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Gene Ellis

German and French banks call the shots - European, Business - Independent.ie - 0 views

www.independent.ie/...ks-call-the-shots-2607577.html

german french banks ireland debt

shared by Gene Ellis on 11 Jul 12 - No Cached
  • German and French banks call the shots Print Email  NormalLargeExtra Large ShareNew  0  0   Also in European Debt crisis: European shares edge lower and growth worries persist Bank of England's Tucker 'wasn't encouraged to lean on Barclays' Draghi keeps door open to further interest rate cuts Marks and Spencers sales hit by summer deluge Spain's debt tops 7pc danger level as Madrid gets more time European Home "Shocking" 2012 HoroscopeWhat Does 2012 Have In Store For You? Shockingly Accurate. See Free!www.PremiumAstrology.comExpat Health InsuranceQuick, Compare, Trusted Website Expatriate Health Insurance Quoteswww.ExpatFinder.com/Instant-Quoteshttp://www.googleadservices.com/pagead/aclk?sa=L&ai=BMEejVeb8T8fDKoSG_QaAhrTCB-q_1OYBmoqphxvAjbcB0NkREAMYAyDgw6kIKAU4AFD4gumFAmCpsL6AzAGgAairsfEDsgESd3d3LmluZGVwZW5kZW50LmllyAEB2gFfaHR0cDovL3d3dy5pbmRlcGVuZGVudC5pZS9idXNpbmVzcy9ldXJvcGVhbi9nZX
  • d, for reasons best
  • known to itself, the ECB -- in clear contravention of both previous market precedent and financial logic -- has insisted that the senior bondholders be repaid in full and has lent the Irish banks, institutions which it must have known were hopelessly insolvent, €70bn to do so.
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  • Top of the list are German banks, to whom we owe €92bn with a further €38bn of other exposures. Does the fact that Irish banks potentially owe their counterparts up to €146bn explain the German government's implacable opposition to any write-down of the Irish banks' debts? After the British and the Germans, it is the French banks -- with total Irish bank loans of almost €32bn and a further €23bn of other exposures -- who have the biggest exposure to Ireland. Does this provide at least a partial explanation for French president Nicolas Sarkozy's truculence when faced with Irish requests that senior bondholders be forced to accept a haircut?
Gene Ellis

Automation Alone Isn't Killing Jobs - NYTimes.com - 0 views

www.nytimes.com/...n-alone-isnt-killing-jobs.html

shared by Gene Ellis on 19 Feb 15 - No Cached
  • Automation Alone Isn’t Killing Jobs
Gene Ellis

PIMCO | - ​​TARGET2: A Channel for Europe's Capital Flight - 0 views

www.pimco.com/...or-Europes-Capital-Flight.aspx

shared by Gene Ellis on 09 Jul 12 - No Cached
  • Its full name is more than a mouthful. Trans-European Automated Real-time Gross Settlement System is better known as TARGET2 for short. It is the behind-the-scene payments system that conveniently enables citizens across the euro area to settle electronic transactions in euro. And at just over €500 billion, its TARGET2 claim on the Eurosystem is also the largest and fastest growing item on the Bundesbank’s balance sheet, as well as a source of much misunderstanding and debate.
  • The allocation of TARGET2 balances among the seventeen national central banks, which together with the ECB make up the Eurosystem, reflects where the market allocates the money created by the ECB. The fact that the Bundesbank has a large TARGET2 claim (asset) on the Eurosystem, while national central banks in southern Europe and Ireland together have an equally large TARGET2 liability, simply reflects that a lot of the ECB’s newly created money has ended up in Germany. Why? Because of capital flight.
  • Since the euro eliminated exchange rate risk among its member states, Germany has invested a substantial portion of its savings in Europe’s current account deficit countries. Some of those savings are now returning home. That’s the capital flight.
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  • The ECB stepped into the void left by foreign investors pulling their savings out of these current account deficit countries by lending their banks more money.
  • When large capital flight to Germany occurred before the euro’s introduction, the deutschemark would appreciate against other European currencies. While pegged against the deutschemark, these exchange rates were still flexible. That flexibility disappeared with the euro. When capital flight occurs today, the Bundesbank effectively ends up with loans to the other national central banks that are reflected in the TARGET2 claims on the Eurosystem. 
  • Debt overhangs persist, growth is mediocre and the governance structure – a common monetary policy without a centralized fiscal policy – is a challenge.
  • The ECB has allowed banks to borrow as much money as they want for up to three years. Indeed, at the end of February banks were borrowing €1.2 trillion from the ECB, twelve times the amount of their required reserves. With so much excess liquidity in the money markets, further capital flight is likely to cause a disproportionable share of this money to end up in Germany
  • Concerned about the stability of the euro, Germany’s savers are shifting their money into real estate. German residential house prices and rents rose by 4.7% last year, the fastest increase since 1993’s reunification boom. So far, Germans are not leveraging to buy houses. Growth in German mortgages is paltry at just 1.2% per annum according to the ECB as of December 2011, but in our view all ingredients for a debt-financed house price boom are there. Distrust in the euro is rising,
  • The ECB’s generous monetary policy will delay the internal devaluation adjustment of the eurozone’s current account deficit countries.
  • Mexico’s current account deficit fell by 5.3% of GDP in 1995, according to Haver Analytics, in the wake of capital flight following the government’s decision to float the peso in 1994, while its recession lasted only one year.
Gene Ellis

