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Gene Ellis

George Soros: how to save the EU from the euro crisis - the speech in full | Business |... - 0 views

www.guardian.co.uk/...ave-eu-from-euro-crisis-speech

shared by Gene Ellis on 09 Apr 13 - No Cached
  • The crisis has also transformed the European Union into something radically different from what was originally intended. The EU was meant to be a voluntary association of equal states but the crisis has turned it into a hierarchy with Germany and other creditors in charge and the heavily indebted countries relegated to second-class status. While in theory Germany cannot dictate policy, in practice no policy can be proposed without obtaining Germany's permission first.
  • Italy now has a majority opposed to the euro and the trend is likely to grow. There is now a real danger that the euro crisis may end up destroying the European Union.
  • The answer to the first question is extremely complicated because the euro crisis is extremely complex. It has both a political and a financial dimension. And the financial dimension can be divided into at least three components: a sovereign debt crisis and a banking crisis, as well as divergences in competitiveness
  • ...37 more annotations...
  • The crisis is almost entirely self-inflicted. It has the quality of a nightmare.
  • My interpretation of the euro crisis is very different from the views prevailing in Germany. I hope that by offering you a different perspective I may get you to reconsider your position before more damage is done. That is my goal in coming here.
  • I regarded the European Union as the embodiment of an open society – a voluntary association of equal states who surrendered part of their sovereignty for the common good.
  • The process of integration was spearheaded by a small group of far sighted statesmen who recognised that perfection was unattainable and practiced what Karl Popper called piecemeal social engineering. They set themselves limited objectives and firm timelines and then mobilised the political will for a small step forward, knowing full well that when they achieved it, its inadequacy would become apparent and require a further step.
    • Gene Ellis
      Gene Ellis on 09 Apr 13
       
      Excellent point!
  • Unfortunately, the Maastricht treaty was fundamentally flawed. The architects of the euro recognised that it was an incomplete construct: a currency union without a political union. The architects had reason to believe, however, that when the need arose, the political will to take the next step forward could be mobilized. After all, that was how the process of integration had worked until then.
  • For instance, the Maastricht Treaty took it for granted that only the public sector could produce chronic deficits because the private sector would always correct its own excesses. The financial crisis of 2007-8 proved that wrong.
  • When the Soviet empire started to disintegrate, Germany's leaders realized that reunification was possible only in the context of a more united Europe and they were prepared to make considerable sacrifices to achieve it. When it came to bargaining, they were willing to contribute a little more and take a little less than the others, thereby facilitating agreement.
  • The financial crisis also revealed a near fatal defect in the construction of the euro: by creating an independent central bank, member countries became indebted in a currency they did not control. This exposed them to the risk of default.
  • Developed countries have no reason to default; they can always print money. Their currency may depreciate in value, but the risk of default is practically nonexistent. By contrast, less developed countries that have to borrow in a foreign currency run the risk of default. To make matters worse, financial markets can actually drive such countries into default through bear raids. The risk of default relegated some member countries to the status of a third world country that became over-indebted in a foreign currency. 
    • Gene Ellis
      Gene Ellis on 09 Apr 13
       
      Again, another excellent point!
    • Gene Ellis
      Gene Ellis on 09 Apr 13
       
      Not quite... Maggie Thatcher, a Conservative; and Gordon Brown, of Labour, both recognized this possible loss of sovereignty (and economic policy weapons they might use to keep the UK afloat), and refused to join the euro.
  • The emphasis placed on sovereign credit revealed the hitherto ignored feature of the euro, namely that by creating an independent central bank the euro member countries signed away part of their sovereign status.
  • Only at the end of 2009, when the extent of the Greek deficit was revealed, did the financial markets realize that a member country could actually default. But then the markets raised the risk premiums on the weaker countries with a vengeance.
  • Then the IMF and the international banking authorities saved the international banking system by lending just enough money to the heavily indebted countries to enable them to avoid default but at the cost of pushing them into a lasting depression. Latin America suffered a lost decade.
  • In effect, however, the euro had turned their government bonds into bonds of third world countries that carry the risk of default.
  • In retrospect, that was the root cause of the euro crisis.
  • The burden of responsibility falls mainly on Germany. The Bundesbank helped design the blueprint for the euro whose defects put Germany into the driver's seat.
  • he fact that Greece blatantly broke the rules has helped to support this attitude. But other countries like Spain and Ireland had played by the rules;
  • the misfortunes of the heavily indebted countries are largely caused by the rules that govern the euro.
    • Gene Ellis
      Gene Ellis on 09 Apr 13
       
