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Gene Ellis

Sasol Betting Big on Gas-to-Liquid Plant in U.S. - NYTimes.com - 0 views

www.nytimes.com/...gas-to-liquid-plant-in-us.html

betting plant natural gas

shared by Gene Ellis on 17 Dec 12 - No Cached
    • Gene Ellis
      Gene Ellis on 17 Dec 12
       
      These are areas with lots of natural gas, and little chance of getting it to market, save for liquefication, but even then lacking access to ports.
  • The process is challenging and complex. First a synthetic gas is made from pure oxygen and methane, the main component of natural gas, which is cleansed of sulfur, metals and other impurities, under intense pressure and heat. Then the synthetic gas is put in giant reactors that make a synthetic crude through the Fischer-Tropsch process. The process essentially forces heated synthetic gas to react with a catalyst, typically cobalt, to convert into a liquid hydrocarbon. Finally that liquid is refined into one fuel or another. The process is far more complex than that at a typical refinery, so the plant is much more expensive to build and operate. Alfred Luaces, a refining specialist at the consultancy IHS, said a conventional oil refinery could be built for $50,000 per barrel of capacity, less than half of what Sasol says it is willing to spend on the proposed Louisiana plant.
  • Sasol is building a gas-to-liquids plant in Uzbekistan with the Malaysian oil company Petronas. It is working with Chevron to build another plant in Nigeria.
  • ...2 more annotations...
  • Rick Manner, a vice president at consultancy KBC Advanced Technologies who has contributed to gas-to-liquids studies for Sasol and other companies, estimated that the projects must keep capital costs at $100,000 for every barrel a day of production capacity to be worthwhile economically at current prices of about $100 a barrel for oil and $4 per thousand cubic feet for natural gas.
  • Mr. Louw, Sasol’s Qatar president, said that the Oryx plant was designed to be profitable with oil at $25 a barrel. That implies a very low long-term price for the natural gas feedstock. He would not specify what Sasol pays its Qatari partner for gas, but he said it was “not zero.”
  • Gene Ellis on 17 Dec 12
     
    The potential, or lack thereof, of natural gas to diesel conversion.
Gene Ellis

Read, I, Pencil | Library of Economics and Liberty - 0 views

www.econlib.org/...rdPncl1.html

shared by Gene Ellis on 26 Apr 13 - Cached
  • Simple? Yet, not a single person on the face of this earth knows how to make me.
  • Not much meets the eye—there's some wood, lacquer, the printed labeling, graphite lead, a bit of metal, and an eraser.
  • a cedar of straight grain that grows in Northern California and Oregon
  • ...16 more annotations...
  • The logs are shipped to a mill in San Leandro, California.
  • The slats are waxed and kiln dried again.
  • The cedar logs are cut into small, pencil-length slats less than one-fourth of an inch in thickness. These are kiln dried and then tinted for the same reason women put rouge on their faces.
  • Don't overlook the ancestors present and distant who have a hand in transporting sixty carloads of slats across the nation.
  • Once in the pencil factory—$4,000,000 in machinery and building, all capital accumulated by thrifty and saving parents of mine—each slat is given eight grooves by a complex machine, after which another machine lays leads in every other slat, applies glue, and places another slat atop—a lead sandwich, so to speak. Seven brothers and I are mechanically carved from this "wood-clinched" sandwich.
  • The graphite is mined in Ceylon.
  • The graphite is mixed with clay from Mississippi in which ammonium hydroxide is used in the refining process. Then wetting agents are added such as sulfonated tallow—animal fats chemically reacted with sulfuric acid. After passing through numerous machines, the mixture finally appears as endless extrusions—as from a sausage grinder-cut to size, dried, and baked for several hours at 1,850 degrees Fahrenheit. To increase their strength and smoothness the leads are then treated with a hot mixture which includes candelilla wax from Mexico, paraffin wax, and hydrogenated natural fats.
  • My cedar receives six coats of lacquer. Do you know all the ingredients of lacquer? Who would think that the growers of castor beans and the refiners of castor oil are a part of it? They are.
  • Observe the labeling. That's a film formed by applying heat to carbon black mixed with resins. How do you make resins and what, pray, is carbon black?
  • My bit of metal—the ferrule—is brass. Think of all the persons who mine zinc and copper and those who have the skills to make shiny sheet brass from these products of nature. Those black rings on my ferrule are black nickel. What is black nickel and how is it applied? The complete story of why the center of my ferrule has no black nickel on it would take pages to explain. RP.18
  • An ingredient called "factice" is what does the erasing. It is a rubber-like product made by reacting rape-seed oil from the Dutch East Indies with sulfur chloride. Rubber, contrary to the common notion, is only for binding purposes. Then, too, there are numerous vulcanizing and accelerating agents. The pumice comes from Italy; and the pigment which gives "the plug" its color is cadmium sulfide
  • Actually, millions of human beings have had a hand in my creation, no one of whom even knows more than a very few of the others.
  • There isn't a single person in all these millions, including the president of the pencil company, who contributes more than a tiny, infinitesimal bit of know-how.
  • Here is an astounding fact: Neither the worker in the oil field nor the chemist nor the digger of graphite or clay nor any who mans or makes the ships or trains or trucks nor the one who runs the machine that does the knurling on my bit of metal nor the president of the company performs his singular task because he wants me.
  • There is a fact still more astounding: the absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being. No trace of such a person can be found.
  • For, if one is aware that these know-hows will naturally, yes, automatically, arrange themselves into creative and productive patterns in response to human necessity and demand—that is, in the absence of governmental or any other coercive masterminding—then one will possess an absolutely essential ingredient for freedom: a faith in free people. Freedom is impossible without this faith.
  • Gene Ellis on 26 Apr 13
     
