Wall Street’s Rent Seeking Vampires Kill Innovation

Here’s a nice piece from my friend Lynn Parramore at Alternet, summarizing a recent conference held in Rio: How Big Finance Crushes Innovation and Holds Back Our Economy. Here’s the conclusion, which is very much in line with my post from Monday: “the U.S. financial sector no longer serves the productive sector—in fact, it may […]

China Engineers a Credit Crisis to Deleverage Shadow Banking

When the global financial crisis began the Chinese government stimulated the economy. It worked. Chinese banks took on risk, and the economy continued to grow. But in recent months China’s investment climate has gotten out of control.In the shadow banking sphere banks have increased sales of trust and wealth management products, which promise high returns […]

EU Commission proposes Single Resolution Mechanism

On 10 July 2013, the EU Commission proposed a Single Resolution Mechanism (SRM), a complement to the Single Supervisory Mechanism (SSM) and one of the building blocks of EU Banking Union.  The SRM is designed to ensure that the resolution of a failing bank can be managed efficiently with minimal costs to taxpayers and the real economy. […]

Paying the price for size – the U.S. doubles up on Basel III

As expected, on 9 July 2013 the FDIC, the OCC and the FRB each issued press releases announcing their adoption of a revised version of Basel III.  In a separate proposal the combined agencies reached a consensus on an increased Tier 1 capital buffer for the largest banks and insurance companies.  While Basel III proposed a 3% capital ratio, the […]

Save If Failure Impending

Yesterday the House Financial Services Committee held a hearing on the too big to fail problem. Ordinarily a hearing includes a couple of witnesses chosen by the majority who say one thing and one or two witnesses chosen by the minority who say exactly the opposite thing. In this, however, it was hard to tell who […]

No Break for Periphery Banks

EU ministers apparently made little progress last week on terms under which the European Stability Mechanism (ESM) would recapitalize weak banks, though they still hope for an agreement by end month.  That said, if a draft plan circulated by European Commission Secretariat is a guide, we are seeing another step in the disappointing (and risky) retreat from last year’s promise to decisively break […]

Turkey: The Chapull-Jew (çapulcu) interest rate lobby

I thought the government had forgotten about them, but Prime Minister Recep Tayyip Erdoğan brought up the mysterious interest rate lobby during his speech outside the airport upon his arrival from his North African Rainbow Tour. Here’s the intro. to my latest Hurriyet Daily News (HDN) column, where I discuss why Erdogan’s “interest rate lobby” […]

Why Latvia’s Decision to Join the Euro Makes Sense

Last week’s convergence report from the European Commission gave Latvia the green light to become the eighteenth member of the eurozone as of next January. “The eurozone is again a club with a queue–not at the exit but at the entrance,” crowed Herman Van Rompuy, president of the European Council. “Joining the eurozone will foster […]

Do Banks Create Money from Thin Air?

It is sometimes said that commercial banks in our modern monetary system create money “from thin air”.  While there is truth in this metaphorical claim, the metaphor can also be seriously misleading, and leads some to attribute powers to commercial banks that are actually retained by the government alone under our system.  It is worth […]

More on the Trumped-Up Charges Against Cyprus

As readers may recall, the Eurozone decided to make an example of Cyprus by using it to set the precedent of raiding deposits to fund a bailout (query: is a self-bailout even properly called a bailout?). Admittedly, if you are going to let your banking sector get to be 800% to 900% of GDP, you had better be […]