Group items matching

in title, tags, annotations or url

Most delicate will be whether the Spanish banks receiving the largest cash injections, like the nationalized mortgage giant Bankia, will be forced to impose losses on holders of their subordinated bonds. Those are the investors whose bonds are not backed by collateral and are thus considered more risky.

In Spain, though, the problem is that 62 percent of the holders of Bankia’s subordinated debt are Spanish individual investors, not overseas hedge funds and investment banks. It is not likely that Madrid will be willing to hit those citizens with a 65 percent loss — the loans are currently priced at about 35 cents on the dollar — at a time of 25 percent unemployment in the country.

“There are compelling reasons for the euro zone to insist on losses for subordinated and even senior bondholders, the least of which is a reduction in moral hazard,” said Adam Lerrick, an expert on banking and sovereign debt at the American Enterprise Institute. “Losses for bondholders is now euro zone policy, so Europe’s credibility is also at stake.”

Italy faces no immediate threat for as long interest rates remain low. The country will be able to muddle through for a while until some political or economic shock will force a decision one way or the other.

Meanwhile, the single largest constraint on the resumption of eurozone growth is not fiscal policy – which is broadly neutral at present across the single currency area – but the continued failure to clean up the banks. The growth rate of loans to the non-financial sector turned negative in 2009, showed some intermittent improvements, only to then deteriorate again last year.

The monetary and banking data are telling us that the economy will teeter on the brink of zero or low growth for the foreseeable future because the financial sector is not supplying the economy with sufficient funds to expand.

Banking union could help, but only if it were to break the relationship between banks and sovereigns and clean up the balance sheets.

Carefully taught, the assignments can help make math more concrete. Students don’t just memorize their times tables and addition facts but also understand how arithmetic works and how to apply it to real-life situations. But in practice, most teachers are unprepared and children are baffled, leaving parents furious.

On national tests, nearly two-thirds of fourth graders and eighth graders are not proficient in math. More than half of fourth graders taking the 2013 National Assessment of Educational Progress could not accurately read the temperature on a neatly drawn thermometer.

On the same multiple-choice test, three-quarters of fourth graders could not translate a simple word problem about a girl who sold 15 cups of lemonade on Saturday and twice as many on Sunday into the expression “15 + (2×15).” Even in Massachusetts, one of the country’s highest-performing states, math students are more than two years behind their counterparts in Shanghai.

A 2012 study comparing 16-to-65-year-olds in 20 countries found that Americans rank in the bottom five in numeracy.

One study that examined medical prescriptions gone awry found that 17 percent of errors were caused by math mistakes on the part of doctors or pharmacists.

“I’m just not a math person,” Lampert says her education students would say with an apologetic shrug.

In the 1970s and the 1980s, cognitive scientists studied a population known as the unschooled, people with little or no formal education.

For instance, many of the workers charged with loading quarts and gallons of milk into crates had no more than a sixth-grade education. But they were able to do math, in order to assemble their loads efficiently, that was “equivalent to shifting between different base systems of numbers.”

Studies of children in Brazil, who helped support their families by roaming the streets selling roasted peanuts and coconuts, showed that the children routinely solved complex problems in their heads to calculate a bill or make change.

The cognitive-science research suggested a startling cause of Americans’ innumeracy: school.

The answer-getting strategies may serve them well for a class period of practice problems, but after a week, they forget. And students often can’t figure out how to apply the strategy for a particular problem to new problems.

In the process, she gave them an opportunity to realize, on their own, why their answers were wrong.

At most education schools, the professors with the research budgets and deanships have little interest in the science of teaching

Only when the company held customer focus groups did it become clear why. The Third Pounder presented the American public with a test in fractions. And we failed. Misunderstanding the value of one-third, customers believed they were being overcharged. Why, they asked the researchers, should they pay the same amount for a third of a pound of meat as they did for a quarter-pound of meat at McDonald’s. The “4” in “¼,” larger than the “3” in “⅓,” led them astray.

Some of the failure could be explained by active resistance.

A year after he got to Chicago, he went to a one-day conference of teachers and mathematicians and was perplexed by the fact that the gathering occurred only twice a year.

More distressing to Takahashi was that American teachers had almost no opportunities to watch one another teach.

In Japan, teachers had always depended on jugyokenkyu, which translates literally as “lesson study,” a set of practices that Japanese teachers use to hone their craft. A teacher first plans lessons, then teaches in front of an audience of students and other teachers along with at least one university observer. Then the observers talk with the teacher about what has just taken place. Each public lesson poses a hypothesis, a new idea about how to help children learn.