    " Articles EconLog EconTalk Books Encyclopedia Guides Search "I, Pencil: My Family Tree as told to Leonard E. Read" A selected essay reprint Home | Books | Read | Selected essay reprint Read, Leonard E. (1898-1983) BIO Display paragraphs in this essay containing: Search essay Editor/Trans. First Pub. Date Dec. 1958 Publisher/Edition Irvington-on-Hudson, NY: The Foundation for Economic Education, Inc. Pub. Date 1999 Comments Pamphlet PRINT EMAIL CITE COPYRIGHT Start PREVIOUS 4 of 5 NEXT End "
Gene Ellis

Bureaucracy's Salaries Defended in Europe - NYTimes.com - 0 views

www.nytimes.com/...icials-salaries-draw-fire.html

shared by Gene Ellis on 05 Feb 13 - No Cached
  • the monthly base salary of the most senior bloc officials is 18,370 euros, or $24,830.
  • the highest-paid European Union officials paid taxes equivalent to about 25 percent of their gross salary.
  • European Union officials generally pay low taxes,
  • ...3 more annotations...
  • Ms. Merkel’s monthly base salary is 21,000 euros,
  • Unlike European Union officials, the 27 members of the European Commission are political appointees. Their salaries are much closer to those of national leaders like Ms. Merkel, and in some cases may exceed them.
  • José Manuel Barroso, president of the commission, is paid a monthly salary of 25,351 euros, a residence allowance equal to 15 percent of that salary, and allowances for expenses like running a household and schooling for children. The seven vice presidents of the commission earn basic monthly salaries of 22,963 euros.
Gene Ellis

'Run For Your Lives': Printing Money with the IMF - SPIEGEL ONLINE - 0 views

www.spiegel.de/...of-last-resort-a-796280-3.html

shared by Gene Ellis on 21 Feb 13 - No Cached
  • Most European leaders have nothing against using the central bank's reserves as a source of financing, as became evident at the Cannes summit. Important politicians like European Council President Herman Van Rompuy and French President Sarkozy proposed making IMF "special drawing rights" available
  • It appears that the euro crisis is approaching its endgame. Many promises made when the common currency was introduced have already been broken. The initial stipulation that only stable countries be allowed in, for example, quickly proved illusory once Italy and Greece were accepted.
  • German taxpayers were also promised that they would never be held liable for the debts of other countries in the euro zone. But then came the first and second bailout packages for Greece and the European bailout fund.
  • ...1 more annotation...
  • The question the German government now faces is whether to preserve the monetary union or have a stable currency.
Gene Ellis

