Category - The Markets

The Trans-Pacific Partnership: Toward Absolutist Capitalism

Naked Capitalism, By Lambert Strether, April 20

There are many excellent arguments against the Trans-Pacific Partnership (TPP), two of which — local zoning over-rides, and loss of national sovereignty — I’ll briefly review as stepping stones to the main topic of the post: Absolutist Capitalism, for which I make two claims:

1) The TPP implies a form of absolute rule, a tyranny as James Madison would have understood the term, and

2) The TPP enshrines capitalization as a principle of jurisprudence.

Zoning over-rides and lost of national sovereignty may seem controversial to the political class, but these two last points may seem controversial even to NC readers. However, I hope to show both points follow easily from the arguments with which we are already familiar. Both flow from the Investor-State Dispute Settlement (ISDS) mechanism, of which I will now give two examples. more

MoJo Explicator: Here’s What You Need to Know About the Trade Deal Dividing the Left

IMF tells regulators to brace for global ‘liquidity shock’

Financial engineering that preceded the last two financial crises is back, International Monetary Fund warns

The Telegraph, By Ambrose Evans-Pritchard, April 15

An illusion of liquidity has beguiled financial markets across the world and spawned some of the worst excesses seen on Wall Street in modern times, the International Monetary Fund has warned.

Investors are borrowing money to buy shares on the US stockmarket at a torrid pace and are resorting to the same sorts of financial engineering that preceded the last two financial crises.

“Margin debt as a percentage of market capitalisation remains higher than it was during the late-1990s stock market bubble. The increasing use of margin debt is occurring in an environment of declining liquidity,” said the IMF in its Global Financial Stability Report.

“Lower market liquidity and higher market leverage in the US system increase the risk of minor shocks being propagated and amplified into sharp price corrections,” it said.
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Thousands in Germany protest against Europe-U.S. trade deal

Reuters, By Noah Barkin, April 18

Berlin – Thousands of people marched in Berlin, Munich and other German cities on Saturday in protest against a planned free trade deal between Europe and the United States that they fear will erode food, labor and environmental standards.

Opposition to the Transatlantic Trade and Investment Partnership (TTIP) is particularly high in Germany, in part due to rising anti-American sentiment linked to revelations of U.S. spying and fears of digital domination by firms like Google.

A recent YouGov poll showed that 43 percent of Germans believe TTIP would be bad for the country, compared to 26 percent who see it as positive.

The level of resistance has taken Chancellor Angela Merkel’s government and German industry by surprise, and they are now scrambling to reverse the tide and save a deal which proponents say could add $100 billion in annual economic output on both sides of the Atlantic.

Sputnik News: Some 22,000 Participated in Anti-TTIP Protests Across Austria – Organizers

Thousands march in evening protest in downtown Montreal

Police quickly declared the demonstration illegal, arrests made

CBC, March 24

Thousands of protesters hit the streets of downtown Montreal Tuesday night as part of student protests against the province’s austerity measures.

Crowds gathered at Parc Émilie-Gamelin at 9 p.m. before marching along the downtown streets.

Police quickly declared the protest illegal, saying an itinerary of the route was not provided, and began making arrests.

CTV News: Montreal students protest for second night, police disperse crowds

France is Europe’s ‘big problem’, warns Mario Monti

Gallic nation threatens to blow Europe’s Franco-German axis apart, warns former Italian prime minister.

The Telegraph, By Szu Ping Chan, March 21

France has become Europe’s “big problem”, according to the former prime minister of Italy, who warned that anti-Brussels sentiment and the rise of populist parties in the Gallic nation threatened to blow the bloc’s Franco-German axis apart.

Mario Monti – who was dubbed “Super Mario” for saving the country from collapse at the height of the eurozone debt crisis – said France’s “unease” with the single currency had already created tensions between Europe’s two largest economies.