PrudentBear - 0 views

prudentbear.com/...featuredcommentaryview

GEP com nytimes nytimes com global europe GDP crisis syndicate euro

shared by Gene Ellis on 09 Jul 12 - No Cached
  • German exporters were major beneficiaries of this growth. German banks and financial institutions helped finance the growth.
  • Exports have provided the majority of Germany’s growth in recent years. Germany is heavily reliant on a narrowly based industrial sector, focused on investment goods—automobiles, industrial machinery, chemicals, electronics and medical devices. These sectors make up a quarter of its GDP and the bulk of exports.
  • Germany’s service sector is weak with lower productivity than comparable countries. While it argues that Greece should deregulate professions, many professions in Germany remain highly regulated. Trades and professions are regulated by complex technical rules and standards rooted in the medieval guild systems. Foreign entrants frequently find these rules difficult and expensive to navigate.
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  • Despite the international standing of Deutsche Bank, Germany’s banking system is fragile. Several German banks required government support during the financial crisis. Highly fragmented (in part due to heavy government involvement) and with low profitability, German banks, especially the German Länder (state) owned Landsbanks, face problems. They have large exposures to European sovereign debt, real estate and structured securities.
  • Prior to 2005, the Landesbanken were able to borrow cheaply, relying on the guarantee of the state governments. The EU ruled these guarantees amounted to subsidies. Before the abolition of the guarantees, the Landesbanks issued large amounts of state-guaranteed loans which mature by December 2015.
  • While it insists on other countries reducing public debt, German debt levels are high—around 81% of GDP. The Bundesbank, Germany’s central bank, has stated that public debt levels will remain above 60% (the level stipulated by European treaties) for many years.
  • Germany’s greatest vulnerability is its financial exposures from the current crisis. German exposure to Europe, especially the troubled peripheral economies, is large.
  • German banks had exposures of around US$500 billion to the debt issues of peripheral nations. While the levels have been reduced, it remains substantial, especially when direct exposures to banks in these countries and indirect exposures via the global financial system are considered. The reduction in risk held by private banks has been offset by the increase in exposure of the German state, which assumed some of this exposure.
  • For example, the exposure of the ECB to Greece, Portugal, Ireland, Spain and Italy is euro 918 billion as of April 2012. This exposure is also rising rapidly, especially driven by capital flight out of these countries.
  • Germany is now caught in a trap. Irrespective of the resolution of the debt crisis, Germany will suffer significant losses on its exposure – it will be the biggest loser.
  • But the largest single direct German exposure is the Bundesbank’s over euro 700 billion current exposure under the TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System) to other central banks in the Eurozone.
  • In late May 2012, French President Francois Hollande provided a curious argument in support of eurozone bonds: “Is it acceptable that some sovereigns can borrow at 6% and others at zero in the same monetary union?”
  • Political will for integration
  • In the peripheral economies, continued withdrawal of deposits from national banks (a rational choice given currency and confiscation risk) may necessitate either a Europe wide deposit guarantee system or further funding of banks.
  • A credible deposit insurance scheme would have to cover household deposits (say up to euro 100,000), which is around 72% of all deposits, in the peripheral countries. This would entail an insurance scheme for around euro 1.3 trillion of deposits.
  • Given that the Spanish Economy Ministry reports that euro 184 billion in loans to developers are “problematic,” the additional recapitalization needs of Spain’s banks may be as high as euro 200-300 billion in additional funds (20-30% of GDP)
  • A Greek default would result in losses to Germany of up to around euro 90 billion. Germany’s potential losses increase rapidly as more countries default or leave the eurozone.
  • Austerity or default will force many European economies into recession for a prolonged period. German exports will be affected given Europe is around 60% of its market, including around 40% within the eurozone. In case of a break-up of the euro, estimates of German growth range from -1% to below -10%. It is worth remembering that the German economy fell in size by around 5% in 2008, the worst result since the Second World War, mainly on the back of declining exports.
  • For example, Greece owes about euro 400 billion to private bondholders but increasingly to public bodies, such as the IMF and ECB, mainly due to the bailouts. If Greece walks away as some political parties have threatened, then the fallout for the lenders, such as Germany, are potentially calamitous.
  • Once the artificial boom ends, voters will discover they were betrayed by Germany’s pro-European political elite. There will be an electoral revolt and, as in the rest of Europe, a strong challenge from radical political forces with unpredictable consequences.
  • by Satyajit Das
Gene Ellis