The tragedy of Argentina: A century of decline | The Economist - 0 views

www.economist.com/...hat-went-wrong-century-decline

shared by Gene Ellis on 19 Feb 14 - No Cached
  • The tragedy of Argentina A century of decline
  • In the 43 years leading up to 1914, GDP had grown at an annual rate of 6%, the fastest recorded in the world.
  • The country ranked among the ten richest in the world, after the likes of Australia, Britain and the United States, but ahead of France, Germany and Italy.
  • ...16 more annotations...
  • Its income per head was 92% of the average of 16 rich economies
  • Its income per head is now 43% of those same 16 rich economies; it trails Chile and Uruguay in its own back yard.
  • The election of 1989 marked the first time in more than 60 years that a civilian president had handed power to an elected successor.
  • the repeated recessions of the 1970s and 1980s, the hyperinflation of 1989-90, the economic crisis of 2001 and now the possibility of another crisis to come.
  • But three deep-lying explanations help to illuminate the country’s diminishment. Firstly, Argentina may have been rich 100 years ago but it was not modern. That made adjustment hard when external shocks hit. The second theory stresses the role of trade policy. Third, when it needed to change, Argentina lacked the institutions to create successful policies.
  • Railways transformed the economics of agriculture and refrigerated shipping made it possible to export meat on an unprecedented scale: between 1900 and 1916 Argentine exports of frozen beef rose from 26,000 tonnes to 411,000 tonnes a year. But Argentina mainly consumed technology from abroad rather than inventing its own.
  • External shocks duly materialised, which leads to the second theory for Argentine decline: trade policy.
  • Argentina raised import tariffs from an average of 16.7% in 1930 to 28.7% in 1933. Reliance on Britain, another country in decline, backfired as Argentina’s favoured export market signed preferential deals with Commonwealth countries.
  • an existing policy of import substitution deepened; the share of trade as a percentage of GDP continued to fall.
  • High food prices meant big profits for farmers but empty stomachs for ordinary Argentines. Open borders increased farmers’ takings but sharpened competition from abroad for domestic industry.
  • “One-third of the country—the commodities industry, engineers and regional industries like wine and tourism—is ready to compete,” says Sergio Berensztein, a political analyst. “Two-thirds are not.”
  • Property rights are insecure
  • Statistics cannot be trusted: Argentina was due this week to unveil new inflation data in a bid to avoid censure from the IMF for its wildly undercooked previous estimates.
  • hort-termism is embedded in the system
  • “We have spent 50 years thinking about maintaining government spending, not about investing to grow,” says Fernando de la Rúa, a former president who resigned during the 2001 crisis.
  • The country’s Vaca Muerta (“Dead Cow”) shale-oil and gasfield is estimated to be the world’s third-largest. If Argentina can attract foreign capital, the money could start flowing within a decade.
Gene Ellis

Ukraine crisis: Russian retaliation could hit Western mulitinationals - 0 views

www.cnbc.com/101614522

shared by Gene Ellis on 05 Feb 15 - No Cached
  • "There no doubt would be Russian retaliation," said Justin Logan, director of foreign policy studies at the Cato Institute. "Companies with money tied up in Russia would have a tough time getting it back out."
  • The White House said Friday that President Barack Obama and the leaders of Germany, the United Kingdom, France and Italy agreed after a conference call that they're ready to inflict targeted sanctions against Russia if Moscow es
  • The lion's share of foreign money in Russia is from major energy sector players like Shell, Exxon, and BP, said Fadel Gheit, senior energy analyst at Oppenheimer
  • ...8 more annotations...
  • Shell is working with Gazprom on natural gas extraction in Russia; Exxon has a multibillion dollar exploration partnership with Rosneft, a major oil producer controlled by the Russian government, and BP owns nearly 20 percent of Rosneft.
  • "Shell and Exxon have physical assets in Russia," said Gheit. "But pound-for-pound, BP has the biggest exposure in Russia." Although BP may have the most to lose from an economic tug-of-war between Moscow and the West, tough lessons that BP learned in Russia—through a defunct partnership with Rosneft called TNK-BP—also make BP best equipped for any future fallout, said Nicholas Spiro, managing director of Spiro Sovereign Strategy.
  • Spiro said that several German firms have also steeled themselves for possible fallout from friction between the Russia and the West. "German companies are huge here," said Spiro, naming BASF, energy firm RWE, and Siemens as companies with operations in Russia. BASF is working to finalize a deal with Gazprom that would give it a stake in Siberian oil fields; RWE has reached a preliminary deal to sell its natural gas subsidiary to Russian billionaires Mikhail Fridman and German Khan, and Siemens has a partnership with state-run railroad monopoly Russian Railways. Late last month, Siemens CEO Joe Kaeser made a trip to Moscow to meet with Russian President Vladimir Putin at his residence and voice support for a "trusting relationship" with Russian companies.
  • We know that if the West's resolve starts to crumble, it will almost certainly start in Germany,
  • "That's the canary in the coal mine."
  • "It starts with Germany and works its way down," said Hogan. "They have the most trade back-and-forth, and Germany gets the highest percentage of its energy from Russia."
  • Alcoa owns aluminum fabrication facilities in Russia, and Boeing has a design center in Moscow, as well as a joint venture with VSMPO-Avisma, the world's largest titanium producer.
  • Members of the Russian parliament have also proposed charging international payments companies like Visa and Mastercard with pre-emptive "security fees," with the stated aim of preparing for future financial disruptions.
Gene Ellis

