of the currency’s rise.

via Japan Unveils Measures on Yen Strength – WSJ.com.

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IMF Survey: Weak and Bumpy Global Recovery Ahead

The risks to the global economy are many, but three in particular demand strong action by policymakers:

• In the euro area, banks must be made stronger, not only to avoid deleveraging and maintain growth, but also, and more importantly, to reduce risks of vicious feedback loops between low growth, weak sovereigns, and weak banks. This requires additional capital buffers, from either private or public sources.

• The top priorities in the United States include devising a medium-term fiscal consolidation plan to put public debt on a sustainable path and to implement policies to sustain the recovery, including by easing the adjustment in the housing and labor markets. The new American Jobs Act would provide needed short-term support to the economy, but it must be flanked with a strong medium-term fiscal plan that raises revenues and contains the growth of entitlement spending.

• In Japan, the government should pursue more ambitious measures to deal with the very high level of public debt while attending to the immediate need for reconstruction and development in the areas hit by the earthquake and tsunami.

via IMF Survey: Weak and Bumpy Global Recovery Ahead.

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