The research showed that Japanese students initiated the method for solving a problem in 40 percent of the lessons; Americans initiated 9 percent of the time.

Finland, meanwhile, made the shift by carving out time for teachers to spend learning. There, as in Japan, teachers teach for 600 or fewer hours each school year, leaving them ample time to prepare, revise and learn. By contrast, American teachers spend nearly 1,100 hours with little feedback.

“Sit on a stone for three years to accomplish anything.”

In one experiment in which more than 200 American teachers took part in lesson study, student achievement rose, as did teachers’ math knowledge — two rare accomplishments.

Examining nearly 3,000 teachers in six school districts, the Bill & Melinda Gates Foundation recently found that nearly two-thirds scored less than “proficient” in the areas of “intellectual challenge” and “classroom discourse.”

The country accounts for over a quarter of global greenhouse gas emissions.

Even assuming that China’s population does not grow at all over the next 30 years, that the energy efficiency of its economy increases at a faster pace than most developed and developing countries and that it manages to decarbonize its energy sources faster than pretty much anybody else, China would still be emitting a lot more carbon in 2040 than it does today, according to E.I.A. calculations.

Can the United States or anybody else do anything to speed China down a low-carbon path?

The latest report from the United Nations Intergovernmental Panel on Climate Change, issued in April, suggested several ways to allot responsibilities. If one starts counting in the 18th century and counts only emissions from industry and energy generation, the United States is responsible for more than a quarter of all greenhouse gases that humanity has put into the air. China, by contrast, is responsible for 10 percent.But if one starts counting in 1990, when the world first became aware that CO2 was a problem, and includes greenhouse gases emitted from changes in land use, the United States is responsible for only 18 percent, and China’s share rises to 15 percent. Rich and poor countries, unsurprisingly, disagree on the proper measure. Photo

Not everybody will meet their Copenhagen pledges. Japan, which unplugged its nuclear energy after the disaster at the Fukushima nuclear power plant, will fall behind. So will Canada and Australia, whose new conservative governments have lost interest in the pledges of their predecessors.

Central banks that buy sovereign debt issued by fiscal authorities offset market-imposed discipline on borrowing costs, effectively subsidizing public-sector profligacy.

Zombie-like companies were kept on artificial life-support in the false hope that time alone would revive them. It was not until late in the decade, when the banking sector was reorganized and corporate restructuring was encouraged,

Like Japan, America’s post-bubble healing has been limited – even in the face of the Fed’s outsize liquidity injections. Household debt stood at 112% of income in the third quarter of 2012 – down from record highs in 2006, but still nearly 40 percentage points above the 75% norm of the last three decades of the twentieth century. Similarly, the personal-saving rate, at just 3.5% in the four months ending in November 2012, was less than half the 7.9% average of 1970-99.

Crisis-torn peripheral European economies still suffer from unsustainable debt loads and serious productivity and competitiveness problems. And a fragmented European banking system remains one of the weakest links in the regional daisy chain.

That leaves a huge sum of excess liquidity sloshing around in global asset markets. Where it goes, the next crisis is inevitably doomed to follow.

While a slide in imports accounts for some of the correction, Greece boosted its exports outside the EU by about 30 percent in the fourth quarter of 2012 from the previous year, while Italy’s rose 13 percent in January from a year ago, he said.

The metamorphosis is known as internal devaluation

Prevented by membership of the euro from driving down currencies, governments and companies are squeezing labor costs to spur productivity.

On average, the periphery is about halfway to eliminating large structural current-account deficits, which allow for declines related to recession-driven weaker import demand, estimates Goldman Sachs (GS).

The OECD today published an index showing that relative labor costs in Spain and Portugal have now dropped below Germany’s for the first time since 2005.

“It’s potentially good for the economy but only if it results in faster investment,”

“If not then there’s a downward spiral risk.”

These huge recessions do matter. For Latvia, the cumulative loss from 2008 to 2012 adds up to 77 per cent of the country’s pre-crisis annual output. On the same basis, the loss was 44 per cent for Lithuania and 43 per cent for Estonia.

In brief, Latvia, worst-hit of the Baltic countries, suffered one of the biggest depressions in history. It is recovering. But it has not yet fully recovered. Are its policies a model for others? In a word, no.

These states have four huge advantages

First, according to Eurostat, Latvian labour costs per hour, in 2012, were a quarter of those of the eurozone as whole, 30 per cent of those in Spain and half those of Portugal.