Ceiling Collapse at Shoe Factory in Cambodia Kills 2 - NYTimes.com - 0 views

www.nytimes.com/...ctory-in-cambodia-kills-2.html

shared by Gene Ellis on 16 May 13 - No Cached
    • Gene Ellis
      Gene Ellis on 16 May 13
       
      Why do you think this is a Hong Kong-based company?
  • “We visually always inspected them, but you need true engineers,” he said.
    • Gene Ellis
      Gene Ellis on 16 May 13
       
      Noe that he says that they always visually inspected the sites... are they the owners?  the managers?  To what degree are they responsible?  And to whom?
  • ...2 more annotations...
  • Multinationals have been looking to Cambodia as one of several countries that could be alternatives to Bangladesh. Cambodia has some of the lowest pay in Asia, with workers earning $120 a month in salary and benefits before overtime. That compares with just $37 in Bangladesh.
  • Bruce Rockowitz, the group president and chief executive at Hong Kong-based Li & Fung, one of the world’s largest sourcing companies,
Gene Ellis

After Bangladesh, Seeking New Sources - NYTimes.com - 0 views

www.nytimes.com/...adesh-seeking-new-sources.html

shared by Gene Ellis on 17 May 13 - No Cached
  • Bennett Model helped pioneer the exporting of garments from China in 1975, the year before Mao Zedong died,
  • Buying from Bangladesh, said Mr. Model, “has been politically incorrect ever since problems started there, so a lot of major players had already been looking for alternatives.”
  • Western executives are checking on potential new suppliers in southern Vietnam, central Cambodia and the hinterlands of Java in Indonesia.
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  • “Right now, the name of Bangladesh just gives a bad rep to a company,”
  • Bangladesh, which is the world’s second-largest garment manufacturer after China
  • Garment manufacturing makes up a fifth of the economy in Bangladesh and four-fifths of its exports,
  • “People are on the one hand looking at contingency plans in case the unrest gets worse,” said Bruce Rockowitz, the group president and chief executive of Hong Kong-based Li & Fung, one of the world’s largest sourcing companies.
Gene Ellis

How Apple and Other Corporations Move Profit to Avoid Taxes - NYTimes.com - 1 views

www.nytimes.com/...ove-profit-to-avoid-taxes.html

shared by Gene Ellis on 03 May 13 - No Cached
  • There is something ridiculous about a tax system that encourages an American company to invest abroad rather than in the United States. But that is what we have.
  • “The fundamental problem we have in trying to tax corporations is that corporations are global,” says Eric Toder, co-director of the Tax Policy Center in Washington. “It is very, very hard for national entities to tax entities that are global, particularly when it is hard to know where their income originates.”
  • Some international companies hate that idea, of course. They warn that we would risk making American multinational corporations uncompetitive with other multinationals, and perhaps encourage some of them to change nationality.
  • ...2 more annotations...
  • The other way is to move to what is called a territorial system, one in which countries tax only profits earned in those countries.
  • In this country, notwithstanding the high rate, the corporate income tax now brings in about 18 percent of all income tax revenue, with individuals paying the rest. That is half the share corporations paid when Dwight Eisenhower was president.
Gene Ellis