The Quality of Jobs: The New Normal and the Old Normal - NYTimes.com - 0 views

economix.blogs.nytimes.com/...-new-normal-and-the-old-normal

shared by Gene Ellis on 20 Sep 13 - No Cached
  • Despite 42 consecutive months of gains in private-sector employment, the unemployment rate is still at 7.3 percent; in December 2007 it was only 4.6 percent. The current unemployment rate is higher now than in 2007 across all age, education, occupation, gender and ethnic groups.
  • That’s despite the fact that about four million workers have left the labor force, driving the labor force participation rate to a historic low
  • Although the share of the long-term unemployed has fallen from its peak of 45 percent in 2011 to 38 percent today, it is still far above its 2001-7 average. And about eight million people are working part-time for “economic reasons,”
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  • 60 percent of the net job losses occurred in middle-income occupations with median hourly wages of $13.84 to $21.13. In contrast, these occupations have accounted for less than a quarter of the net job gains in the recovery, while low-wage occupations with median hourly wages of $7.69 to $13.83 have accounted for more than half of these gains.
  • Over the last year, more than 40 percent of job growth has been in low-paying sectors including retail, leisure/hospitality (hotels and restaurants) and temporary help agencies.
  • The economy’s growth rate has been less than half the rate of previous recoveries and the employment losses in the Great Recession were more than twice as large as those in previous recessions.
  • Based on history, what’s distinctive about this recovery is its sluggish pace, not the composition of its jobs.
  • What is distinctive during this recovery relative to earlier ones is the growing disparity in wages across sectors, a trend that was apparent long before the Great Recession.
  • Since then, however, wage growth has fallen far short of productivity growth, and that’s true for workers regardless of education, occupation, gender or race.
  • But technological change and the globalization it has enabled have played major roles, and these driving forces have probably strengthened during the recovery.
  • Jobs that are routine, that do not involve manual tasks and that do not need to be done near the customer are being replaced by computers and automation or are being outsourced to low-cost workers in other countries.
  • According to another study, the top 1 percent of households captured 65 percent of real family income gains (including realized capital gains) between 2002 and 2007 and 95 percent of the gains between 2009 and 2012. In 2012, the top decile claimed more than 50 percent of income, the highest share ever.
Gene Ellis

U.S. Textile Plants Return, With Floors Largely Empty of People - NYTimes.com - 0 views