      Well, yes, but this is an extremely big point.  If, instead of convergence, we continue to see growth patterns growing apart, what then?
  • Germany did not seek the dominant position into which it has been thrust and it is unwilling to accept the obligations and liabilities that go with it.
  • Austerity doesn't work.
  • As soon as the pressure from the financial markets abated, Germany started to whittle down the promises it had made at the height of the crisis.
  • What happened in Cyprus undermined the business model of European banks, which relies heavily on deposits. Until now the authorities went out of their way to protect depositors
  • Banks will have to pay risk premiums that will fall more heavily on weaker banks and the banks of weaker countries. The insidious link between the cost of sovereign debt and bank debt will be reinforced.
  • In this context the German word "Schuld" plays a key role. As you know it means both debt and responsibility or guilt.
  • If countries that abide by the fiscal compact were allowed to convert their entire existing stock of government debt into eurobonds, the positive impact would be little short of the miraculous.
  • Only the divergences in competitiveness would remain unresolved.
  • Germany is opposed to eurobonds on the grounds that once they are introduced there can be no assurance that the so-called periphery countries would not break the rules once again. I believe these fears are misplaced.
  • Losing the privilege of issuing eurobonds and having to pay stiff risk premiums would be a powerful inducement to stay in compliance.
  • There are also widespread fears that eurobonds would ruin Germany's credit rating. eurobonds are often compared with the Marshall Plan.
  • It is up to Germany to decide whether it is willing to authorise eurobonds or not. But it has no right to prevent the heavily indebted countries from escaping their misery by banding together and issuing eurobonds. In other words, if Germany is opposed to eurobonds it should consider leaving the euro and letting the others introduce them.
  • Individual countries would still need to undertake structural reforms. Those that fail to do so would turn into permanent pockets of poverty and dependency similar to the ones that persist in many rich countries.
  • They would survive on limited support from European Structural Funds and remittances
  • Second, the European Union also needs a banking union and eventually a political union.
  • If Germany left, the euro would depreciate. The debtor countries would regain their competitiveness. Their debt would diminish in real terms and, if they issued eurobonds, the threat of default would disappear. 
Gene Ellis

An interview with Athanasios Orphanides: What happened in Cyprus | The Economist - 0 views

www.economist.com/...nterview-athanasios-orphanides

shared by Gene Ellis on 29 Oct 13 - No Cached
  • Cyprus had developed its financial center over three decades ago by having double taxation treaties with a number of countries, the Soviet Union for example. That means if profits are booked and earned and taxed in Cyprus, they are not taxed again in the other country. Russian deposits are there because Cyprus has a low corporate tax rate, much like Malta and Luxembourg, which annoys some people in Europe.
  • In addition, Cyprus has a legal system based on English law and follows English accounting rules
  • This government took a country with excellent fiscal finances, a surplus in fiscal accounts, and a banking system that was in excellent health. They started overspending, not only for unproductive government expenditures but also they raised implicit liabilities by raising pension promises, and so forth.
  • ...11 more annotations...
  • The size of the banking sector and exposure to Greece were known risks but at that time there was no banking problem in Cyprus
  • The containers were part of a shipment going from Iran to Syria that was intercepted in Cypriot waters after a tip from the U.S. The president took the decision to keep the ammunition. [NOTE: An independent prosecutor found that Christofias has ignored repeated warnings and pleas to destroy or safeguard the ammunition, apparently in hopes of one day returning it to Syria or Iran.]
  • Instead, they started lobbying the Russian government to give them a loan that would help them finance the country for a couple more years, and Russia came through, unfortunately,
  • I say unfortunately because as a result the government could keep operating and accumulating deficits without taking corrective action.
  • The next important date was the October 26-27, 2011 meeting of the EU council in Brussels where European leaders decided to wipe out what ended up being about 80% of the value of Greek debt that the private sector held. Every bank operating in Greece, regardless of where it was headquartered, had a lot of Greek debt.
  • For Cyprus, the writedown of Greek debt was between 4.5 and 5 billion euro, a substantial chunk of capital.
  • The second element of the decision taken by heads of states was to instruct the EBA to do a so- called capital exercise that marked to market sovereign debt and effectively raised abruptly capital requirements. The exercise required banks to have a core tier-1 ratio of 9%, and on top of that a buffer to make up for differences in market and book value of government debt. That famous capital exercise created the capital crunch in the euro area which is the cause of the recession we've had in the euro area for the last 2 years.
  • The Basle II framework that governments adopted internationally, and that the EU supervisory framework during this period also incorporated, specifies that holdings of government debt in a states' own currency are a zero-risk-weight asset, that is they are assigned a weight of zero in calculating capital requirements.
  • the governments should have agreed to make the EFSF/ESM available for direct recapitalization of banks instead of asking each government to be responsible for the capitalization.
  • Following a downgrading in late June 2012, all three major rating agencies rated the sovereign paper Cyprus below investment grade. According to ECB rules, that made the government debt not eligible as collateral for borrowing from the eurosystem, unless the ECB suspended the rules, as it had done for the cases of Greece, Portugal and Ireland. In the case of Cyprus, the ECB decided not to suspend the eligibility rule.
  • The governments have created risk in what before last week were considered perfectly safe deposits. This is going to have a chilling effect on deposits in any bank in a country perceived to be weak. This will mean the cost of funding will increase in the periphery of Europe and as a result, the cost of financing for businesses and households will increase. That will add to the divergences we already have and make the recession in the periphery of Europe deeper than it already is. This is really a disaster for European economic management as a whole. 
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