Euro Zone Interest Rate Remains Unchanged - NYTimes.com - 0 views

www.nytimes.com/...st-rate-remains-unchanged.html

euro zone interest interest rate rate remains nytimes nytimes com com

shared by Gene Ellis on 08 Nov 12 - No Cached
  • But some analysts warn that the calm could prove temporary because the underlying causes of the crisis remain: too much debt and poorly performing national economies. “The E.C.B. has been very active since Mr. Draghi has been president, and this has been a major factor contributing to stabilize financial markets and thereby avoid much worse outcomes for the euro zone,” Marie Diron, an economist who advises the consulting firm Ernst & Young, said in a note.
  • “But the E.C.B. is not the sole actor and cannot save the euro on its own,” Ms. Diron said. “Ultimately the sustainability of the euro zone is down to structural changes at the country and European levels that are beyond the E.C.B.’s remit.”
  • Banks in the euro zone can borrow unlimited funds from the E.C.B. at the benchmark rate, provided they post collateral. But banks are not obligated to pass that rate on to their customers and might not do so in countries like Spain where banks are already struggling with large numbers of bad loans.
  • ...1 more annotation...
  • Meanwhile, interest rates may be too low for countries like Germany, helping to fuel a rise in real estate prices, Dirk Schumacher, an economist at Goldman Sachs in Frankfurt, said. “Cutting rates in the current environment of segmented markets is likely to boost growth in those places where it is needed least,” he wrote in a note to clients before the rate decision.
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.
  • ...18 more annotations...
  • 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.
  • 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.
  • 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.
  • 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.
  • by Satyajit Das
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.
  • ...1 more annotation...
  • 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

Analysis: Euro zone fragmenting faster than EU can act - 0 views

www.theprovince.com/...story.html

analysis euro zone faster act

shared by Gene Ellis on 14 Jul 12 - No Cached
  • Deposit flight from Spanish banks has been gaining pace and it is not clear a euro zone agreement to lend Madrid up to 100 billion euros in rescue funds will reverse the flows if investors fear Spain may face a full sovereign bailout.
  • Many banks are reorganising, or being forced to reorganise, along national lines, accentuating a deepening north-south divide within the currency bloc.
  • Since government credit ratings and bond yields effectively set a floor for the borrowing costs of banks and businesses in their jurisdiction, the best-managed Spanish or Italian banks or companies have to pay far more for loans, if they can get them, than their worst-managed German or Dutch peers.
  • ...10 more annotations...
  • European Central Bank President Mario Draghi acknowledged as he cut interest rates last week that the north-south disconnect was making it more difficult to run a single monetary policy.
  • Two huge injections of cheap three-year loans into the euro zone banking system this year, amounting to 1 trillion euros, bought only a few months' respite.
  • Conservative German economists led by Hans-Werner Sinn, head of the Ifo institute, are warning of dire consequences for Germany from ballooning claims via the ECB's system for settling payments among national central banks, known as TARGET2.
  • If a southern country were to default or leave the euro, they contend, Germany would be left with an astronomical bill, far beyond its theoretical limit of 211 billion euros liability for euro zone bailout funds.
  • As long as European monetary union is permanent and irreversible, such cross-border claims and capital flows within the currency area should not matter any more than money moving between Texas and California does.But even the faintest prospect of a Day of Reckoning changes that calculus radically.In that case, money would flood into German assets considered "safe" and out of securities and deposits in countries seen as at risk of leaving the monetary union. Some pessimists reckon we are already witnessing the early signs of such a process.
  • Either member governments would always be willing to let their national central banks give unlimited credit to each other, in which case a collapse would be impossible, or they might be unwilling to provide boundless credit, "and this will set the parameters for the dynamics of collapse", Garber warned.
  • "The problem is that at the time of a sovereign debt crisis, large portions of a national balance sheet may suddenly flee to the ECB's books, possibly overwhelming the capacity of a bailout fund to absorb the entire hit," he wrote in 2010,
  • national regulators in some EU countries are moving quietly to try to reduce their home banks' exposure to such an eventuality. The ECB itself last week set a limit on the amount of state-backed bank bonds that banks could use as collateral in its lending operations.
  • In one high-profile case, Germany's financial regulator Bafin ordered HypoVereinsbank (HVB), the German subsidiary of UniCredit, to curb transfers to its parent bank in Italy last year, people familiar with the case said.
  • In any case, common supervision without joint deposit insurance may be insufficient to reverse capital flight.
Gene Ellis