“In the last few years we have seen France receding in terms of actual economic performance, in terms of complying with all the European rules, and above all in terms of its domestic public opinion – which is turning more and more against Europe,” he told The Telegraph.

Overdue Justice for Ferguson, Missouri

For related articles by Numerian on the Ferguson racial crisis, see America’s Police on Trial, and The Cycle of Fear in Ferguson, Missouri, both posted on the jehoshuathebook.com website.
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The U.S. Department of Justice Civil Rights Division has released its report on the causes behind the civil disturbances last year in Ferguson, Missouri.  This is a long overdue contribution to the national discussion on race and municipal policing strategies and tactics.  During last year’s protests in Ferguson, several reporters wrote about what appeared to be a side issue: the propensity of the Ferguson city authorities to use the police force and the municipal court as a money-raising mechanism, which relied on harassment to enforce its fines and penalties liberally bestowed upon the African-American population of Ferguson.  This side issue turns out to be the main focus of the Department of Justice report. The report turns attention away from Officer Darren Wilson, who was exonerated by the Department of Justice for civil rights violations, based on what the FBI learned about the shooting of Michael Brown.  The evidence suggests that Officer Wilson was responding reasonably to a threat to his life.  The attention instead turns to the municipal practices in Ferguson which pressured the police department to harass African-Americans as a matter of routine.  City authorities put no constraints on police behavior, and had no concern for community safety standards.  Instead, the police department, and the municipal court system, were turned into profit centers, with business-like monthly targets for revenue generation.  Here is what the report reveals:

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U.S. optimistic global trade deal will come into force this year

Reuters, By Krista Hughes, March 4

Washington – The United States expects a global deal to cut customs red tape and streamline import procedures to come into force this year, a senior trade official said on Wednesday.

Mark Linscott, Assistant U.S. Trade Representative for World Trade Organization and Multilateral Affairs, said Washington was “pretty confident” the deal agreed in Bali in 2013 would be up and running by year-end.

“It’s quite realistic to expect that the trade facilitation agreement [wikipedia: The “Bali Package”, WTO: Trade Facilitation] can come into force by the end of the year,” he told a Washington International Trade Association event.

[…]

Virginia Brown, director of trade and regulatory reforms at USAID, said the aid agency was ready to work with countries on implementation steps, which in many cases require lawmakers’ approval. “Our bread and butter is drafting that legislation and getting it through the legislative process,” she said.

Deflation Swamps Switzerland

originally posted Jan 17

Shocking!  Unprecedented!  Unfair!  These were some of the politer adjectives used by financial experts to describe this week’s decision by the Swiss National Bank to abandon its currency peg to the euro.  As is often the case with major central bank decisions involving currencies, the public finds it very hard to understand what is happening or why it matters.  In Switzerland’s case, the situation was made even more confusing by the central bank lowering its overnight money rate to negative 0.75%.  This means you have to pay interest to the central bank for the privilege of lending them your money, an act that strikes many as contrary to the laws of nature.  Doesn’t the lender always earn interest, and the borrower always pay?  Not in the topsy-turvy world of deflation, which is the strange financial anti-matter world that Switzerland now inhabits.  The Swiss no doubt are asking themselves how they have found themselves in such a situation.  We would all do well to ask the same question, because deflation is the most important financial reality facing the world today. Read More

LEAKED: Secret Negotiations to Let Big Brother Go Global

The ugly ramifications of the Trade in Services Act (TiSA)

Wolf Street, By Don Quijones, December 25

Much has been written, at least in the alternative media, about the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), two multilateral trade treaties being negotiated between the representatives of dozens of national governments and armies of corporate lawyers and lobbyists (on which you can read more here, here and here). However, much less is known about the decidedly more secretive Trade in Services Act (TiSA), which involves more countries than either of the other two.