A Driving School in France Hits a Wall of Regulations - NYTimes.com - 0 views

www.nytimes.com/...its-a-wall-of-regulations.html

shared by Gene Ellis on 05 Feb 15 - No Cached
  • The other driving schools have sued them, saying their innovations break the rules.
  • partly because getting a driver’s license here is so difficult and expensive that it has inspired books on the subject,
  • their struggle highlights how the myriad rules governing driving schools — and 36 other highly regulated professions — stifle competition and inflate prices in France.
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  • In the case of driving schools, the government offers only a limited number of exams each year, and these are doled out to the driving schools depending on their success rate the year before. That fact alone gives the old guard a virtual monopoly,
  • calling for an overhaul of the written test, which he says goes far beyond making sure that a person knows the rules of the road.
  • Some studies have concluded that the French are probably paying 20 percent more than they should for the services they get from regulated professions, which include notaries, lawyers, bailiffs, ambulance drivers, court clerks, driving instructors and more.
  • The failure rate for the French driving exam is about 41 percent, the government office for road safety said. The cost to the economy goes beyond the embarrassment of those who fail, according to those who have studied it.
  • barriers to getting a license are so high that about one million French people, who should have licenses, have never been able to get them.
  • Mr. Kramarz said that it often costs 3,000 euros, or about $3,900, to get a license. But others said the average was closer to 1,500 to 2,000 euros.
  • Although students are required to take only 20 hours of driving lessons, most end up doing double that while they wait for a chance to take the test.
Gene Ellis

To Lower Tariffs, Vietnam Pushes for Easing Trade Rules - NYTimes.com - 0 views

www.nytimes.com/...es-for-easing-trade-rules.html

trade rules Vietnam Europe

shared by Gene Ellis on 19 Feb 15 - No Cached
  • Europe generally requires what is known as a “double transformation” in goods for them to be considered made in a certain region. In the case of clothing, one step, or “transformation,” would be weaving yarn into a fabric. A second transformation would be assembling the fabric into a garment. The United States requires a “triple transformation” that extends back to the production of yarn from synthetic or natural fibers, like cotton.
  • Lien Phat Ltd.'s factory,
  • Its supplies are imported. “I mainly take orders from international corporations, who give us materials and designs,” said Truong Thi Thuy Lien, the owner of Lien Phat. “Usually the clients will designate us to certain suppliers, most of them are in China.”
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  • “I don’t deal with the exporting process. I take the order and deliver the goods to the port” in Ho Chi Minh City, she said. “The rest lies with my clients.” <img src="http://meter-svc.nytimes.com/meter.gif"/>
Gene Ellis