Merkel's good politics and bad economics - FT.com - 0 views

www.ft.com/...ed-11e1-a6c2-00144feabdc0.html

shared by Gene Ellis on 06 Sep 12 - No Cached
  • the ECB gears up to go full throttle into a business that, according to its statutes, is verboten: buying the debt of member states.
  • Of course, Mr Draghi mumbles about conditionality: cheap cash only in exchange for deficit-slashing and market reforms. Sure. And when Mr Monti and Mariano Rajoy, Spanish prime minister, instead bend to the wishes of their electorates, what then? Will Mr Draghi stop buying and let their bonds go through the floor? Of course not. You do not have to be a central banker to predict the obvious: no market pressure, no reform.
  • The ECB is about to turn into a money machine, into a lender of last resort, and damn the treaties that mandate an inflation-fighting commitment to “price stability”. The magic phrase now is “capping bond yields”, meaning the ECB buys up the debt of Italy and others in order to depress their borrowing costs.
  • ...4 more annotations...
  • Look beyond the debt crisis and take the longer view. European growth has been slowing for 40 years. During this period its share of global gross domestic product has shrunk by 10 percentage points; that of the US has held steady.
  • Otmar Issing, the ECB’s former chief economist, recalls how, before 1981, “the Italian Treasury set yields for government debt. All the bonds that couldn’t be sold at that price had to be bought up by the Banca d’Italia.” Hence easy money, exploding debt, double-digit inflation – and no change in the country’s frozen politics. Why reform when you can always devalue?
  • After the fall of the Berlin Wall, chancellor Helmut Kohl offered the D-Mark to President François Mitterrand in exchange for French acceptance of German reunification. This noble gesture of self-containment was not, of course, an entirely selfless act. As part of a hard-headed bargain in return for giving up the symbol of German economic primacy, Europe’s monetary and fiscal policy would be “Germanised”.
  • Mr Weidmann is right to fear the moral hazard contemplated by the ECB and its lackadaisical allies from Madrid to Berlin.
Gene Ellis

Central banks prepare for turmoil after Greek vote | Reuters - 0 views

www.reuters.com/...e-crisis-idUSBRE85D0CA20120616

central banks turmoil greek vote reuters

shared by Gene Ellis on 16 Jun 12 - No Cached
  • ECB President Mario Draghi, one of many policymakers gearing up for trouble after Sunday's vote in Greece, said his bank was ready to step in and fund any viable euro zone bank that gets in trouble.
  • At best, we are going to have a situation that is extremely serious on Monday," Swedish Finance Minister Anders Borg told journalists. "In all likelihood, whatever the outcome, we are going to have a government which is going to find it hard to live up to the agreements they (the Greeks) have signed up to."
Gene Ellis

Where Factory Apprenticeship Is Latest Model From Germany - NYTimes.com - 0 views

www.nytimes.com/...latest-model-from-germany.html

learning apprenticeship germany us

shared by Gene Ellis on 09 Jan 14 - No Cached
  • European companies are major employers in the state, with more than 28,000 workers for German companies alone.
  • School officials were wary of allowing a private company to dictate the curriculum.
  • Richard Morris, vice president for assembly and logistics, identifies one of the company’s biggest problems: a serious shortage of medium-skilled workers who specialize in mechatronics, or repairing robots and metal presses when they break down and operating the computers that dot the paint shop, body shop and assembly shop. Not only do these jobs pay better than typical assembly-line positions, they also open up avenues for advancement.
Gene Ellis

Why Is Zambia So Poor? And Will Things Ever Get Better? - 0 views

www.psmag.com/...zation-mining-corruption-66080

Zambia Why so poor?