www.nytimes.com/...-textile-factories-return.html

shared by Gene Ellis on 29 Oct 13 - No Cached
  • The problems in India were cultural, bureaucratic and practical.
  • Mr. Winthrop says American manufacturing has several advantages over outsourcing. Transportation costs are a fraction of what they are overseas. Turnaround time is quicker. Most striking, labor costs — the reason all these companies fled in the first place — aren’t that much higher than overseas because the factories that survived the outsourcing wave have largely turned to automation and are employing far fewer workers.
  • In 2012, the M.I.T. Forum for Supply Chain Innovation and the publication Supply Chain Digest conducted a joint survey of 340 of their members. The survey found that one-third of American companies with manufacturing overseas said they were considering moving some production to the United States, and about 15 percent of the respondents said they had already decided to do so.
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  • Between 2000 and 2011, on average, 17 manufacturers closed up shop every day across the country, according to research from the Information Technology and Innovation Foundation.
  • yes, it means jobs, but on nowhere near the scale there was before, because machines have replaced humans at almost every point in the production process. Take Parkdale: The mill here produces 2.5 million pounds of yarn a week with about 140 workers. In 1980, that production level would have required more than 2,000 people.
  • But he was frustrated with the quality, and the lengthy process.
  • “We just avoid so many big and small stumbles that invariably happen when you try to do things from far away,” he said. “We would never be where we are today if we were overseas. Nowhere close.”
  • Time was foremost among them. The Indian mill needed too much time — three to five months — to perfect its designs, send samples, schedule production, ship the fabric to the United States and get it through customs. Mr. Winthrop was hesitant to predict demand that far in advance.
  • There were also communication issues.
  • like moving half-finished yarn between machines on forklifts.
  • The North American Free Trade Agreement in 1994 was the first blow, erasing import duties on much of the apparel produced in Mexico.
Gene Ellis

As Robots Grow Smarter, American Workers Struggle to Keep Up - NYTimes.com - 0 views

www.nytimes.com/...rkers-struggle-to-keep-up.html

shared by Gene Ellis on 16 Dec 14 - No Cached
  • As Robots Grow Smarter, American Workers Struggle to Keep Up
  • Erik Brynjolfsson, an economist at M.I.T., said, “This is the biggest challenge of our society for the next decade.”
  • Americans between the ages of 55 and 64 are among the most skilled in the world, according to a recent report from the Organization for Economic Cooperation and Development. Younger Americans are closer to average among the residents of rich countries, and below average by some measures.
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  • Self-driving vehicles are an example of the crosscurrents.
  • Ad sales agents and pilots are two jobs that the Bureau of Labor Statistics projects will decline in number over the next decade. Flying a plane is largely automated today and will become more so.
  • Telemarketers are among those most at risk
  • More than 16 percent of men between the ages of 25 and 54 are not working, up from 5 percent in the late 1960s; 30 percent of women in this age group are not working, up from 25 percent in the late 1990s.
  • “The answer is surely not to try to stop technical change,” Mr. Summers said, “but the answer is not to just suppose that everything’s going to be O.K. because the magic of the market will assure that’s true.”
Gene Ellis

The third great wave | The Economist - 0 views

www.economist.com/...enty-pain-ultimately-benefited

shared by Gene Ellis on 05 Feb 15 - No Cached
  • The third great wave
  • A third great wave of invention and economic disruption, set off by advances in computing and information and communication technology (ICT) in the late 20th century, promises to deliver a similar mixture of social stress and economic transformation
  • Powerful, ubiquitous computing was made possible by the development of the integrated circuit in the 1950s
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  • Evidence of this is all around. Until recently machines have found it difficult to “understand” written or spoken language, or to deal with complex visual images, but now they seem to be getting to grips with such things.
  • concluded that 47% of employment in America is at high risk of being automated away over the next decade or two.
  • Now technology is empowering talented individuals as never before and opening up yawning gaps between the earnings of the skilled and the unskilled, capital-owners and labour.
  • The effect of technological change on trade is also changing the basis of tried-and-true methods of economic development in poorer economies.
Gene Ellis