Op-Ed Columnist - Bubbles and the Banks - NYTimes.com - 0 views

www.nytimes.com/...08krugman.html

Krugman banks

shared by Gene Ellis on 24 Apr 13 - Cached
  • Bear in mind that the implosion of the 1990s stock bubble, while nasty — households took a $5 trillion hit — didn’t provoke a financial crisis. So what was different about the housing bubble that followed?
  • The short answer is that while the stock bubble created a lot of risk, that risk was fairly widely diffused across the economy. By contrast, the risks created by the housing bubble were strongly concentrated in the financial sector. As a result, the collapse of the housing bubble threatened to bring down the nation’s banks. And banks play a special role in the economy. If they can’t function, the wheels of commerce as a whole grind to a halt.
  • Why did the bankers take on so much risk? Because it was in their self-interest to do so.
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  • Of course, that conflict of interest is the reason we have bank regulation. But in the years before the crisis, the rules were relaxed — and, even more important, regulators failed to expand the rules to cover the growing “shadow” banking system, consisting of institutions like Lehman Brothers that performed banklike functions even though they didn’t offer conventional bank deposits.
  • And here’s the thing: Since that aid came with few strings — in particular, no major banks were nationalized even though some clearly wouldn’t have survived without government help — there’s every incentive for bankers to engage in a repeat performance.
Gene Ellis

New Hurdle for Resolving Euro Crisis: Constitutions - WSJ.com - 0 views

online.wsj.com/...3864604579069350790061202.html

shared by Gene Ellis on 29 Oct 13 - No Cached
  • In the latest example, Portugal's Constitutional Court on Thursday shot down the government's attempts to improve the country's competitiveness by making it easier for companies to shed workers—as demanded under the terms of the country's international bailout. The court ruled against the measures because, it said, they went against the principle of firing workers only when there was just cause.
  • Courts have been able to thwart some attempts to shrink the state bureaucracy or make the labor force more flexible.
  • Portugal's 1976 constitution calls for "opening the path to a socialist society." It obliges the state to promote employment, move toward free health and education services and even develop "centers of rest and holiday" for workers.
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  • So perhaps it comes as little surprise that, in the last five months, the country's Constitutional Court has struck down four government measures, including a tax on unemployment benefits and temporary trims in wages and pensions that the judges said were unfairly targeted at civil servants.
  • Last month the court ruled against a plan to steer redundant public employees into a retraining program and lay off those who aren't placed in new jobs after 12 months
  • "To fulfill what the [judges] want, we need to leave the euro," said Medina Carreira, an economist and former Portuguese finance minister.
  • Under the terms of its 2011 bailout, the government has until the end of this year to move 25,000 civil servants into a labor reserve—at reduced pay—that many view as a prelude to layoffs.
  • "In several cases, local political norms seem incompatible with euro-area membership in the long term," said J.P. Morgan Chase economist Alex White.
  • Unlike the U.S. Constitution, which has seven articles and 27 amendments, Europe's national charters tend to be lengthy and prescriptive, limiting the space for judicial interpretation. Portugal's has 296 articles, Italy's has 139 and Greece's has 120.
  • "The constitution can't set a series of obligations for a state that simply has no money to fulfill them,"
Gene Ellis

Angela Merkel scolds Italy and France over the faltering eurozone recovery | Business |... - 0 views

www.theguardian.com/...ance-eurozone-faltering-growth

shared by Gene Ellis on 05 Feb 15 - No Cached
  • said faltering growth was the direct result of the 18-member currency zone's inability to punish those countries that ran high deficits in contravention of limits set by Brussels.
  • "We have very little, if any, possibility of sanctioning those countries that break the rules," she said.
  • Her comments echoed those of ECB president Mario Draghi, who last month warned that without moves to strengthen the fiscal pact and impose punishments on rule-breaking countries, the eurozone project could flounder.
Gene Ellis

