Robert Waldmann
Matthew Yglesias discusses the financial crisis and the idea of causation. He shows that he was a philosophy major. I'm delighted. The question is whether the answer to the question "What caused the financial crisis?" is of the form "A, because if A had not been true, then there wouldn't have been a financial crisis." Yglesias notes potential problems with that approach. I critique after the jump.
by Rebecca Wilder
Japan to increase holding of US assets
Here's one that was tucked away in the Financial Times, Japan Post Bank urged to diversify holdings. With all of the talk about China, its currency, and the question of the Chinese "financing the U.S. deficit", the media always forgets about Japan!
From the FT:
One of the largest buyers of Japanese government bonds is under pressure to diversify its holdings in a move that will reverberate throughout the huge JGB market.
Shizuka Kamei, Japanese financial services minister, said on Monday that Japan Post Bank should diversify its investments into US Treasuries and corporate bonds in an effort to reduce the risks of over-concentration in JGBs.
and later..
A big shift by the postal bank away from JGBs could have unsettling implications for the market. Japan Post helped digest 45 per cent of the increase in outstanding JGBs between 2001 and 2007 and already holds about 24 per cent of outstanding JGBs, according to Ruixue Xu, rates strategist at Royal Bank of Scotland in Tokyo.
Was 2009 a great year to be a bank? The headlines all say so. (The 140 U.S. banks that were closed by the FDIC last year may disagree some.) But, as Isabelle Kaminska of Alphaville notes, very little of the gains posted for last year came from anything related to talent:
Deutsche Bank reported net income of €5bn for the year 2009 on Thursday, compared to a €3.9bn loss in 2008.
This, we would say, is a pretty impressive turnaround in anyone’s business....
Deutsche attributes much of that growth to the successful re-orientation of its business towards customer business and liquid, ‘flow’ products. While it’s not broken out within the results, we’re willing to bet that a large slice of that re-orientation was therefore focused on managing flow emanating from the group’s ever growing synthetic exchange-traded-product and foreign exchange businesses — both of which happen to do very well when spreads are wide, and volatility is high.
When I first started working in the investment side of the banking industry, 20-some years ago, the traders and marketers were especially careful to distinguish themselves from the "retail" side of banking. Indeed, the retail bankers were described as "9-6-3" people: lend at 9%, take deposits at 6%, and be on the golf course by 3:00.
Now that that same type of effort is producing all those record profits, is it time to decide that the legendary "management skills" of Jimmy Cayne, Vikram Pandit, and Neutron Jack (who turned GE from a products company into a finance company) might not have been all that different from that of a polyester-suited small-town bank manager?
by cactus
Real GDP per Capita and Tax Cuts, Top Marginal Income Tax Rate Edition
One often hears that cutting marginal income tax rates, particularly on high individuals, leads to faster economic growth. Let's dispense with argumentification, opinionizing and pontificatulationizing and graph us some data. Data for this post - top marginal rates from the IRS and real GDP per capita from the Bureau of Economic Analysis.
The first graph shows the annual change in real GDP per capita from one year to the next. I took a few liberties with the graph, namely:
1. I color coded each bar - black means the devil raised taxes, white is for the sweetness and light of a tax cut, and gray means no change to top marginal rates.
2. I included a couple of text boxes. The first shows the average growth in real GDP per capita when you have tax cuts, tax hikes, and no change, and it does so for two periods - 1930 to 2009 and 1952 - 2009.
3. The second text box shows the number of instances of tax cuts, tax hikes, and no change to the tax burden over the two periods.
The graph goes back to 1930 because data on real GDP per capita only goes back to 1929. Here's what it looks like:
(Graph 1)
by Tom aka Rusty Rustbelt
While Rome Burns, Nero Fiddles – Health Care Edition
While the House and Senate were trying to overhaul the entire health care system, key Medicare regulations were left in limbo. Those provisions are still in limbo.
Medicare physician reimbursement based on Sustainable Growth Rate (SGR) have been controversial and generally considered unworkable since being passed. The solution has been an annual fix rather than a permanent fix. The House bill had a permanent fix, but went nowhere.
As a result of not being fixed, some physicians will see draconian cuts in Medicare reimbursements as of March 1. Primary care docs will see a small increase in rates. Or there may be a fix, or maybe not.
Physical therapists who provide Medicare services are now subject to a cap, amounting to rationing, for elderly patients. This capping system was instituted in 1997 but an annual fix has prevented implementation. Now that too is in limbo, and therapists may be “donating” services in 2010, while waiting on an answer. If the cap remains, services will have to be rationed..
Seniors are very dependent on various forms of therapy to regain mobility and self-sufficiency after fractures, surgeries and strokes. Would we prefer nursing home placement instead?
If health care reform enlarges the role of the federal government, and this is how the feds do business, this could prove interesting.
Newsflash: Apparently Obama's 2011 budget assumes a fix for physician SGR. 2010? In limbo.
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Tom aka Rusty Rustbelt
For those who missed it yesterday, Palace defeated the Wolves at Selhurst Park last night, 3-1 (only a goal in the 90th minute breaking the shutout) behind a hat trick from defenseman-moved-forward Danny Butterfield, who played a similar role in Saturday's 2-0 win over Peterborough.
Most interesting is this observation from Palace manager Neil Warnock:
"Transfer deadline day was a long day for me. I think Fulham offered £30,000 for three of our academy players, and Chelsea came in for some too. That's disgusting. And everybody knows that [the full-back Nathaniel] Clyne almost went to Wolves yesterday, and I was disappointed with the offer we accepted for him. But he turned them down and the money we would have got for him we'll get from this Cup run now."
Fire sales rarely make economic sense if you're caretaking a Going Concern and willing to provide bridge financing. That the latter was secured the day after the Transfer Deadline may not be coincident.
Via my usual source, Citi has launched a blog.
Kids, don't try this at home.
The highlight is "Help Us Build a New Citi":
Join the conversation about reform, recovery and responsible finance.Tell us what’s on your mind.
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