At least until now, that is. Thanks to a leaked document jointly published by the Associated Whistleblowing Press and Filtrala, the potential ramifications of the treaty being hashed out behind hermetically sealed doors in Geneva are finally seeping out into the public arena.
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Keep an Eye on the Yen

Global financial crises have a tendency to spring upon the world unsuspected, especially if the foreign exchange markets are involved, since they tie all global markets together (equities, bonds, commodities, derivatives).  That’s why it is necessary to keep one eye fixed for the moment on the yen.

The yen was trading around Yen 100/$ in October.  On Halloween, Bank of Japan Governor Haruhiko Kuroda surprised the financial markets with a massive expansion of the central bank’s Quantitative Easing program.  The Japanese central bank is now using QE to buy up every new bond that the Ministry of Finance is issuing.  This constitutes 100% monetization of Japanese debt by its own government, a situation which is unprecedented in modern finance among major industrialized countries.  The foreign exchange markets reacted poorly to this announcement, on that same day driving the yen down to Yen 110/$.  Today it has now crossed the Yen 120/$ threshold, meaning several things.  It is cheaper to buy yen – for every dollar spent, you now get 20 more yen than a few months ago.

This is great news for Japanese exporters, because their products are now 20% cheaper merely because of an exchange rate change.   But the flip side of this is that Japan is exporting its deflation problem (which has persisted for over 20 years now), by forcing its competitors to lower their prices by 20%.  This is a real problem for American and European manufacturers, who can’t afford such a hit to their revenue, but it is devastating for the Chinese export machine, since “Made in China” is the mainstay of the Chinese economy.  China can quietly or not so quietly protest to the Japanese government, but much more likely, China can allow its currency to devalue in order to restore its competitiveness.  This is how currency wars start, and currency wars have been the most frequent source of global financial crises in the past 30 years.

Japan will be under terrific pressure to halt the slide in its currency – but here’s the nub of the problem: Japan is out of tools to defend itself financially.

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Bernie Sanders Speaks Truth. Sort Of.

I love Bernie Sanders. I want to have his babby.

However, I think he needs to step back from this. His agenda is too easily co-opted by moderates and conservatives. It’s a nice counterculture statement of values, to be sure, but in the current environment completely unworkable. 

I’ve been thinking about Ferguson and the rioting and protests across the country.  

And then I found this quote from MLK, Jr: 

I have almost reached the regrettable conclusion that the Negro’s great stumbling block in his stride towards freedom is not the Ku Klux Klanner but the white moderate, who is more devoted to “order” than justice

When people riot for politics, when people organize for politics, they inevitably have either been subdued (Occupy) or placated (the Rodney King outrage) by some sop tossed towards them to make it a little less painful to be subdued.  

And then I remember that the Boston Tea Party was not regarded highly by colonial Americans. Indeed, until we achieved independence, the entire Revolution dangled on a thread in terms of public support. But it succeeded because it was outrageous to think it would.  

I love Bernie Sanders. I don’t think he’s right on this, at least with this current nation.

US Federal Reserve Initiates Investigation of New York Federal Reserve

Value Walk, By Mark Melin, November 21

After press reports reveal more than a cozy relationship, but sharing of confidential documents, investigation called for on eve of Senate testimony on the issue

After a withering expose in The New York Times that showed bank regulators at the New York Federal Reserve sharing confidential information with Goldman Sachs and earlier disclosure from secret tapes inside the New York Fed showed regulators providing the large Wall Street bank kid glove treatment, comes a two-pronged investigation and a call for structural changes.

In a letter to the Inspector General for the Federal Reserve System and the Consumer Financial Protection Bureau Thursday, Scott Alvarez, general counsel at the Federal Reserve Board of Governors, and Michael Gibson, director of banking supervision, both with primary offices in Washington DC, are requesting an investigation into the operations at the New York Federal Reserve and other locations.

“After consultation with the Chair and other Board members, we respectfully request that the Office of the Inspector General conduct a review of… the manner in which the Federal Reserve System conducts examinations of large banking organizations (with over $50 billion in total assets),” the letter requested. The vast majority of such banks are located in New York City.