Carmakers Are Central Voice in U.S.-Europe Trade Talks - NYTimes.com - 0 views

www.nytimes.com/...for-us-europe-trade-talks.html

shared by Gene Ellis on 18 Feb 15 - No Cached
  • With the dexterity of thieves stripping a vehicle for parts, they remove each van’s engine, bumpers, tires, drive shaft, fuel tank and the exhaust system.
  • Next, the crews pack everything into steel freight containers, which begin a journey by river barge and cargo ship to Ladson, S.C., near the port of Charleston. There, American teams put the vans back together again.
  • It would be more efficient to ship the vans in one piece, of course. But with current trade rules, efficiency is seldom the goal.
  • ...10 more annotations...
  • Daimler’s stripped-down vans travel by cargo ship to Ladson, S.C., where a token portion of assembly occurs to avoid a costly American tariff.
  • It was first imposed on European light trucks during the 1960s in retaliation for German and French trade restrictions on American chickens.
  • The importance of European-American auto production, meanwhile, was highlighted by Volkswagen’s announcement on Monday that it would open a new production line in Chattanooga, Tenn., to make sport utility vehicles.
  • In Europe, discussion about the economic benefits of an agreement has been overshadowed by fears that more open trade would expose the Continent to what are widely perceived as less stringent safety and environmental standards in the United States. (And once again, chickens play a big role.)
  • Trucks, cars and other transportation equipment such as airplanes make up the second-biggest category of merchandise traded between the United States and Europe, just behind chemicals.
  • n the first three months of 2014 alone, the United States exported $2.6 billion in motor vehicles and parts to the European Union, and imported $12.3 billion worth.
  • The engines and other components used in Freightliner heavy trucks made in Portland, Ore., are similar to those installed in Mercedes-Benz heavy trucks made in Wörth, Germany. But Daimler must design and engineer many parts twice — and submit them for regulatory certification twice — to meet different United States and European rules.
  • The reason that Daimler goes to the trouble of finishing assembly in Germany in the first place is that the vehicles must be test-driven before they leave the factory. It would be too costly to set up a separate testing operation in the United States, the company said.
  • Industries like chemicals and pharmaceuticals are even trickier, and food is a particularly emotional issue in Europe.
  • there is a fixation on American chickens disinfected with chlorine, which local consumers find repellent
Gene Ellis

Europe, Facing Economic Pain, May Ease Climate Rules - NYTimes.com - 0 views

www.nytimes.com/...tions-on-renewable-energy.html

climate change

shared by Gene Ellis on 23 Jan 14 - No Cached
  • Europe, Facing Economic Pain, May Ease Climate Rules
  • On Wednesday, the European Union proposed an end to binding national targets for renewable energy production after 2020. Instead, it substituted an overall European goal that is likely to be much harder to enforce.
  • 14 executives at large companies called for “one single, realistic target” and warned that “the high-cost of noncompetitive technologies to decarbonise the power sector” will strain businesses already hit by Europe’s high energy prices, particularly for electricity, which costs twice what it does in the United States.
Gene Ellis

Tax Breaks for Companies Like Apple Investigated by E.U. - NYTimes.com - 0 views

www.nytimes.com/...tries-business-tax-breaks.html

shared by Gene Ellis on 05 Feb 15 - No Cached
  • The subcommittee said that Apple had “exploited a difference between Irish and American tax residency rules” but had not broken any laws.
  • Among the ideas under consideration are strict rules for defining where a company has a permanent presence and measures to limit the practice of so-called transfer pricing — the shunting of profits and losses between subsidiaries by disguising them as internal corporate payments for goods or, as is increasingly common, for copyright or patent royalties.
Gene Ellis

The Limits to ECB Policy - The Euro Crisis - WSJ - 0 views

blogs.wsj.com/...the-limits-to-ecb-policy-2

shared by Gene Ellis on 08 Mar 13 - No Cached
  • Although it has yet to be implemented or even clearly delineated, the mere threat of an ECB bond-buying program, which is what the OMT boils down to, has been enough to drive down yields and reopen the fixed-income markets to the single currency’s struggling sovereigns.
  • Those in employment don’t want their salaries to adjust downwards and insist on maintaining regulations that protect them from competition from the unemployed. Impossible to justify regulatory barriers to entry remain in many employment sectors (such as French rules that make becoming a ski guide almost as onerous as it is to get a pilot’s license).
  • ultimately, politicians will have to make the decisions on whether the euro zone can be saved by choosing to accept either inflation or massive, and unlimited, cross-border transfers or painful unwinding of past excesses through internal devaluation and restructuring.
Gene Ellis

Canada Aims to Woo International Students - NYTimes.com - 0 views

www.nytimes.com/...25iht-educlede25.html

shared by Gene Ellis on 25 Mar 13 - No Cached
  • International students are allowed to seek part-time employment off campus after six months of full-time study, as a way to help them defray costs. They can also obtain foreign work credentials: After earning a four-year undergraduate degree, they can apply to work in Canada for up to three years.
  • Other nations are not as generous: In the United States, international students are eligible to work only on campus, and many struggle to stay in the country after graduation. Tough visa rules have led to a foreign student “brain drain,”
  • In Britain, international students can work no more than 10 hours a week and need an endorsement from their school to work after graduation.
  • Gene Ellis on 25 Mar 13
     
