Debt comes first

Economic Anthropologist David Graeber is interviewed on Naked Capitalism. He gives an interesting perspective on debt as a fundamental concept and money as a derived one. His account starts in pre-history: Obviously what would really happen, and this is what anthropologists observe when neighbors do engage in something like exchange with each other, if you […]

George says give them a break

In a great article on Bloomberg, George Magnus reprises his what we can learn from Marx about the current crisis theme. He has five policy prescriptions, all of which are worth reading; here I will concentrate on the third …to improve the functionality of the credit system, well-capitalized and well-structured banks should be allowed some […]

Best wishes for the holiday weekend

Deus Ex will be back next week.

Solvency uncertainty

I have said this before, but not as starkly as Steve Randy Waldman: “hard” capital and solvency constraints for big banks are better than mealy-mouthed technocratic flexibility. But absent much deeper reforms, totemic leverage restrictions will not meaningfully constrain bank behavior. Bank capital cannot be measured. Think about that until you really get it. “Large […]

Two encouraging pieces of news on tax

First, following Buffett, the French rich too say that they should pay more tax. According to the Guardian, 16 prominent French CEOs have called for rich people like themselves to be taxed more. Second, again from the Guardian: The Treasury has struck a deal with the Swiss government to repatriate unpaid British taxes from private […]

Take me to the river

Fortunately Morgan Stanley had a friend who could indeed drop them in the water or at least provide ample liquidity: Bloomberg reports that Morgan Stanley borrowed $107.3 billion, the most of any bank in the height of the crisis. A hundred billion doesn’t seem like a totally implausible number for the liquidity need of a […]

George and the giant investment problem

One of the things that I like about finance is that ideas matter to the investment community. If you might possibly be able to make them some money then be you Tea Partier, Obama loyalist or Communist, they will listen to you. Often they’ll discard what you have to say, of course, but many will […]

Global bank rules at no more risk that usual

Bloomberg has a curious lead piece today. Both its positioning at the top of the site and the title, Global Bank Capital Regime at Risk as Regulators Spar Over Rules suggest that there is some new and bad news for the Basel framework. There isn’t. The facts in the story are solid enough: the European […]

Market comment

Don’t you just love the places where 10,000 asses descending at speed have worn the metal bare? It’s kinda like a margin call only it burns a little more.

Spend spend spend

Jeffrey Sachs, writing in the FT (non gated version here), has a far more eloquent recipe to address the issues I discussed in the last post: Jobs for low-skilled workers in manufacturing, and new investments in large swaths of industry, have been lost to international competition. Employment in the US and Europe during the 2000s […]

Who suffers?

Mostly, it turns out, the young and the poor. Today the Guardian reports The Office for National Statistics revealed that unemployment jumped by 38,000 to 2.49 million in the three months to June on the government’s preferred measure… On the more timely claimant count measure, unemployment was up by 37,100 on a month earlier – […]

Basel chairman’s regulator implies that Basel is inadequate

Stefan Ingves is the new Basel Committee chair. He’s from Sweden. So it is very interesting that Sweden is pushing for capital requirements higher than Basel levels, and for further penalties on funding mismatches. From Bloomberg: Swedish banks must do more to prepare for a deterioration in Europe’s debt crisis that could freeze interbank markets […]

Hands up

OK, so I go away for a few days leaving the global financial system with you folks, and look what happens while I am away. You pretty much broke it. Now whoever was responsible should own up. Form an orderly line outside my office and yes, Merkel, that does include you…

I fear it may get a little messy from here

I’ll return in a week or so. Meanwhile I wish all my readers luck in today’s turmoil: may all your convexity be positive.

How bad was the Lehman close-out?

One answer is not that bad as LCH returned some initial margin to Lehman’s liquidators. They didn’t need it all – let alone any default fund – to close Lehman out. That rosy picture is somewhat nuanced in a new book by Peter Norman, The Risk Controllers (yes, I hate the title too). Norman recounts […]

A bad, bad day

I hate this. Really I hate it. But I have to admit that Alan Greenspan is right about something. Don’t worry, he is wrong headed about many things. The lone insight is this: Bank managements, currently repairing their demonstrably flawed risk management paradigm, have been moving aggressively to build adequate capital to enable them to […]

Is that a debt deal…

… or a slime covered relic of former times standing in dirty water? Just asking… Update. Robert Reich articulates most of what I feel about this deal here.