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Calculated Risk

Calculated Risk
by Bill McBride on 4/18/2014 08:21:00 PM Following some comments from Senator Rand Paul, I've been requested to post this again with a couple of tables added. Senator Paul said last week: "When is the last time in our country we created millions of jobs? It was under Ronald Reagan ..." That is completely wrong. (I've corrected both Republicans and Democrats, but recently it is mostly prominent Republicans that make stuff up!).

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Economists used to be the priests of free markets—now they’re just a bunch of engineers When the General Assembly of the United Nations meets at the end of September, it will vote on whether or not an independent body should investigate alleged war crimes committed by the government of Sri Lanka during its 26-year civil conflict. The government of the newly elected president Maithripala Sirisena has insisted that a domestic truth and reconciliation commission—not unlike that instituted in post-apartheid South Africa—will be sufficient; but others disagree. “It is, I believe, an inescapable reality that Sri Lanka’s criminal justice system is not yet ready to handle these types of crimes,” said Zeid Raad Hussein, the UN’s human rights commissioner, at a news conference in Geneva. “A purely domestic court procedure will simply not succeed in overcoming the widespread and justifiable suspicions fueled by decades of violence, malpractice and broken promises.”

Real Time Economics China’s GDP growth fell in the first quarter to its slowest pace since September of 2012, slipping to 7.4% on-year growth from 7.7% the in the fourth quarter. The increase was slightly higher than economists’ expectations of a 7.3% gain. Authorities released other data that suggested continuing weakness, but not at a quickening pace.

Eurozone Crisis: In the Eye of the Storm The Eurozone crisis has been in retreat since the introduction of the European Central Bank’s (ECB) three-year long-term refinancing operations (LTROs) in late December 2011. At the European Council Meeting in early March, journalists who cover the crisis fretted that boredom loomed. The current lull does not indicate that the Eurozone is in the clear, but rather it is simply in the eye of the storm, and more drama inevitably awaits.

DAILYBAIL The company also practices dirty accounting tricks like "forward funding," "advance funding," and "delayed obligations," deceptive tricks that hide its precipitous finances from auditors and its investors. This company routinely borrows from its workers' pension plan to pay off its debt. Its accountants then claim that because the company owes the borrowed money to its own pensioners and not to outside creditors, the resulting hole in the pension plan doesn't really count as a liability. Sometimes, the company's executives neglect to pass a budget at all. When that happens, they keep the company running with "emergency expenditures," which its accountants don't consider real expenditures for records-keeping purposes, even though they're paid with real money. By now, you've probably guessed where I'm headed.

Street Sweep - Fortune Finance: Hedge Funds, Markets, Mergers & Acquisitions, Private Equity, Venture Capital, Wall Street, Washington Apparently Bernie Madoff wasn't the only bad apple at Nasdaq. In the latest shining moment for the U.S. stock exchanges, the Securities and Exchange Commission on Thursday charged Donald Johnson, a former Nasdaq managing director, with ripping off investors to the tune of $755,000 by insider trading ahead of the release of corporate press releases. Johnson, you will be impressed to learn, was in charge through October 2009 of the Nasdaq's "market intelligence" desk, which is surely a misnomer but seems in any case to have afforded him with a lot of info he used to trade profitably on outfits like United Therapeutics (UTHR). Fearless leader The SEC has come under heavy fire in recent years for its failure to nab Madoff, a three-term Nasdaq chairman in the 1990s, before he frittered away $20 billion in the biggest-ever Ponzi scheme. But the agency is doggedly trying to restore its good name by putting really catchy quotes in its press releases, an effort that was much in evidence Thursday.

If you can't choose wisely, pick at random – Michael Schulson We could start with birds, or we could start with Greeks. Each option has advantages. Let’s flip a coin. Heads and it’s the Greeks, tails and it’s the birds. Tails. In the 1970s, a young American anthropologist named Michael Dove set out for Indonesia, intending to solve an ethnographic mystery. Economics Roundtable January 2014 Payroll Employment We are getting closer to the previous peak. Click on the image to get a bigger version. Credit Slips Today is the day for filing amicus briefs with the U.S. Supreme Court in NML v. Argentina (pari passu case). Brazil, France, Mexico, the Jubilee Network and Nobel Laureate Joseph Stiglitz are all asking the court to take the case. Others will doubtless come in on all sides; then the court might ask for the United States to say something ... it's a long story; stay tuned.

The Wealth Report One of the most famous and funny Monty Python skits is the “Four Yorkshiremen.” Four cigar-smoking, tux-wearing swells recount their childhood and try to top each other with stories of hardship. One says he used to live in a single room with 26 others. Why Liberalism Means Empire History ended on October 14, 1806. That was the day of the Battle of Jena, the turning point, as far as philosopher G.W.F. Hegel was concerned, in humanity’s struggle for freedom. Once Napoleon triumphed over the reactionary forces of Prussia, the ideals that post-revolutionary France represented—not just liberté, égalité, and fraternité, but the modern state and its legal order—would serve as the model for Europe and world. When Francis Fukuyama revisited this idea in “The End of History?”—with a question mark—in the pages of The National Interest a quarter century ago, he had to remind readers what Hegel had meant.

Brave New World Today’s Financial Times articles: Swiss central bank discord provides a warning bell (Feb 24), Sovereigns turn to pre-crisis financial wizardry (Feb 24) On facing pages in the print version of the FT, the reader is invited to consider the encounter of the modern state with the modern market. On the left hand page the story is about the central bank, on the right hand page the story is about the Treasury, and on both pages the story is about the continuing reverberations of the Global Financial Crisis and the changing role of both central banks and Treasuries as a consequence of financial globalization. IRA Analyst - A Crime Called Private Mortgage Insurance; Alex Pollock on the Political Finance of Covered Bonds Basel III and Capital Adequacy: Are We Paying Enough Attention to Consequence Risks?October 29, 2013 As part of our ongoing R&D process to review and adjust our analytics systems as U.S. banking regulations evolve, we regularly read the Financial Information Letters (FIL’s) published by the FDIC. On July 9, 2013, the FDIC released three Financial Institution Letters on Capital Adequacy and Liquidity requirements for Basel III compliance requesting comments.

Lawrence Summers Some time ago speaking at the IMF, I joined others who have invoked the old idea of secular stagnation and raised the possibility that the American and global economies could not rely on normal market mechanisms to assure full employment and strong growth without sustained unconventional policy support. My concern rested on a number of considerations. First, even though financial repair had largely taken place four years ago, recovery since that time has only kept up with population growth and normal productivity growth in the United States, and has been worse elsewhere in the industrial world. Second, manifestly unsustainable bubbles and loosening of credit standards during the middle of the last decade, along with very easy money, were sufficient to drive only moderate economic growth. The implication of these considerations is that the presumption that runs through most policy discussion — that normal economic and policy conditions will return at some point — cannot be maintained.

Economics blog from the Financial Times Global economic recovery stuck below takeoff speed By Eswar Prasad and Karim Foda The global economic recovery remains stuck below takeoff speed, unable to achieve liftoff and facing the risk of stalling. Half-hearted fiscal austerity measures are proving to be a drag on growth and doing little to rebuild investor and consumer confidence.

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