    "choose"
Gene Ellis

Will bank supervision in Ohio and Austria be similar? A transatlantic view of the Singl... - 0 views

www.voxeu.org/...w-single-supervisory-mechanism

bank supervision ohio austria single mechanism

shared by Gene Ellis on 25 Mar 13 - No Cached
  • At the inception of the euro, it was thought possible to have a centralised monetary authority and decentralised bank supervision, but the inability to separate sovereign-debt problems from those of bank stability has led the leaders of the member states of the EU to agree to centralise supervision in the Single Supervisory Mechanism.
  • The states retained their powers to supervise the small number of state-chartered banks that seemed little threat to the stability of the new more tightly regulated national system.
  • What was not anticipated was that the more stable national banks would fail to adequately supply credit to the economy.
  • ...9 more annotations...
  • States, not the federal government, regulated securities markets and insurance, leaving little oversight for interstate business.
  • The 1930s New Deal reforms added more agencies, including the Securities Exchange Commission and the Federal Deposit Insurance Corporation, complicating political oversight by giving them distinctive missions,
  • Yet, it was the trust companies, lacking access to emergency liquidity that caused the 1907 crisis to erupt and spread to the banks.
  • To remedy these defects, the Federal Reserve System, established in 1913, was to act as a lender of last resort, bringing all systemically important institutions – national banks , large state banks and trust companies – under the federal supervision of the Office of the Comptroller of the Currency or the Federal Reserve banks.
  • Consequently, when onerous rules, such as the prohibition on branch banking prevented banks from financing the emerging giant corporations, markets, assisted by more lightly regulated trust and insurance companies, stepped in.
  • But, they have not converged, especially with regard to state banks that often pressure state regulators.
  • Surveillance of a bank is not dependent on the geographic scope of its operations, as in the US, but on its systemic significance measured in several dimensions and whether it receives financial assistance from the European Stability Mechanism.
  • the ECB’s direct authority is more encompassing.
  • The ECB will not be directly involved in crisis management and bank resolution, which will be the responsibility of the national authorities. This autonomy will not be incentive compatible until EU directives are adopted for a unified deposit insurance system and a funded single resolution authority.
Gene Ellis

Cyprus adds to Europe's confusion - FT.com - 0 views

www.ft.com/...4a-11e2-a4fa-00144feabdc0.html

shared by Gene Ellis on 29 Mar 13 - No Cached
  • First, the eurozone does indeed have the capacity to do the right thing in the end, though not before first exhausting all the alternatives.
  • It protects the small deposits and imposes a rational resolution process.
  • Second, a euro is indeed not a euro everywhere.
  • ...6 more annotations...
  • A consensus on the principle that creditors, not taxpayers, should pay if a bank becomes insolvent does not yet exist across the eurozone. Does anybody imagine the German government would not rescue Deutsche Bank if it were in trouble? Of course it would.
  • The outcome in Cyprus underlines the fact that the value of a euro of bank liabilities depends on the solvency of the bank itself and the solvency of the government standing behind the bank. If both bank and state are insolvent, lenders are likely not only to lose a big proportion of their money outright, but to find that the rest is frozen behind controls,
  • Yet, as Guntram Wolff of Bruegel notes, a currency union with internal exchange controls is a contradiction in terms. Only the willingness of the European Central Bank to finance Cypriot banks without limit could end these controls in the near future. Will it be willing to act soon?
  • The ideal conclusion from the Cypriot imbroglio would be that all eurozone banks should have more capital.
  • A final lesson of this crisis is that what I have called the “bad marriage” that binds the eurozone members together has become worse.
  • Thus the eurozone limps on through crisis after crisis. Can – or will – this continue indefinitely? I do not know.
Gene Ellis