The Washington DC-based inspector-general is being asked to examine if there are “adequate methods for decision makers to obtain all the necessary information to make supervisory assessments” and if there are channels, both within and outside the immediate chain of command, for decision-makers to be aware of divergent views about material issues regarding large banking organizations addressed by the members of the dedicated examination team?

New York Times: New Scrutiny of Goldman’s Ties to the New York Fed After a Leak
ProPublica: Federal Reserve Announces Sweeping Review of Its Big Bank Oversight

Senate Report: Banks Had Unfair Commodity-Market Advantages

Report Notes Deals Between Goldman, Deutsche and Others Drove Up Aluminum Prices

The Wall Street Journal, by Christian Berthelsen & Ryan Tracy, November 19

Washington — A U.S. Senate report on commodity-market activities at big Wall Street banks accuses the firms of being so powerful they were able to influence prices, gain trading advantages and put the broader financial system at risk by entering volatile businesses such as uranium trading and coal production.

The two-year, bipartisan probe by the U.S. Senate Permanent Subcommittee on Investigations is the most extensive look at how banks like Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Morgan Stanley built up voluminous inventories of aluminum, copper and other commodities. The report said the banks often exceeded regulatory limits on the size of commodity holdings. It portrays banks straying far beyond their traditional business lines to dabble in lucrative but risky activities that posed legal and financial threats to the firms.

The findings are likely to put additional pressure on the Federal Reserve as it considers whether to restrict or reduce Wall Street banks’ role in physical commodity markets. A two-day hearing on the report begins Thursday, with Fed Gov. Daniel Tarullo expected to testify on Friday. The Fed, which is reviewing its oversight of banks’ commodity-market activities, declined to comment.

The banks identified in the report said they adequately manage risks of the activities and don’t use their commodities business to gain an unfair advantage. All three firms have moved to reduce their commodities holdings amid congressional and regulatory scrutiny.

New York Times: Senate Report Finds Goldman and JPMorgan Can Influence Commodities
New York Times: Senate Report on Wall Street’s Role in Commodities
Reuters: In Senate hot seat, Goldman denies commodity manipulation Add to …

Making Fools of the Fed

Just about everything the Federal Reserve Bank does speaks of dignity.  Dignified premises, dignified public relations, dignified people running and staffing the institution.  The same applies to all the other major central banks, like the Bank of England, the Banque de France, the Deutsche Bundesbank, the European Central Bank, and the Bank of Japan.  You would think such dignified institutions with such distinguished people running them would not easily be fooled, or be easily made to look foolish, but fools they have been, and fools they continue to be, judging how once again the giant international commercial banks have been found to be perpetrators of large-scale, deliberate, and criminal fraud. Read More

Foreign exchange fines: banks handed £2bn in penalties for market rigging

Regulators in US and UK mete out record fines after finding a ‘free for all culture’ on currency trading floors at RBS, HSBC, Citibank, JP Morgan and UBS

The Guardian, By Jill Treanor, November 12

The corruption of the world’s biggest currency dealers was laid bare on Wednesday when regulators imposed £2bn of fines on five major banks for rigging the £3.5tn-a-day foreign exchange markets.

Regulators said they had found a “free for all culture” rife on their trading floors which allowed the markets to be rigged for five years, from January 2008 to October 2013.

The much-anticipated record settlement with US and UK regulators did not include Barclays, which remains in discussions with other regulators.

Each of the fines imposed on Royal Bank of Scotland, HSBC, Citibank, JP Morgan and UBS were records for the UK’s Financial Conduct Authority (FCA), smashing the penalties imposed over the last two years for Libor rigging.

The government welcomed the action. The chancellor, George Osborne, said: “Today we take tough action to clean up corruption by a few so that we have a financial system that works for everyone. It’s part of a long-term plan that is fixing what went wrong in Britain’s banks and our economy.”

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