Second, these are very small and open economies

Its trade partners hardly notice Latvia’s adjustment. But they would notice a comparably large Italian one.

Third, foreign-owned banks play a central role in these economies. For the eurozone, this is the alternative to a banking union: let banks with fiscally strong host governments take over the weaker financial systems.

inally, the Baltic states have embraced their European destiny as an alternative to falling back into Russia’s orbit.

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

Eastern Valencia said it was asking for central government help as it could not refinance loans that must be paid off this year.

Valencia, which has long been run by Rajoy's PP, is emblematic of Spain's current crisis. A property crash has hit both regional government income and the region's banks, with its three main banks having to be rescued. Local politicians, meanwhile, have a growing reputation for corruption and frivolous spending.

Valencia mopped up a quarter of the €17bn (£13.2bn) of extra money made available by central government in April to pay a backlog of regional government bills.

Last year the regions not only failed to meet government-set deficit reduction targets, but actually increased their joint deficit.

Analysts believe most regions will miss this year's 1.5 percent deficit target. The government last week asked at least eight of them to revise their 2012 budgets, threatening to take over the finances of some of them.

The U.S.D.A. must consider salmonella that’s been linked to illness an “adulterant” (as it does strains of E. coli), which would mean that its very presence on foods would be sufficient to take them off the market. Again, it’s almost as simple as that. (Sweden produces chicken with zero levels of salmonella. Are they that much smarter than us?)

Much of this unwanted catch will likely be sold to fish farmers to feed high-value fish like salmon.

though there are no legally binding targets for rebuilding fishing stocks.

How to enforce the new discards law is also under debate. Installing video cameras on all vessels or employing observers to ensure fisherman follow the law has been proposed, but nothing yet has been settled. "We do not have the resources for this kind of enforcement,

Organizations notes that Norway—which, along with Iceland, is one of two non-EU nations to ban discards—took 20 years to eliminate them.

It has also delayed new energy investments and is planning to close almost a quarter of its fossil fuel power plants,

European energy companies, struggling to respond to weak demand in a flatlining economy, say they need guaranteed pricing to keep open unprofitable plants or to invest in new ones.

Their revenue is being hit by dwindling demand for electricity and by new wind and solar projects that undercut the price of the energy produced from many fossil fuel plants.

At the same time, record-low prices on carbon emissions trading markets, which were introduced to encourage clean and efficient energy production and use, have perversely become a disincentive to investment.

Many of the Continent’s aging power stations, particularly those that burn highly polluting coal, are earmarked for closure by 2020 to meet stringent local environment regulations.

Without these investments, industrial companies in Europe may face higher energy prices when local economies eventually recover,

“Energy utilities are facing a perfect storm,”

In a bid to generate 20 percent of the European Union’s electricity from renewable sources by 2020, Germany, Spain and other E.U. countries have provided hefty subsidies to wind and solar farms, which now constitute a sizable minority of daily electricity generation, often surpassing the 20 percent target.

Policy makers are debating a system of support payments to keep uneconomic power plants open,

“Without long-term signals of energy prices, investment won’t happen.”

Some analysts also expect domestic regulators to eventually create financial incentives for companies

Germany is the second-largest foreign investor in Ukraine behind Cyprus, which is a transit point for Russian money.

“Germany in particular is dependent on Russian gas,”

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.

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.

One aim of the exercise is to identify the bad debts that are fouling up euro-zone banks and preventing the flow of new credit. This is important because parts of the single-currency area are crippled not just by public borrowing but by private debt, most of which is sitting on banking books.

High private debt is more detrimental to growth than high public debt, according to recent research by the IMF.

Other balance-sheet indicators also suggest that Italian business is in a bad way. For example, 30% of corporate debt is owed by firms whose pre-tax earnings are less than the interest payments they have to make. That share of frail companies is even higher in Spain and Portugal (40% and nearly 50% respectively).

Little progress has been made to lighten the private-debt burden since the crisis began. Though it eased in Spain from 227% of GDP in 2009 to 215% in 2012, it rose over the same period in Cyprus, Ireland and Portugal. In Britain, by contrast, private debt fell from 207% of GDP in 2009 to 190% in 2012 thanks to improvements by both households and firms.

Firms that have overborrowed are reluctant to embark on new ventures, and banks are in any case reluctant to lend because their balance-sheets are peppered with bad debts. This unhappy state of affairs prevails throughout southern Europe though its precise causes vary.