Op-Ed Columnist - Learning From Europe - NYTimes.com - 0 views

www.nytimes.com/...11krugman.html

europe krugman

shared by Gene Ellis on 24 Apr 13 - Cached
  • It’s true that the U.S. economy has grown faster than that of Europe for the past generation. Since 1980 — when our politics took a sharp turn to the right, while Europe’s didn’t — America’s real G.D.P. has grown, on average, 3 percent per year. Meanwhile, the E.U. 15 — the bloc of 15 countries that were members of the European Union before it was enlarged to include a number of former Communist nations — has grown only 2.2 percent a year. America rules!
  • In 2008, 80 percent of adults aged 25 to 54 in the E.U. 15 were employed (and 83 percent in France). That’s about the same as in the United States. Europeans are less likely than we are to work when young or old, but is that entirely a bad thing?
  • Broadband, in particular, is just about as widespread in Europe as it is in the United States, and it’s much faster and cheaper.
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  • Or maybe not. All this really says is that we’ve had faster population growth. Since 1980, per capita real G.D.P. — which is what matters for living standards — has risen at about the same rate in America and in the E.U. 15: 1.95 percent a year here; 1.83 percent there.
  • And Europeans are quite productive, too: they work fewer hours, but output per hour in France and Germany is close to U.S. levels.
  • After all, while reports of Europe’s economic demise are greatly exaggerated, reports of its high taxes and generous benefits aren’t. Taxes in major European nations range from 36 to 44 percent of G.D.P., compared with 28 in the United States. Universal health care is, well, universal. Social expenditure is vastly higher than it is here.
  • So if there were anything to the economic assumptions that dominate U.S. public discussion — above all, the belief that even modestly higher taxes on the rich and benefits for the less well off would drastically undermine incentives to work, invest and innovate — Europe would be the stagnant, decaying economy of legend. But it isn’t.
Gene Ellis

Foreign Banks in U.S. Face Greater Restrictions - NYTimes.com - 0 views

www.nytimes.com/...face-greater-restrictions.html

shared by Gene Ellis on 26 Apr 13 - No Cached
  • As for equity levels, in many cases a foreign bank might simply have to convert loans it had made to the American operation into equity investments. Suddenly the American operation would appear to be better capitalized.
  • European regulators who trusted Iceland to regulate its own banks wound up paying off depositors even though there is little hope Iceland will ever reimburse those payments.
  • It turns out that in the financial crisis, big banks with high leverage ratios — that is, more capital relative to assets — were significantly more likely to survive without needing bailouts.
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  • “The current rules can be very easily gamed,”
  • thinks that regulators would be better off to seek simplicity through measures like leverage ratios, rather than allow banks to make calculations that depend on thousands of estimates to determine how much capital they need.
Gene Ellis

What If We Never Run Out of Oil? - Charles C. Mann - The Atlantic - 1 views

www.theatlantic.com/...5

shared by Gene Ellis on 01 May 13 - No Cached
  • Walking around town, my friend and I had noticed that almost every home had a pile of coal outside, soft dark chunks that people shoveled into stoves for cooking and heating. Thousands upon thousands of coal fires were loading the air with tiny dots of soot. Scientists have taken to calling these dots “black carbon,” and have steadily ratcheted up their assessments of its harm. In March, for instance, a research team led by a Mumbai environmental group estimated that black carbon and other particulate matter from India’s coal-fired power plants cause about 100,000 deaths a year.
  • A 31-scientist team from nine nations released a comprehensive, four-year assessment in January arguing that planetary black-carbon output is the second-biggest driver of anthropogenic (human-caused) climate change; the little black specks I found on my glasses and clothes have roughly two-thirds the impact of carbon dioxide.
  • The rule of thumb is that if a well leaks more than about 3 percent” of its methane production into the air, “natural gas actually becomes dirtier than coal, from a climate-change perspective,
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  • Worse still, the aging natural-gas infrastructure is riddled with holes and seeps; early this year, a survey of gas mains along Boston’s 785 miles of road, the first-ever such examination, found 3,356 leaks.
  • What we can’t do, or at least not readily, is overcome the laws of economics.
  • To ask utilities to take in large amounts of solar power
  • One recent estimate put the EROEI of Spain’s extensive solar-power network at less than 3.
  • When renewables supply 20 to 30 percent of all electricity, many utility-energy engineers predict, the system will no longer be able to balance supply and demand. Brownouts will ripple across the landscape
  • As an example, typical solar cells today have an EROEI of about 10—better than tar sands but worse than most oil and gas.
  • is like asking a shipping firm to replace its huge, professionally staffed container ships with squadrons of canoes paddled by random adolescents.
  • But even if such techniques work in the way researchers hope, the infrastructure transformation ahead is daunting in scale and scope. It’s like setting up a second Industrial Revolution, only all over the world and in one-third the time.
Gene Ellis