Productivity: Technology isn't working | The Economist - 0 views

www.economist.com/...higher-productivity-and-better

shared by Gene Ellis on 05 Feb 15 - No Cached
  • Technology isn’t working
  • Technology isn’t working
  • n the 1970s the blistering growth after the second world war vanished in both Europe and America. In the early 1990s Japan joined the slump, entering a prolonged period of economic stagnation.
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  • Between 1991 and 2012 the average annual increase in real wages in Britain was 1.5% and in America 1%, according to the Organisation for Economic Co-operation and Development, a club of mostly rich countries.
  • Real wage growth in Germany from 1992 to 2012 was just 0.6%; Italy and Japan saw hardly any increase at all.
  • And the dramatic dip in productivity growth after 2000 seems to have coincided with an apparent acceleration in technological advances as the web and smartphones spread everywhere and machine intelligence and robotics made rapid progress.
  • A second explanation for the Solow paradox, put forward by Erik Brynjolfsson and Andrew McAfee (as well as plenty of techno-optimists in Silicon Valley), is that technological advances increase productivity only after a long lag.
  • John Fernald, an economist at the Federal Reserve Bank of San Francisco and perhaps the foremost authority on American productivity figures, earlier this year published a study of productivity growth over the past decade. He found that its slowness had nothing to do with the housing boom and bust, the financial crisis or the recession. Instead, it was concentrated in ICT industries and those that use ICT intensively.
  • Once an online course has been developed, it can be offered to unlimited numbers of extra students at little extra cost.
  • For example, new techniques and technologies in medical care appear to be slowing the rise in health-care costs in America. Machine intelligence could aid diagnosis, allowing a given doctor or nurse to diagnose more patients more effectively at lower cost. The use of mobile technology to monitor chronically ill patients at home could also produce huge savings.
  • Health care and education are expensive, in large part, because expansion involves putting up new buildings and filling them with costly employees. Rising productivity in those sectors would probably cut employment.
  • The integration of large emerging markets into the global economy added a large pool of relatively low-skilled labour which many workers in rich countries had to compete with. That meant firms were able to keep workers’ pay low.
  • By creating a labour glut, new technologies have trapped rich economies in a cycle of self-limiting productivity growth.
  • Productivity growth has always meant cutting down on labour. In 1900 some 40% of Americans worked in agriculture, and just over 40% of the typical household budget was spent on food. Over the next century automation reduced agricultural employment in most rich countries to below 5%,
  • A new paper by Peter Cappelli, of the University of Pennsylvania, concludes that in recent years over-education has been a consistent problem in most developed economies, which do not produce enough suitable jobs to absorb the growing number of college-educated workers.
Gene Ellis

Why Apple Got a 'Made in U.S.A.' Bug - NYTimes.com - 0 views

bits.blogs.nytimes.com/...-apple-got-a-made-in-u-s-a-bug

apple u s location economics mncs

shared by Gene Ellis on 11 Dec 12 - No Cached
  • Today, rising energy prices and a global market for computers are changing the way companies make their machines.
  • Hewlett-Packard, which turns out over 50 million computers a year through its own plants and subcontractors, makes many of its larger desktop personal computers in such higher-cost areas as Indianapolis and Tokyo to save on fuel costs and to serve business buyers rapidly.
  • “It’s important that they get an order in five days,
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  • there is a pride for the local consumer to see a sticker that says ‘Made in Tokyo,’
  • Cook is looking to give Apple some good news.
  • A Dell factory in Winston-Salem, N.C., for which Dell received $280 million in incentives from the government, was shut in 2010 (Dell had to repay some of the incentives).
  • In 1998, President Bill Clinton visited a Gateway Computer factory outside Dublin to cheer the role of American manufacturers in the rise of a “Celtic Tiger” in technology.That plant was shut in 2001, when Gateway elected to save costs by manufacturing in China
  • As cheap as a Chinese assembly worker may be, an emerging trend in manufacturing, specialized robots, promises to be even cheaper. The most valuable part of the computer, a motherboard loaded with microprocessors and memory, is already largely made with robots. People do things like fitting in batteries and snapping on screens.
  • The labor cost on a notebook, which is about 4 to 5 percent of the retail price, is only slightly higher than the cost of shipping by air. Soon even that is likely to change because of the twin forces of lower manufacturing costs from automation and higher transportation costs from rising global activity.
  • Intel, which makes most of the processors, has plants in Oregon, Arizona, New Mexico, Israel, Ireland and China.
  • Many other chip companies design their own products and have them made in giant factories, largely in Taiwan and China. Computer screens are made in Taiwan and South Korea, for the most part.
  • The special glass used for the touch screens of Apple’s iPhone and iPad, however, is an exception. It comes primarily from the United States.
  • More recent products, laptops and notebook computers, were in many cases originally assembled in China, and they are still largely made there. So are most smartphones and tablets. Every week, H.P. sends a group of cargo containers filled with notebooks to Europe.
  • That plant was shut in 2001, when Gateway elected to save costs by manufacturing in China. Dell, which made its mark by developing lean manufacturing techniques in Texas, closed its showcase Austin factory in 2008 as part of a companywide move to manufacturing in China. A Dell factory in Winston-Salem, N.C., for which Dell received $280 million in incentives from the government, was shut in 2010 (Dell had to repay some of the incentives).
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