shared by Gene Ellis on 09 Jan 14 - No Cached
  • Sixty-four percent of the population lives on less than $1 per day, 14 percent have HIV, 40 percent don’t have access to clean drinking water. Almost 90 percent of women in rural areas cannot read or write. Name a category—schools, health care, environment—and I’ll give you statistics that will depress the shit out of you.
  • For more than 150 years, the only reason to come to Kitwe—to Zambia, really—was the copper.
  • Most of the buildings in Kitwe, the roads, the health clinics, the schools, were built by the national mining company
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  • At its peak, the Zambia Consolidated Copper Mines company employed more than 65,000 Zambians and carried out services like water delivery and waste collection for five cities in the Copper Belt Province.
  • Mining employment has dropped to just 30,000, half of its glory-days peak, and the job of maintaining all that company housing and infrastructure has reverted back to the government.
  • The stats identify Switzerland as Zambia’s primary export market. This is not an indicator that Zambia hosts a thriving chocolate and suspenders sector, but rather that its copper trades are booked in the jurisdiction where they are least likely to be taxed.
  • Many of the mining companies pay just 0.6 percent royalties to Zambia, far below the already-meager industry standard of three percent.
  • And then there’s the Chinese. They arrived like a well-packed picnic, everything in shipping crates ready to be unpacked. Their own materials, their own equipment, their own workers, their own fences. If you were designing a foreign investment not to benefit the host community, this is what it would look like.
  • This is Namwile Uzondile, the director of a rural health education project.
  • Last year Namwile conducted a survey of prostitutes here in Kitwe, and found that at least half of them had education certificates, but couldn’t find work. Most had been married off early, 15 or 16, and since then had either left their husbands or lost them to AIDS.
  • First, you go to the tribal chief. Ninety-four percent of the land in Zambia is customary or traditional, no one has a title to it. It’s not just sitting there, people are living on it, farming, grazing animals, it’s just technically under the control of a chief.
  • In Zambia most of the chiefs require a gift just to get a meeting. This might mean taking them lunch at a restaurant in Lusaka, or it could mean buying their daughter a car—it’s up to them.
  • Another reason Zambia lacks skills is that some parts of the workforce operate as cartels. Take lawyers. Zambia only has 1,000 of them, and they’re concentrated where the money is: Lusaka (government), Copper Belt (mining) and Livingstone (safari tourists).
  • Last year, only six lawyers were admitted to the bar out of 164 who took the exam. The year before that, it was 16 out of 145. Keep in mind, these aren’t people coming in off the streets. These are people who have a law degree.
  • More than 60 percent of Zambia’s government revenue comes from the copper mines.
  • Taxing all this informal activity would be costly in both resources and voter goodwill. In 2012, Zambia collected just $2.3 million in income taxes from its citizens.
  • It goes as high up as you want to follow it. Michael Sata, the president of Zambia, appointed his uncle the finance minister, his nephew the deputy finance minister, his niece the local government minister, and cousins as ambassador to Japan and chief justice.
  • Zambia’s cabinet has ballooned to 20 ministers and 47 deputy ministers, the largest in Africa. With salaries three to four times higher than opposition MPs and each ministerial post bundled with perks like a company car, free fuel, house servants, and mobile phone talk-time, you get the feeling politicians aren’t jumping from opposition into government on moral sentiment alone.
  • But even if Zambia was run by a coalition of charitable technocrats and Mormon philanthropists, that wouldn’t solve the most fundamental problem of all: There simply isn’t that much money to go around.
  • In 2011, Zambia spent a total of $4.3 billion running itself. Stretch that to cover every man, woman, and child, and it amounts to just $325 per person per year. That amount—less than a dollar per person per day—has to cover education, health care, infrastructure, law enforcement, foreign debt … everything.
  • Now she goes all NGO. “Little government capacity,” she says, is the nicest way to put it. “There are simply no systems for routine government services,” she says. Getting a license, a permit, certificates, approvals to start work, visas for expats to fly down here—nothing is in one place, nothing is fast or easy.
  • And that’s just the bureaucracy. Then there are the cops that pull you over to ask for 50 kwacha ($10); the schools with slots reserved for paying parents; the hospitals that swear the earliest appointment, the only available medicine, is six months away until you reach into your pocket.
  • “Sometimes we have to pay for the inspectors to come to our mines,” Jane says.
  • The conversation goes like this: Jane tells the local certification body that she needs an inspector to sign off for a permit. The local certification body tells her that they would be happy to come out to the site, but they don’t have fuel for their cars, or enough petty cash to pay per diems. Jane offers to pay their costs, but only their costs, and the payments aren’t related to clearing the inspection.
  • The company has even paid the police to follow up on complaints or to investigate thefts. “They say, ‘We don’t have this in our budget’ or ‘We’ll need you to pay for it,’” Jane says. So the company fixes the police cars, covers their travel expenses, treats them to lunch.
  • “We tell them, ‘The company I work for, we’re not going to pay up.’ But at the end of the day, they know you’re on a short timeline, and they aren’t.”
  • Thomas’ family told him his nephews didn’t need to be in school. From their perspective, that’s not totally irrational. In a country with so few formal jobs and so much competition for getting them, I can see how spending hundreds of hours, thousands of kwachas, on education would seem superfluous. Thomas’ daughter wants to become a lawyer. You could almost forgive Thomas if he told her that the bar exam failure rate is more than 90 percent, so what’s the use?
  • International investors pledged $750 million last year to build infrastructure.
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