Kenen on the euro | vox - 0 views

www.voxeu.org/kenen-euro

shared by Gene Ellis on 26 Jan 13 - No Cached
  • Early work on optimum currency areas by Robert Mundell had emphasised the symmetry or asymmetry of disturbances hitting different regional economies as a key criterion on which to gauge their suitability for sharing a common currency.
  • Peter took this insight further by arguing that disturbances were often sector specific and that the diversification of regional economies was therefore a key consideration in gauging their suitability for monetary union (the better diversified an economy was, the less likely it was to be badly destabilised by a sector-specific shock). (Kenen 1969).
  • We now know that Kenen flagged a problem for which the Eurozone could have been better prepared. With an outsized capital-goods producing sector, Germany benefitted from a strong positive shock as a result of China’s emergence onto the global stage, given the Chinese economy’s voracious appetite for capital goods.
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  • Portugal and Italy, on the other hand, specialised much more heavily in consumer-goods producing sectors and felt the brunt of Chinese competition. No Eurozone member was sufficiently well diversified to shrug off this kind of shock, something that should have made the euro’s architects think twice.
  • Specifically, they should have thought again, Kenen argued, about the coordination of national fiscal policies, the need for a common Eurozone budget, and mechanisms for transferring fiscal resources from booming to depressed regions.
  • More than any other economist, Peter understood that monetary union was a legal as well as an economic construct. His careful parsing of the Maastricht Treaty explained to the economics profession exactly what the treaty did and did not allow (Kenen 1992).
  • Peter even anticipated the debate over TARGET2 imbalances, observing in 1999 that it was possible to “easily conceive of conditions…in which one [national central bank] would be reluctant to build up claims indefinitely on some other national central bank.” (Kenen 1999).
  • Finally, Peter observed that the possibility of a member state exiting from the Eurozone could not be ruled out but warned that European officials should be cautious in bandying about the idea (Kenen 1999). “The costs of defecting,” he wrote back in 1999, “could be very high.”
  • Gene Ellis on 26 Jan 13
     
    Good Eichengreen, Wyplosz EUVox article on Peter Kenen and insights on why the Euro might have difficuties.
Gene Ellis

European Union Leaders Gather in Brussels Over Budget - NYTimes.com - 0 views

www.nytimes.com/...r-in-brussels-over-budget.html

shared by Gene Ellis on 05 Feb 13 - No Cached
  • He has threatened to veto any new budget that does not at least freeze spending,
  • “Europeans who are attached to the European Union are now in a minority.” Fifty-two percent of those surveyed said they felt little or no attachment, up seven percentage points since 2010. In Britain, only 27 percent felt attached to the union.
  • Ahead of this week’s negotiations, at least seven countries, mostly those that contribute more to Europe’s coffers than they get back in farm subsidies and other payments, have already warned that they may veto a budget that does not give them a better deal. Among these is Austria, where, according to Mr. Ehrenhauser, who sits on the European Parliament’s budgetary control committee, “there is a critical mass building against the European Union.”
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  • The rethink, which would have scrapped spending on agricultural subsidies, ran into heavy opposition and stalled
  • All long-term budget decisions require unanimous approval by the member states, a rule first established when the grouping, then known as the European Economic Community, had just six members, not 27. The power of veto makes any major change to spending all but impossible and entrenches the status quo, no matter how unworkable or unpopular.
  • “It is extremely difficult to change anything,” Mr. Sapir said. “Everyone is always fighting at the margins over narrow national interests. They try to make sure they get money for their own countries and that cuts go to other countries.”
  • After months of arguments, two broad alliances have emerged. The first comprises countries like Britain, Germany and Sweden that are big net contributors and want to keep a tighter rein on spending. The second, known as the “Friends of Cohesion,” after a class of development grants aimed at less wealthy areas, includes Poland, Spain, Portugal and others that want to make sure the union’s largess does not dry up.
  • The European Commission, however, has been far less forthcoming. It told Mr. Ehrenhauser that it could not give a breakdown of spending in recent years on wine because that would require “lengthy research” and “it cannot consider doing this at the present time because of other priorities.”
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